Business Recovery: How To Optimise The Rebuilding Process

Thousands of businesses have been directly impacted by flood in Queensland and Victoria, a large number of which will need to rebuild from scratch.

Although during the early stages of business recovery it’s difficult to accept that anything positive can result from disaster, the rebuilding process provides business owners with an opportunity to critically assess their businesses – internal business processes and procedures as well as external positioning in the changed competitive landscape.

The rebuilding process provides many business owners with a clean slate on which to redesign their businesses, and is an ideal opportunity to implement the changes needed to ensure they emerge leaner, stronger and more competitive.

Internal Business Process Considerations

When preparing your Business Recovery Plan consider how you can improve internal business processes, including:

  • Business Premises– Does your existing premises still satisfy your business needs?  Consider whether you will need to scale back your business in the short term, and how long will it be until you might need extra space again?
  • Factory Layout – The rebuilding process is a great opportunity to review production process efficiency and implement lean manufacturing strategies to reduce costs, improve product quality and reduce production time. Enterprise Connect is an Australian Government grant scheme which provides industry-specific advice on how to improve productivity, increase competitiveness and maximise growth potential.  More information can be obtained from their website.
  • Equipment Utilisation – Consider how you will meet the anticipated changes in market demand.  Use this opportunity to review your equipment needs and your financing structure – can damaged equipment be replaced through your insurer?  Will you purchase, lease or finance new equipment? Can you take advantage of new technologies or processes? And finally, consider divesting non-essential and under-utilised equipment.
  • Inventory – Customer demand may have shifted, so before committing to replacing existing products undertake market analysis. Consider culling slow moving products and review the pricing of those products which will remain – input costs may have changed significantly due to scarcity and/or the need to source from new suppliers. Failure to build increased costs into your new pricing structure will result in margin erosion and flow through to the bottom line.
  • Marketing – Consider how you are going to advertise that your business is re-opening. Many businesses are offering significant discounts to people and businesses that have been flood impacted so review local publications to see what others are doing and consider offering special deals to restore market presence and build customer loyalty.
  • Pricing – Your suppliers may be charging more for materials, or may no longer be in business.  You may need to purchase stock from further afield.  Re-calculate break even points and margin analysis based on anticipated changes to input costs, and determine what changes you will need to make to prices. Then consider your customers’ ability to absorb higher prices, and monitor how your competitors are dealing with the changed pricing conditions.
  • Staffing – Have your staffing needs reduced?  If so consider whether this is a short term or permanent change and how you will deal with this. Short term changes might be overcome through an across the board reduction in working hours (to preserve overall employment), whereas long term changes may require redundancies.
  • Electronic Systems – Almost all business processes are underpinned, or supported by electronic systems.  If you’ve lost operational and/or financial data now is a great opportunity to consider implementing new systems which are better suited to current business needs.  Taking advantage of technological advancement in recording and monitoring systems could significantly improve the timeliness and quality of decision making.

External Environment Considerations

The environment in which your business operates will have changed.  When preparing your Business Recovery Plan, consider how you can mitigate the risks and maximise the benefits of your new external environment, including:

  • Geographical Location – Consider whether your customer and supplier bases shifted. Have new opportunities or markets opened up elsewhere?
  • Customer Base – Meet significant customers to understand how the disaster has impacted their operations and their financial position.  Proactively manage customers who are suffering financial hardship (eg. implement payment plans) and also manage their expectations regarding anticipated delays in product supply and pricing changes.
  • Supplier Base – Meet with your key suppliers to discuss the changing needs of your business (they may be able to assist with increased credit terms, new products, etc), and proactively manage expected periods of cash shortage by approaching your suppliers for a payment plan – this approach will ensure your suppliers continue to see you as a solid, dependable customer, even during times of uncertainty and rapid change.

If you have any business recovery tips to offer, or stories to tell of how a disaster impacted on your business, we’d love you to share these.

Michael Fingland is a director of the Turnaround Management Association of Australia and founder and Executive Director of Vantage Performance. Michael is a Chartered Accountant with more than sixteen years experience in corporate turnaround, profit improvement and corporate restructuring. Vantage Performance specialise in improving business performance and executing corporate turnarounds. We work with companies going through major growth or change, helping them to improve profit and performance. We also advise underperforming companies or those in financial distress, helping improve cash flow, profitability and value of the business. Vantage Performance was awarded Turnaround of the Year in 2008, 2009 and 2010 by the Turnaround Management Association of Australia for its work with troubled companies. 

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