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How to spot a resilient business

Start Your Business
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6 Min Read

The last year has shone a spotlight on the long-term future of the UK’s business sector, its reliance on people and the need for business resilience. It was crucial to protect the financial security of consumers so that they could continue to conduct business with each other, and that was understandably Chancellor of the Exchequer Rishi Sunak’s priority, with the unprecedented introduction of Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and furlough schemes. But while businesses across the country have shown extraordinary levels of adaptability and strength in the face of changing consumer behaviour, it must also be acknowledged that many are beyond the survival stage.

Going forward, we should be focusing our attention on identifying, prioritising, and protecting our most resilient businesses and sectors, avoiding exasperating the zombie status of many UK companies, living off an ever-increasing debt pile. Other strategic sectors will require specific longer-term government intervention to ensure their survival, such as those that rely on inward tourism.

So, what constitutes a resilient business and how can you spot and protect one? The pandemic has unquestionably focused our attention on resilient businesses as we have witnessed firms rapidly adapting and responding to all types of risks with sectors closing overnight, industries being mothballed, cashflows being decimated, working practices being altered, technological issues, production challenges and many more. With this backdrop we believe there are five fundamental pillars that you should look for when assessing the robustness of a company, namely:

1.     The company’s operating location

2.     The longevity of the market

3.     The sector’s competitiveness

4.     Barriers to market entry, and

5.     Your business’s USPs

6.     The company’s operating location

It is important to determine the stability of the market in which the business operates or plans to operate within. How much interference is there from government? Is the rule of law fair to all? How has the market performed economically in the past? Is it a country that permits free and open trade for all? Looking at the UK, it does historically have that structural level of robustness which can be evidenced by how such a major challenge as Brexit is now forecast to be little more than a short-term blip to GDP. The pandemic has also demonstrated the UK’s ability to adapt, remain productive and has cemented the nation as a strong and fertile market for growth businesses.

2.       The longevity of the market

Look to see that the market in which the business operates has longevity and support from its government. In recent years, the UK government has focussed its efforts on and supported certain markets such as infrastructure, agriculture, bio sectors, real estate and the ‘green’ sectors. By using trade body content, relevant market associations’ publications, government generated statistics and relevant press cuttings, one can take a view on the future sustainability of any sector.

3.       The sector’s competitiveness

Evaluate whether the sector is overly congested or dominated by a small handful of brands. Where will or does the busines fit amongst its peers? Is there a chance that the business simply cannot gain a foothold or a sustainable level of scale? Ensure you carry out your own thorough research on the competitive landscape and check to see how viable expansion is for the business in its chosen sector.

4.       Barriers to entry

Look to see how the business can enter the market. Has it the competencies to enter alone and compete successfully, or can it bring a scarce resource to an existing market player via a joint venture, or should it acquire an existing player? All three do not necessarily disrupt an existing market but present a situation where competitors may respond or quench any potential growth or gap in the market – considering your competitor’s response to your entry should form part of your strategy. It is vital to see how the business plans to enter or has entered a market to gauge its potential long-term resilience.

5.       Your business’s USPs

Finally, look comprehensively at your business and determine what core competencies it has that will allow it to be successful in the long term. What makes your business different to others and why will it be successful? What scarce resources does it offer and how are they allocated so that players in the market will ultimately not be able to do without? Most importantly, do not be afraid of trusting your intuition on a business as it will often hold true and, as Blaise Pascal once said, “The heart has reasons that reason does not understand.”

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Start Your Business April 14, 2021
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