The traditional view of profitability to rebuild your business
COVID-19 has had a huge impact on the business community. The economic outlook is uncertain for many, however, one thing is certain - firms must adapt quickly to the current environment and maximise their financial strength in order to give themselves the best chance of survival.
For many companies, rebuilding means trying to return to pre-COVID levels of business and traditional ways of working. However, some businesses still see profitability solely in terms of increasing sales or reducing the cost of sales.
However, that traditional view of improving your financial strength may not be possible at the moment, or it may take too long. To thrive after the pandemic, businesses may need to completely rethink their route back to profitability.
For example, when we look at overheads, all too often some of these are simply viewed as the cost of doing business, with many leaders not realising the positive impact that people management can have on optimising costs and improving profit margins.
Championing a strong company culture as SMEs
Championing a strong and responsible company culture is no longer a box-ticking exercise - it's a fundamental part of business growth. For SMEs with staff who drive as part of their job, a strong culture around managing the risks of driving for work is all-important. By playing a role in the safety and management of drivers, employers improve safety, reduce risk and save costs - which all work to enhance business outcomes.
One of the ways SMEs can achieve this is by looking at performance and employee data. Analysing the detail behind the data will often highlight areas where behaviour is impacting costs.
For fleet operators, fuel is a good example. Use, and therefore cost, can be much higher than necessary when driver behaviour isn't monitored. Good practice in this area can not only reduce overall fuel costs but it will also in turn help to build a more sustainable business over time - both financially and environmentally.
The challenge is to identify the true root cause of costs, and it may be surprising to learn that driver behaviour isn't solely the driver's responsibility. If we take a normal business with delivery drivers or service engineers using a fleet of vans as an example, a high number of accidents and excessive fuel use might both be the result of drivers speeding. But can a business be sure it isn't the work schedule that is encouraging drivers to speed? If the work schedule is the problem, no amount of telling drivers to slow down will have any effect.
As a result, both managers and employees - across all businesses and industries - need to accept a share of the responsibility in order to achieve significant and lasting improvement in business performance. Championing a strong culture of doing things ‘the right way' is a necessary step on this journey.
Managing talent to drive business growth
An important aspect of a strong company culture is effective staff management. Driving for work, whatever the job role, is business and safety-critical function. It needs to be both performed and managed to a high standard because, in addition to the traditional argument around reducing costs and driving efficiency, it can also have a huge impact on customer service and the reputation of the business.
By valuing staff, understanding the environment in which they operate, and undertaking proper training, businesses will engender the behavioural change required to deliver an improvement in profitability - and this is true across all businesses, both big and small.
How to rethink profitability in a post-COVID-19 world
COVID-19 has changed the world of work and impacted all businesses. But there have been lessons which can be harnessed to drive profitability and performance, as we slowly return to normal in 2021.
Firstly, businesses should not just blame their employees when things go wrong. Instead, through engaging employees to find out what challenges and risks they face on a day-to-day basis, businesses will learn new insights about their business performance, and how to optimise costs and reduce overheads to drive growth. In turn, through valuing the contribution of employees, businesses will foster a better and more collaborative working environment which will create an engaged and high performing workforce, who enjoy their work and value the company they work for.
In addition, measuring and monitoring is key. SMEs should look to measure and monitor all aspects of their business operations, asking for regular reports, discussing them at board level, and using data to inform business decisions - this will make the business accountable and resilient in a challenging post-COVD-19 environment.
Finally, SMEs should lead with conviction. Whatever industry they operate in, and whatever products or services they provide, Directors need to identify what may now be new business-critical areas of their operation, and strengthen company culture and management effectiveness. Businesses that embrace good practice across all areas of operations will be the ones who grow rapidly in the future.
Rethinking profitability will therefore keep SMEs one step ahead of the competition. With many businesses continuing to focus on reducing overheads with a view to returning to normal, pre-COVID-19 levels of profitability in the near future, businesses who champion a strong company culture and invest in their talent will reap the benefits as the post-pandemic recovery continues.
