6 Strategies to Create a More Resilient Small Business
The word “resilience" has had a resurgence, likely due to the challenges businesses have had to cope with in recent years. From supply chain disruptions to rising interest rates, destructive weather patterns, a workforce that now prefers to work from home, rumors of an impending recession, and industries that dried up overnight, entrepreneurs have had to become quickly adaptable.
The key to success is no longer just zigging—business owners must also learn how to zag, swerve, and veer.
What a resilient business looks like
You've heard the term, but what, exactly, is business resilience? Harvard Business Review defines resilience as “a company's capacity to absorb stress, recover critical functionality, and thrive in altered circumstances." It's an ability to respond effectively to unpredictability, which is becoming increasingly important as the pace of change continues to quicken. Staying in business is now almost as challenging as scaling.
Why resilience is make or break
The capability to adapt to sudden change is what resilience is all about. The more resilient you are, the better your odds of not only staying in business but thriving long-term.
Resilient businesses are better able to resist unwanted change, such as proposed legislation, for example, by being better prepared or by being ready to pivot to avoid the negative impact. It's all about thinking and planning ahead for all the what-ifs.
More resilient businesses can also recover faster by being able to identify what repairs, changes, or course corrections are needed to get back to business.
Finally, companies that build resilience also become better able to prepare for future shifts. Resilient businesses are more flexible, adaptable, and able to execute more quickly. Other companies may still be assessing the damage while resilient businesses are full steam ahead. Resilient businesses understand that change is the new default.
How to build resilience
To become more resilient and flexible, companies should explore the following six strategies.
1. Build in redundancy
Although generally less efficient than lean, just-in-time operations, introducing redundancy across the business can significantly reduce the chances of being caught unprepared when disruption occurs. Redundancy is really just stockpiling resources and having a Plan B.
Those preparations can include bulking up on raw materials, duplicating production operations, and/or having contractors at the ready to fill in during sales surges. Newer businesses might set up a line of credit, for example, investigate alternate materials or suppliers, and safeguard customer information online and offline.
The more flexible you can keep those backup plans, the smaller the impact on your profitability when a crisis occurs. Setting up parallel production efforts, investing in additional supplies or inventory, and bringing on board extra workers can drive up expenses. So, do what you can to balance reducing expenses with simultaneously investing in redundancy.
2. Build up cash reserves
When a disaster of any kind occurs, it's generally expensive to get past it. The more money you have access to, the faster you'll be able to recover. That's the essence of resilience. Your cash reserves are a stockpile of cash—savings you've squirreled away.
While you're building your business, work to set aside profits regularly. You want to be able to tap into funds quickly should a hurricane, extended power failure, labor strike, transportation disruption, product outage, or other disruptor hit.
At the same time, arranging access to a line of credit is also smart in case those reserves are insufficient to keep you afloat in the short term.
3. Introduce modularity
Reorganizing your business or its systems to consist of independent modules rather than interdependent elements can help reduce the chances of business collapse when sudden change occurs.
A business composed of individual modules, or building blocks, which are then made up of smaller pieces, is much easier to reconfigure when change is thrust upon the company. This is true for computer systems as well as for suppliers and internal processes.
For example, dividing up a work process across several people, rather than relying on one person to complete several steps, can reduce the chance of things going sideways if that one person misses work. Or, introducing several ways of purchasing your products—such as online, in-person, through local delivery, and through partner outlets, for example—can help reduce the chance of losing 100% of sales if one channel shuts down.
4. Back up everything
While modularity can reduce the impact of a major event, backing up computer files can help protect data and important files. Save digital files to the desktop and in the cloud or on flash drives stored in a fireproof safe to help preserve important records.
Set up systems to routinely back up all of your files everywhere so you can access them later, even if your building is underwater or your computer systems have been stolen.
5. Go all in on diversification
The old adage not to put all your eggs in one basket holds true and can prevent massive losses during times of big change. Diversifying your operations and income streams helps reduce the potential impact of upheaval that affects one part of your business.
For example, a supply chain disruption that cuts off access to a chief ingredient in your lone product can mean shutting down. But if you have multiple products and services, you can shift your focus when one stream becomes temporarily unavailable or obsolete.
6. Designate a risk management leader
When a disaster occurs, it's best to have one person in charge of decision-making. This person is responsible for monitoring potential threats and developing plans to avert or deal with threats that turn into problems for the company.
That person should be well-known to all employees as the key point of contact and be in charge of staying up to date on government policies and regulations that could impact the business.
Creating a more resilient business is all about imagining the what-ifs and then building potential paths forward should disaster strike.