The last few months have caused many small firms to re-evaluate their business models and in some cases fundamentally change their proposition. Peter Crush outlines why a little introspection may not be a bad thing.
When lockdown first hit, few firms were more suddenly decimated than those in the eating and drinking sector. And for start-up Dines, the app-based business whose entire premise is allowing restaurants to offer its customers demand-based pricing and discounts, it was literally business as usual one day, nothing the next.
“We were doing well,” recalls founder Dil Hussain. “We had a few hundred clients but overnight our USP vanished. Even as eateries began to open, we could see that our business model would still struggle because the last thing reduced-capacity restaurants want is discounting – something that would erode their already perilous margins even further.”
Left with no choice, Mr Hussain was forced to completely refocus his approach to market by rebuilding his entire business model – creating a new online offering within weeks. It included everything from menus with on-table ordering that customers could use from their mobiles, to other innovations such as food or drink suggestions if particular combinations of options were ordered.
The latter could help restaurant owners boost average spent per head. “From helping clients boost footfall, we’ve had to pivot to being about helping clients create efficiencies,” he says.
“Our new message is we can help clients boost sales, but our table service ordering facility also means restaurants can save on wages, by not needing so many waiting staff.”
To say Dines needed a complete U-turn in its approach is an understatement, but according to recent research by software developer Capterra, Covid-19 has exposed many SMEs to the fragility of their existing models. It finds a third of SMEs didn’t have a business continuity plan before the pandemic, but already 76 per cent have had to change their offering to some degree, with 51 per cent saying they needed new investment to do so.
This is despite many not knowing if they are likely to survive – data by Bizdaq suggests 363,000 SMEs will cease trading in the next five years, while the Office for National Statistics predicts 529,000 SME sector jobs could go in the next 12 months. ‘Adapt or die’ has been the motto of big business for years, but right
now it’s a phrase that couldn’t be more
apt for SMEs.
“The strong pre-Covid economy has definitely caused complacency,” argues Ian Cooper, former Visiting Professor at Henley Business School and author of The Financial Times Guide To Business Development. He argues SMEs need to get back to basics and assiduously assess the new normal and where their market is, or needs to be. “It’s vital businesses reconnect with their customers – to ask what they now need from them, rather than wait to be contacted,” he says. “In business, 60-70 per cent is word of mouth, but this doesn’t come about by accident.”
Mr Hussain believes now is a good time for businesses to think about the long-term, rather than just short-term survival.
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“They can no longer think about what their products or services were; they have to put themselves in the shoes of their customers and understand how they might now feel about buying a product or service,” he says.
This has certainly been the case for office relocation firm Business Moves Group (BMG), which suddenly found its work ceased when no one was working in offices any more. “From enjoying an annual turnover of £15 million, work was suddenly being cancelled in March,” recalls Managing Director Rachel Houghton. “We had to totally bolt-on new services to survive: moving furniture to people’s homes (to facilitate working from home), doing working-from-home assessments and redesigning offices to allow for social distancing. But this is all stuff that will stay now.”
The key, she argues, is not being seen to suddenly flog a new service.
“The rebuilding has to be done through relationships, not transaction-based interactions,” she says. “It’s listening to customers; understanding what their new issues are and how they can now be supported.”
Fortune presents itself to the proactive. At the height of the pandemic Ms Houghton says she took a call from NHS Scotland, asking if BMG could distribute medical equipment; she simply said yes. “We definitely wouldn’t rule out adding such non-core elements to the business now,” she admits. “We’ve always had to evolve our offering as the world of work has changed, but this compressed period of rebuild has certainly pushed us into making decisions that we were already thinking about. We were considering diversifying into change management solutions anyway, and this has cemented the need to do this.”
Simon Owen, Managing Director of Manchester-based TV commercials firm Standby Productions, agrees. He took the decision to develop services that make more use of stills-photography and B-roll footage rather than sending crews out taking bespoke film footage. Again, this is likely to be a permanent service, thanks to clients backing the approach – including Cotton Traders, which ordered a new ‘ident’ done this way from the firm.
“The need to be determined and attack a new opportunity when the time is right can’t be underestimated,” he says. “I put most of my staff on furlough, but when I came to refocus the business, I actually found it was holding me back. Without my usual new business development person I was prevented from rebuilding, so I’ve now got this resource back and we’ve had seven to 10 new enquiries in just the past few weeks because of it.”
FSB’s own research, New Horizons: How small firms are navigating the Covid-19 crisis, finds that SMEs have been proactive during lockdown, with 16 per cent saying they’ve developed a new or enhanced online presence and 24 per cent saying they’ve adopted or increased their used of digital technology such as Zoom or Teams meetings.
Meanwhile, 10 per cent have actually taken the opportunity to scan the horizon and diversified into producing new services.
An offering that many SMEs seem to have easily moved into is home delivery services – 19 per cent have done this, according to the FSB research. Among those that have spotted a new business opportunity, many – including gin-maker The Bond Street Distillery – will be continuing it. “We only opened in December 2019, so not being able to run our distillery tours and bar was a major setback,” says distillery founder Sally Faulkner.
“What we’ve done, though, is create pre-made gin cocktail pouches that people can order online, and during lockdown alone we sold more than 3,000 of them. It seemed to us to be an obvious alternative way to stay afloat, but we’ll definitely keep this now. It’s a case of just rolling with the punches, and reacting.”
Ms Faulkner is no stranger to adapting. During lockdown she temporarily used her distillery equipment to diversify into making hand sanitiser (alcohol being the key ingredient) when there were huge shortages. After negotiating with the Treasury so that she would not have to pay duty on ethanol if it was used in this way, she bought 1,000 litres and had a new mini-business on her hands.
According to Gary Smith, boss of packaging firm Charpak – which temporarily switched from making plastic chocolate box inserts for the likes of Hotel Chocolate, M&S and Sainsbury’s to supplying PPE face masks – a temporary change of focus can create lasting business opportunities.
“By supplying our masks back to our chocolate manufacturer suppliers, we’ve been able to demonstrate our ability to design and produce new products quickly,” he says. “This has been great, given confidence is so important right now. The short-term switch has helped solidify our business and kept us in clients’ minds.” He also says it has opened doors to potential new business opportunities – for instance, to produce other plastic-based medical supplies.
Just getting out there and showcasing yourself is a rebuilding strategy in its own right, says Jack Izzard, founder of Rhizome PR. Faced with clients pulling back on work, he decided to create The Great British Bounce Back – a listings platform small firms can join for free (or pay £30 for a promoted listing). Journalists can search by sector or region to find and feature innovative SMEs to write about.
Done more out of altruism than to build new clients, Mr Izzard says the site has generated interviews with small businesses on the BBC’s Today programme, as well as on ITV and in countless regional newspapers. “It’s vital that people in the regions served by small firms know they are doing new things,” he says. “Since launching during lockdown more than 500 have signed up, and about a dozen new SMEs are signing up every day.”
Should all small firms take the chance they have now to refocus and rebuild?
“Absolutely,” says Ms Houghton. “This whole experience has been tough, but it’s enabled me to focus my attention on where our business needs to be for the future. Sure, it would have been easier if we’d done this earlier, but often we do just concentrate on the day-to-day. Now, though, I’ve got excitement and pride about where we go from here.”
Making a killing
Founded in 2016, high-end bespoke event-planning company La Fête normally plans and organises three or four big-buck events per month – everything from lavish weddings to milestone birthday parties, baby showers, themed afternoon teas and more. But like all firms that rely on people coming together in-person, Covid-19 meant it was suddenly thrust into a parlous situation.
“This year was supposed to be our big year, but then the cancellations snowballed,” recalls founder Charlotte Ricard-Quesada. However, Ms Ricard-Quesada regularly networks, and a planned meeting with a fellow contact about ways to adapt soon
turned into a separate business venture – The Digital Murder Mystery Co.
“At first, I thought the idea of having a virtual murder mystery would be a much-needed source of income, but it’s now turning into its own permanent add-on,” she says. In just eight weeks, the whole concept – based on having different murder themes – was created, designed and made available to customers.
Now the plan is to add more new themes every month, as well as to diversify into interactive children’s adventures. “We sold more than 50 packages in the first five weeks,” she says. “But best of all it’s given us an exciting new business opportunity. We’re even planning on taking the product to existing clients to develop bespoke murder mysteries featuring their own venues, as a way of helping hotels connect with booked customers that currently can’t stay with them.”
The new venture has also given the firm a chance to reach new markets. “Normally, our minimum big-event spend is £1,500, but this product gives us a pricing level to target those who want an experience costing less,” she says. “Crucially, this is a product that’s not only relevant to lockdown – it could have existed pre-coronavirus.”
And there’s one more thing too: she says she’s become much more business-savvy. “For La Fête I might have gone the extra mile out of passion, but it would cost me margin,” she says.
“This new venture has forced me to be much more realistic and cost-driven, and to invest appropriately to make a return. It’s definitely improved my business acumen.”