The word sustainability has come to be synonymous with “green”, meaning environmental. But for businesses, sustainability takes on aspects of survival. I call it the ability to handle the hiccups. Making your business sustainable means that it can weather unexpected shifts: market changes, cash flow, personnel, legal and client base. Each one of these on their own can be a challenge to address. I’m going to do a dis-service to all of them by providing a capsule view of what is involved in each.
Market changes. Service based companies – and consultants in particular – have a tough road when the economy turns sour. High levels of service become discretionary. Your task is to position your services as essential, with added value thrown in because your expertise tells you it is critical to your client’s success.
Cash flow. This iceberg sinks more businesses than any other, and I am constantly amazed by how few see it coming. And there are so many ways to manage this: Payment terms. Deployment fees. Progress billing. Short term work. Replicable reports and audits. Contract work force. And a working line of credit.
Personnel changes. The smaller the business, the more reliance on key personnel. Especially the owner-manager, who is usually also the main sales force. Ensuring continuity of operations and sales are separate plans and processes – don’t lump them together. The good news is that these are also critical when you want to sell a business, so in stabilizing now, you also make your business more valuable.
Legal issues. This is usually a blind side attack – a lawsuit, or a change in legislation. Your best protection is always good governance, which limits liability and exposure. Governance isn’t only for the megaliths. And of course insurance.
Client base. Diversifying your client base is hard for most small companies, but always worth the effort. You dream of landing the whale, then when you have it fear of losing it. If your business doesn’t allow you to add small fish, and grow with them, then you need to change the model. Whaling on its own, is never sustainable.
Each of these hiccup handling plans does more than bring peace of mind. They reduce risk. They ensure manageable situations – even when things pile up at once. And every one of them adds value to a potential sale of the company. Stability, and long term gains – sounds sustainable to me. And worth the effort.