Prepare Your Business for the Future
This is article is part of a series of monthly articles produced by Harbour Results for PMA’s MetalForming Business Edge e-newsletter. Click here to view the full collection of articles.
Creating a Business Roadmap with a Stress Test
In our recent Harbour IQ Manufacturing Pulse Study, which looks at data across all manufacturing processes, respondents – on average – saw a drop in capacity utilization from Q3 2022 to Q1 2023. And, when asked a majority of companies are optimistic that the back half of 2023 will bring improved business performance, but we are not as confident.
Although we don’t foresee a significant recession or prolonged downturn in the economy, we do think growing interest rates and softening consumer confidence are impacting durable good demand in select markets. And, it’s a fact that customer forecasts have been inconsistent and frequently change, businesses are finding it difficult to plan for the future.
So, as a business leader, what should you be doing to prepare for an uncertain future?
Stress test your business for both positive and negative scenarios. What you are testing for is simple – how will your company react to a significant, negative or positive change in business. Testing beyond normal business and operational limits, often to a breaking point, will give insight to your weaknesses and allow your team to build a game plan that will help insulate your company and improve your flexibility.
Why should you do it? There are many reasons. Aside from being a good business practice, today’s uncertain economy, technology changes and growing competition create a situation in which a change could come from anywhere. Whether it results from changes in material costs or the economy, losing or gaining a customer or having them go on strike, it’s imperative you take a proactive look at how, or if, your business will respond. By doing so you eliminate risks by:
Identifying vulnerabilities
Understanding gaps and risk points
Future proofing your business
Creating transparency
By creating a couple of real-world situations – your largest customer is pulling nearly all its business, or your newest customer has doubled its production requirements – and doing a “test” allows your management team to take the necessary time without emotion or stress to determine what decisions need to be made, levers to pull and communication to share. So, if (or should we say when) your business faces future challenges, your team is “practiced” and has a roadmap to follow to quickly implemented the needed tools and tactics to address the situation.
Now is not the time to stick your head in the sand or hope things are going to be ok. Prepare your leadership team, continuously review your company metrics (including your financial statements) and make smart decisions. It is hard to forecast drastic changes up or down, so it is best to establish a road map and maintain your flexibility.
