Under the chancellor's cosh

One of my clients wanted to discuss how to deal with the recent changes to NI and the minimum wage.  The direct impact in their SME is going to be about £50k pa off the bottom line before any increase in supplier costs is included.

We talked about operational and strategic changes that could help offset this.

We had already discusssed the operational changes in our work together to improve productivity, but the budget definitely sharpened their focus:

• Offshoring functions that can be easily defined and easily measured - PPC and other online marketing is an example, and they will move more of this to lower-cost countries.
• Clarifying, documenting and measuring processes.  Just doing this will improve productivity even before reviews, coaching and process improvements are added.
• Actively pushing prices.  They have good systems that allow them to track the impact of this on sales.
• Improving their prioritisation of system development by assessing each change against its current-year impact on net profit and making sure those benefits are quantified and managed.
• Continuing to manage salespeople up or out.
• Reducing current-year pay awards where possible (bearing in mind the long-term implications of this)
• Communicating with employees.

Strategically we talked about two possible responses:

• Selling additional, related, products to existing accounts.  This needs to be done with care if they are not to lose their carefully-crafted space in the minds of buyers.
• Designing, from the ground up, a new channel to sell their core products that has much lower, and fixed, labour costs.  They will need to be alert to cannibalising their existing market and they will need to be confident that they can sustain an advantage in what is likely to be a price-based channel.

Of course in the back of my mind during the conversation was the thought that they should have been progressing all of these things more quickly anyway.  However, most business owners are always beset by too many demands on their time, and humans generally respond more urgently to threat than opportunity.  Being coshed by the chancellor was definitely seen as the former.

If you want to learn more about improving productivity in your SME then maybe you should attend one of these events.