Our previous articles to date have focused on:
- Modelling realistic revenue projections over the next 18 – 24 months; and
- Accurately modelling (to the extent possible) the business’ working capital/liquidity requirements over the next 18–24 months.
In this article, we discuss some of the key areas of focus that business owners and managers should prioritise when undertaking an early assessment of business operations to ensure that productive functions are reflective of a new operating environment. This is especially important where Coronavirus (COVID-19) has led to a significant change in the business model.
Whilst some sectors, such as the food and grocery, pharmaceutical and takeaway delivery, have been boosted by above-average demand for their products, others have not been as lucky.
The drastic effect of the pandemic on many of the social constructs we have come to take for granted has accelerated the demise of outdated business models (for example, brick and mortar multi-site retailers), whilst forcing some businesses within other sectors to reimagine operations that may have to be adapted to new commercial realities as we exit lockdown restrictions.
The range of issues that owners and managers will focus on when considering ways of right sizing operations will naturally vary by sector and some will be specific to individual companies. However, from our experience, there are some pre-requisites that should be included in any assessment of the adaptation of operations in a post COVID-19 environment. These key areas of focus are discussed below:
Market research and sector analyses
Forecasting future revenue is not an exact science but the unprecedented impact of the pandemic on the revenue/customer base of many businesses has made this a particularly difficult task.
We therefore recommend that businesses, where possible, should consider engaging market research consultants to provide the latest insight on market conditions and outlook in the relevant sector. The input of these experts can help business owners more realistically model the expected impact of key factors (for example, the effect of the pandemic on customers’ buying habits) on the target's ability to deliver its forecast results.
Review and understand supply chain landscape in a post COVID-19 environment
The COVID-19 outbreak exposed the vulnerabilities of many businesses, especially those that have a high dependence on China, to meet raw materials or take delivery of finished products. Anecdotally, we have heard of businesses that were unaware of how many layers there were in their supply chain.
We recommend that businesses should consider root and branch reviews of their supply chains in order to map out the individual linkages and undertake risk assessments of the potential points of vulnerability. This should enable mitigations to be built into the supply chain going forward.
Business and operational model review and assessment
The impact of the pandemic on the commercial world has meant that some business models have been rendered redundant, whilst new ones have been created in response to the necessary adjustments society has made to undertake routine activities.
We would advise business owners to consider undertaking a review of their existing business model in order to validate whether it remains fit for purpose post COVID-19. The following key questions would be pertinent to consider: Can the business move to a more online or digital model?; Should the business operate with less physical sites/office space given the normalisation of working from home?; and Is the business able to refocus its operations to meet new demand/markets that have arisen due to the pandemic?.
The above considerations are not meant to be exhaustive but should hopefully provide some useful guidance as businesses try to plot their own routes back to some kind of business as usual.
