Futureproof your business model in three steps

Wednesday, April 14, 2010 | Posted by: Fiona Cullinan
Categories: Business advice, Thought Leadership | Tags: innovation, business, entrepreneurs, recession, finance, research, strategy, business models, New Business Models, competition, Economist, board, CEOs

Recently, Grant Thornton commissioned The Economist Intelligence Unit to survey over 450 UK executives on their business models and if/how they are planning to adapt over the next 18 months - you can download the report for free below. Then ask yourself three key questions about your business model and discover some simple ways to answer them…

Grant Thornton’s survey was published in March 2010 and is available for download at Retrench or refresh: Do existing business models still deliver the goods?

The survey makes for fascinating reading, and notes that most companies are complacent about the need to innovate or change their business model – which should make it easier for innovators to stand out from the crowd. Check out the mostly negative types of behaviour surrounding business model change in response to the recession. We’ve also blogged about other features of the survey in What’s wrong with your business model?

So how can you avoid complacency and check that your strategy is on track?

Simply ask these three questions:

1. Is your business model still fit for purpose?
It may be tempting to answer,“Yes, of course, it is!” to this question. But are you sure that isn’t just the complacent answer? What does ‘fit for the purpose’ mean post-recession? For example:
• Is your business satisfying the needs of an ever more value-conscious, less tolerant market? Or do you need to make changes to your product/service offering?
• How have your competitors responded to the downturn? Have they focused more on innovation and growth than pure cost-cutting?
• Do you have the right leadership and people in place to take your strategy forward? What plans do they have in place for the next 18 months?
• Have you identified surplus costs? Are there opportunities to improve your operational efficiency?

It can be difficult to answer these types of questions without doing further research and it might be tempting to make assumptions, especially if you look back to business as it was before the recession. But it makes sense to at least conduct a review to avoid flawed strategies putting future business at risk.

Here is where you can use the holistic services of your accountants and business advisors to:
• Benchmark your market position against competition.
• Assess customer purchasing criteria, customer future spending habits and perceptions of your business, in line with your product/service offering.
• Review the effectiveness of your organisational structure.
• Ensure operations are thoroughly tested in all areas of the business, and recommend improvements.
• Get a second opinion – an external perspective from a sector expert can independently analyse the strength of your business model, your core business proposition, key markets and also suggest ways to leverage your strengths.

2. How will you take your business forward?
With many of the executives in the survey reluctant to change, there are opportunities available for the forward-thinking. Foe example:
• What opportunities are you considering for growing sales through new product/service development, or entering new markets?
• What M&A opportunities exist? Eg, from competitors in distress.
• Have you considered moving your activities out of the UK or expanding into another jurisdiction? Perhaps there is a need to shift your target market from previously debt-led consumers to increased exports – especially given the weak value of the pound.
• Are the shareholders planning a trade sale or some other kind of exit in the future? What is the timeframe for this? Does the growth strategy support this?

Again, here’s where you can ask for help from your accountant or business advisors. They can help you to:
• Research and evaluate entry into new markets.
• Identify and take advantage of strategic acquisition opportunities as quickly as possible. Get strategic decision support, advice on funding, guidance through the transaction process and help managing the transition through to completion.
• Research and evaluate opportunities in international markets.
• Understand the tax and reporting implications of expanding overseas.
• Manage your funding and finances as effectively as possible in the context of the trading requirements and/or acquisitions or divestments of overseas operations.

3. How will you finance your strategy?
This is one of the toughest questions to answer post-recession – and, as a result, will be the subject of a forthcoming Grant Thornton business survey. Ask yourself these questions:
• Is there a need to refinance your current facilities? Are you facing any issues with meeting covenants, or is the bank pushing to renegotiate?
• Does your business have an appropriate funding structure going forward? Does a change in business strategy mean extra funding requirements?
• Are you aware of all the alternative funding options?

In order to figure out the answers to these questions, you will need to:
• Assess your current financial position – you can take advantage of a free debt advisory health check (Grant Thornton offers this service).
• See if there is potential for flotation on a stock exchange or growth market such as AIM, and look at securing support for this.
• Identify the right funding options to support your future strategy.

For more help on revising your business model, visit our dedicated site Refresh: 2010 and Beyond.

For individual advice on how we can help and support your business through strategic change, email the Grant Thornton team at heretohelp@gtuk.com