Business Resilience

Business resilience in a fast changing world

In an increasingly globalised economy it is important that businesses take the steps necessary to reduce volatility and sensitivity to changes on the global stage. This involves building agility and robustness in decision making, and factoring in uncertainty as part of business planning.

External influences such as global slowdown, threats to supply chains, competition for talent, access to finance or diversification into new markets does affect businesses. Practical steps can be taken to improve robustness and this tool is designed to quickly focus on key areas which might help the business and its owners build resilience to changing markets.

BDO, working with the regional Growth Hubs, has designed this diagnostic to help businesses think about the factors which might impact the ability of a business to succeed in an ever changing world.

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Business Plan / Q1
Has the business prepared a business plan or conducted a strategic review in the last 12 months?*
- Both
- Business plan
- Strategic review
- Neither
In developing the direction and vision for you business, and identifying the opportunities and challenges ahead, it is important to ensure you consider all areas of your business and a strategic review is a great way to do this. Looking across sales, resources, operations and finances allows you to build a coherent business plan which ensures all areas of the business are working together to achieve success. Taking time out to look at your business in invaluable, but also can be difficult with competing pressures for time and therefore it can be beneficial to seek external support to ensure meaninful actions are agreed.
A business plan is a great way of communicating the vision and direction of travel to stakeholders including internal teams and external stakeholders. This needs to include the goal and size of the opportunity, the markets and how you will reach them, the need for your offering and why you are best placed to deliver it, operational matters and how you will do what you do; the financial opportunity and requirements including cash needs and how you will fund; and the risks to any business success such as external threats.
A business plan is a great way of communicating the vision and direction of travel to stakeholders including internal teams and external stakeholders. This needs to include the goal and size of the opportunity, the markets and how you will reach them, the need for your offering and why you are best placed to deliver it, operational matters and how you will do what you do; the financial opportunity and requirements including cash needs and how you will fund; and the risks to any business success such as external threats. In developing the direction and vision for you business, and identifying the opportunities and challenges ahead it is important to ensure you consider all areas of your business and a strategic review is a great way to do this. Looking across sales, resources, operations and finances allows you to build a coherent business plan which ensures all areas of the business are working together to achieve success. Taking time out to look at your business in invaluable, but also can be difficult with competing pressures for time and therefore it can be beneficial to seek external support to ensure meaninful actions are agreed.

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Business Plan / Q2
Have you undertaken a review of your market and competition in the last six months?*
- Yes
- No
- Not Sure
Markets constantly change and it is important to watch competition for new products, changes to pricing, new ways of incentivising customers or if they have raised new finance to generate growth.
Markets constantly change and it is important to watch competition for new products, changes to pricing, new ways of incentivising customers or if they have raised new finance to generate growth.

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Business Plan / Q3
Are more than 75% of your sales generated in one country?*
- Yes
- No
- Not Sure
Over exposure to one country or market can mean that you are subject to excessive risk if that market is impacted by external changes such as economic or demographic shifts in that market, entry of new competition in that geography, or political impact if new laws are introducted. Resilient businesses normally operate in multiple markets to reduce this exposure.
Over exposure to one country or market can mean that you are subject to excessive risk if that market is impacted by external changes such as economic or demographic shifts in that market, entry of new competition in that geography, or political impact if new laws are introducted. Resilient businesses normally operate in multiple markets to reduce this exposure.

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Business Plan / Q4
Are more that 50% of your sales generated from one product or service?*
- Yes
- No
- Not Sure
Over exposure to one product or service can mean that you are subject to excessive risk if that product is impacted by external changes such as new entrants, substitute products, technological change or new legislation. Resilient businesses normally have multiple products to reduce this exposure.
Over exposure to one product or service can mean that you are subject to excessive risk if that market is impacted by external changes such as new entrants, substitute products, technological change or new legislation. Resilient businesses normally have multiple products to reduce this exposure.

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Business Plan / Q5
Are more than 25% of sales generated from one key customer?*
- Yes
- No
- Not Sure
Over exposure to one customer can mean that you are subject to excessive risk if that customer faces financial problems or if they want to drive savings through their supply chain. It can also be impacted if competition succeed in diverting business to them and it can be harder to raise finance if there is over dependency. Resilient businesses normally have good diversification in their customer base.
Over exposure to one customer can mean that you are subject to excessive risk if that customer faces financial problems or if they want to drive savings through their supply chain. It can also be impacted if competition succeed in diverting business to them and it can be harder to raise finance if there is over dependency. Resilient businesses normally have good diversification in their customer base.

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Business Plan / Q6
Have there been new entrants into your market in the last six months?*
- Yes
- No
- Not Sure
Although new entrants may actually stimilate overall market growth, in general new entrants will seek to take market share and therefore could drive price erosion or loss of customers.
Although new entrants may actually stimulate overall market growth, in general new entrants will seek to take market share and therefore could drive price erosion or loss of customers.

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Business Plan / Q7
Is your market share of your chosen markets growing?*
- Yes
- No
- Not Sure
Lack of growth in market share could represent lack of competitive advantage and therefore in an economic down turn the business could struggle to retain customers.
Lack of growth in market share could represent lack of competitive advantage and therefore in an economic down turn the business could struggle to retain customers.

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Business Plan / Q8
Do you hold any patents or trademarks for your key goods and services?*
- Yes
- No
- Not Sure
Patents or trademarks help to reduce the ability of new entrants into a market, or protect competitive advantage you may have obtained through innovation and product development. Lack of patents protection around your intellectual property may leave the business at risk from competition.
Patents or trademarks help to reduce the ability of new entrants into a market, or protect competitive advantage you may have obtained through innovation and product development. Lack of patents protection around your intellectual property may leave the business at risk from competition.

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Business Plan / Q9
Have you had to delay or abandon the launch of new products or markets due to lack of resource or finance?*
- Yes
- No
- Not Sure
Finite resources, skills and time are a common challenge for all businesses, but this may lead to a a failure to diversify away from existing markets and could allow competition to take the lead.
Finite resources, skills and time are a common challenge for all businesses, but this may lead to a a failure to diversify away from existing markets and could allow competition to take the lead.

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Business Plan / Q10
Are there individuals who would be hard to replace, who have unique skills or connections, and who are critical to the running of the business?*
- Yes
- No
- Not Sure
Over dependence on key staff could result in significant business challenges if they leave due to health or choice. It can also constrain the business through lack of depth of resource.
Over dependence on key staff could result in significant business challenges if they leave due to health or choice. It can also constrain the business through lack of depth of resource.

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Business Plan / Q11
In the last year, has the business struggled to find skills or talent to meet business needs?*
- Yes
- No
- Not Sure
Access to skills and people is the number one reason affecting business growth. Developing clear strategies for attracting and retaining talent, or identifying other resourcing models such as outsourcing or apprenticeships, is essential for business resilience and growth. Businesses with clear values, people propositions and incentive schemes are proven to attract the best talent.
Access to skills and people is the number one reason affecting business growth. Developing clear strategies for attracting and retaining talent, or identifying other resourcing models such as outsourcing or apprenticeships, is essential for business resilience and growth. Businesses with clear values, people propositions and incentive schemes are proven to attract the best talent.

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Business Plan / Q12
Do all employees have employment contracts including non-compete and confidentiality clauses?*
- Yes
- No
- Not Sure
Lack of employment contracts can make it easy for staff to take customers, intellectual property and know how. This could destroy competitive advantage and allow competition to save cost if accessing your markets.
Lack of employment contracts can make it easy for staff to take customers, intellectual property and know how. This could destroy competitive advantage and allow competition to save cost if accessing your markets.

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Business Plan / Q13
Does the business rely on foreign or overseas workers?*
- Yes
- No
- Not Sure
Uncertainty regarding Brexit and the mobility of labour, changes to imigration law, as well as changes in exchange rates and therefore relative earnings between countries can make it harder to attract talent from other countries. This will impact on the businesses ability to grow or replace existing staff.
Uncertainty regarding Brexit and the mobility of labour, changes to imigration law, as well as changes in exchange rates and therefore relative earnings between countries can make it harder to attract talent from other countries. This will impact on the businesses ability to grow or replace existing staff.

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Business Plan / Q14
Do you produce and review monthly management information on the business?*
- Yes
- No
- Not Sure
Monthly management information ensures decisions are made based on fact, allows action to be taken early if adverse performance arises, and allows business decision makers to understand how the business is performing. External financial sources will expect robust monthly financial information and regular business reviews and therefore this is needed to secure finance.
Monthly management information ensures decisions are made based on fact, allows action to be taken early if adverse performance arises, and allows business decision makers to understand how the business is performing. External financial sources will expect robust monthly financial information and regular business reviews and therefore this is needed to secure finance.

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Business Plan / Q15
Does the business prepare Key Performance Indicators, including non-financial measures and advance warning indicators?*
- Yes
- No
- Not Sure
Key performance indicators, if designed right, give a quick picture on the financial health of the business. In addition to routine metrics such as profit and sales, other indicators help quickly identify customer satisfaction, staff engagement, productivity, quality and other measures which will protect the business as markets change.
Key performance indicators, if designed right, give a quick picture on the financial health of the business. In addition to routine metrics such as profit and sales, other indicators help quickly identify customer satisfaction, staff engagement, productivity, quality and other measures which will protect the business as markets change.

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Business Plan / Q16
Do you prepare a cash flow forecast for the business, and consider what-if situations?*
- Yes including what-if analysis
- Yes, but cash flow only
- Not sure
- No
A cash flow is essential to identify funding needs and ensure affordability of any finance. It will also identify pinch points where cash outflows all come at the same tiem, and allows for careful management of timings of payments. In addition to a cash flow forecast, a business should consider sensitivies for various business changes. For example, what would happen if exchange rates moved, if customers took longer to pay or if costs increase. These scenarios allow the business to prepare and take action quickly if change happens.
A cash flow is essential to identify funding needs and ensure affordability of any finance. It will also identify pinch points where cash outflows all come at the same tiem, and allows for careful management of timings of payments. In addition to a cash flow forecast, a business should consider sensitivies for various business changes. For example, what would happen if exchange rates moved, if customers took longer to pay or if costs increase. These scenarios allow the business to prepare and take action quickly if change happens.
A cash flow is essential to identify funding needs and ensure affordability of any finance. It will also identify pinch points where cash outflows all come at the same tiem, and allows for careful management of timings of payments. In addition to a cash flow forecast, a business should consider sensitivies for various business changes. For example, what would happen if exchange rates moved, if customers took longer to pay or if costs increase. These scenarios allow the business to prepare and take action quickly if change happens.

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Business Plan / Q17
Do you know the break-even point for the business (the level of sales needed to make a profit)?*
- Yes
- No
- Not Sure
Understanding the level of sales needed to generate profits allows better decision making around whether price reductions can be made or if price increases can be absorbed. The head room above the break-even point shows how resilient the business is.
Understanding the level of sales needed to generate profits allows better decision making around whether price reductions can be made or if price increases can be absorbed. The head room above the break-even point shows how resilient the business is.

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Business Plan / Q18
Does the business monitor profitability by product, market and customer?*
- Yes
- No
- Not Sure
It is important to understand business performance by product, market and customer to ensure good business decisions are made and identify if there are trends which could indicate future financial uncertainty.
It is important to understand business performance by product, market and customer to ensure good business decisions are made and identify if there are trends which could indicate future financial uncertainty.

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Business Park / Q19
Do you have any exposure to foreign exchange movements, either directly or through your supply chain?*
- Yes
- No
- Not Sure
Changes to exchange rate can result in price erosion or cost inflation. This may also include inflation in costs such as energy and utilities. Use of forward contracts on currency and energy can help to reduce this risk, and strategies around whether to contract in local currency or sterling can make a difference.
Changes to exchange rate can result in price erosion or cost inflation. This may also include inflation in costs such as energy and utilities. Use of forward contracts on currency and energy can help to reduce this risk, and strategies around whether to contract in local currency or sterling can make a difference.

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Business Plan / Q20
Do you have a clear process for controlling outstanding customer balances each month, including revisiting credit limits and chasing outstanding debts?*
- Yes, including setting credit limits
- Yes, but just review outstanding balances
- Not Sure
- No
Reviewing customer outstanding balances regularly is important, but also ensuring credit limits are in place and enforced helps remove over exposure to single customers. The review of credit limits also gives early warning of issues.
Customer outstanding balances should be reviewed regularly to identify late paying customers or issues regarding satisfaction with your services/products. A robust credit control facility will include regular reminders and statements, and tracking of issues. Ensuring credit limits are in place and enforced helps remove over exposure to single customers. The review of credit limits also gives early warning of issues.
Customer outstanding balances should be reviewed regularly to identify late paying customers or issues regarding satisfaction with your services/products. A robust credit control facility will include regular reminders and statements, and tracking of issues. Ensuring credit limits are in place and enforced helps remove over exposure to single customers. The review of credit limits also gives early warning of issues.

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Financial Environment & Control Q21
Does your business regularly review productivity and efficiency internally and through its supply chain?*
- Yes
- No
- Not Sure
Ensuring you are maximising your output from your inputs leads to greater ability to expand and also improves the headroom within the business. This builds greater resilience to fluctuating costs, sales volumes and exchange rates.
Ensuring you are maximising your output from your inputs leads to greater ability to expand and also improves the headroom within the business. This builds greater resilience to fluctuating costs, sales volumes and exchange rates.

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Financial Environment & Control Q22
Do you have any key suppliers for your goods or services where it would be hard to find replacements at short notice?*
- Yes
- No
- Not Sure
Over exposure to key suppliers could create critical business failure if they face financial distress or if they chose to leave your market. They may also use their relative position of strength to drive up prices.
Over exposure to key suppliers could create critical business failure if they face financial distress or if they chose to leave your market. They may also use their relative position of strength to drive up prices.

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Financial Environment & Control Q23
Do you review the financial status of key suppliers on a regular basis?*
- Yes
- No
- Not Sure
Monitoring the financial status of your suppliers gives early warning if there are potential issues regarding the resilience of your supply chain. Part of your supply chain struggling financially could lead to failure to supply goods on time, pressure regarding prices or the need to find alternatives in case of business failure.
Monitoring the financial status of your suppliers gives early warning if there are potential issues regarding the resilience of your supply chain. Part of your supply chain struggling financially could lead to failure to supply goods on time, pressure regarding prices or the need to find alternatives in case of business failure.

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Financial Environment & Control Q24
Has the business had to delay paying suppliers or other creditors in the last six months to manage cash?*
- Yes
- No
- Not Sure
Delaying payments is often a sign of underlying strain in the business. If you have had to delay payments due to lack of cash headroom, then unless there have been significant improvements in cash flows and profits, it is possible the issue will arise again. If revenues start to fall and profits decline, these cash issues are likely to increase.
Delaying payments is often a sign of underlying strain in the business. If you have had to delay payments due to lack of cash headroom, then unless there have been significant improvements in cash flows and profits, it is possible the issue will arise again. If revenues start to fall and profits decline, these cash issues are likely to increase.

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Financial Environment & Control Q25
Does the business regularly review and manage its own credit rating?*
- Yes
- No
- Not Sure
Falling credit ratings will impact on the ability to source finance, obtain credit from suppliers and could mean customers divert work elsewhere. Credit ratings are not always accurate and can be managed. Investing time in understanding your credit rating will improve access to finance and build resilience.
Falling credit ratings will impact on the ability to source finance, obtain credit from suppliers and could mean customers divert work elsewhere. Credit ratings are not always accurate and can be managed. Investing time in understanding your credit rating will improve access to finance and build resilience.

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Financial Environment & Control Q26
If the business requires debt finance, what is the main source of finance?*
- Fixed term debt (eg. Term loan)
- Flexible debt (eg. Invoice discounting)
- Short term debt (eg. overdraft;credit cards)
- Savings
- No debt
Fixed term debt provides certainty in the business, but often should be combined with other finance to spread the risk and match the investment profile of the business. The term maturity dates should be reviewed to reduce the risk that all finance needs to be renegiated at the same time which may reduce options and increase the risk of finance.
Flexible debt models such as invoice discounting are important sources of finance, but if the business has a reduction in sales, excessive dependence on a small number of customers, or seasonality, then funding levels can be reduced at short notice.
Short term debt can be withdrawn at short notice. In the 2008 recession, many businesses had overdrafts cut back and credit limits reduced at short notice. Fixed term debt allows for greater certainty if there are economic changes.
Ensuring funding matches the activity in the business is important, and savings should be the last choice for funding since these may be needed to cover shortfalls in other finance.

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Financial Environment & Control Q27
Does the business have a documented disaster recovery plan?*
- Yes
- No
- Not Sure
A disaster recovery plan allows the business to quickly take action if the business is impacted by external factors. This should include a range of what-if situations ranging from external disaster such as flooding, through to cyber crime or product recalls.
A disaster recovery plan allows the business to quickly take action if the business is impacted by external factors. This should include a range of what-if situations ranging from external disaster such as flooding, through to cyber crime or product recalls.

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Financial Environment & Control Q28
Is there a succession plan in place for key directors and staff?*
- Yes
- No
- Not Sure
Key staff leaving can lead to critical business failure and therefore single points of exposure should be identified and plans put in place for succession if staff leave. This includes transferring knowledge to others and ensuring future talent is being identified and brought on.
Key staff leaving can lead to critical business failure and therefore single points of exposure should be identified and plans put in place for succession if staff leave. This includes transferring knowledge to others and ensuring future talent is being identified and brought on.

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Financial Environment & Control Q29
Do you provide well being support for directors and staff?*
- Yes
- No
- Not Sure
Mental health in the work place is a growing issue, leading to lost productivity and lost talent. Well designed support for staff is becoming essential for businesses wanting to be resilient. Business owners are also very susceptible to mental hearth challenges and if adverse business conditions exist this is heightened.
Mental health in the work place is a growing issue, leading to lost productivity and lost talent. Well designed support for staff is becoming essential for businesses wanting to be resilient. Business owners are also very susceptible to mental hearth challenges and if adverse business conditions exist this is heightened.

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Financial Environment & Control Q30
Do you feel you have access to peers and advisers to support you and your business goals?*
- Yes
- No
- Not Sure
The most successful businesses identify access to peers and quality advisers as essential in achieving their growth. Likewise handling adverse changes in business relies on support and knowledge so that the right decisions are made.
The most successful businesses identify access to peers and quality advisers as essential in achieving their growth. Likewise handling adverse changes in business relies on support and knowledge so that the right decisions are made.

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We hope this diagnostic is useful and has given you some food for thought.

BDO and the Growth Hubs have experience in helping businesses plan for success, which includes building resilience. We would therefore like to keep in touch.

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Business resilience diagnostic

Step 1 of 32 - Business Plan

Business resilience in a fast changing world

Business Plan / Q1

Business Plan / Q2

Business Plan / Q3

Business Plan / Q4

Business Plan / Q5

Business Plan / Q6

Business Plan / Q7

Business Plan / Q8

Business Plan / Q9

Business Plan / Q10

Business Plan / Q11

Business Plan / Q12

Business Plan / Q13

Business Plan / Q14

Business Plan / Q15

Business Plan / Q16

Business Plan / Q17

Business Plan / Q18

Business Park / Q19

Business Plan / Q20

Financial Environment & Control Q21

Financial Environment & Control Q22

Financial Environment & Control Q23

Financial Environment & Control Q24

Financial Environment & Control Q25

Financial Environment & Control Q26

Financial Environment & Control Q27

Financial Environment & Control Q28

Financial Environment & Control Q29

Financial Environment & Control Q30

We hope this diagnostic is useful and has given you some food for thought.