Wednesday, May 18, 2011

Having choices is essential to business agility

The economy shows signs of picking up momentum, yet unemployment, housing values, and world events remain unsettled. Funding is still elusive for our businesses and our clients, yet banks are reportedly hoarding cash. We are seeing more activity than we have since the fall of 2008 (yes, the double meaning is intended), but will it translate into actual revenue?
Mixed signals and uncertainty create more personal and business stress than times of clear direction. Is it better to hold onto our cash and live to fight another day? Or is it prime time to risk investing to gain market share and get a leg up on our competition? We all have responsibilities — to ourselves, our families, our teams, and our clients — and investing in the wrong areas at the wrong times could spell disaster.

Finding Options

In times like these, having all my chips on one uncertain investment or direction is too risky for my taste. I like options. I want to seize opportunities as they arise, but I also want the flexibility to pull back if those opportunities lose momentum. Think “nimble” — a mouse dancing in the moonlight.
Diversified services. Options come from looking at our business as a “portfolio” balanced to suit our appetite for risk. Large, design-intensive renovations such as additions, kitchens, and master bedroom suites offer great returns in good times, but they dry up quickly when clients are forced to focus on need-based projects and repairs.
To balance this risk, we try to serve our clients regardless of project size. Our smallest project last year was $78; our largest was more than $700,000. We have also balanced our business portfolio by offering services beyond just home remodeling.
Variable costs. Options come from making our costs as scalable as possible. We have blended more independent contractors with in-house labor over the last two years. We are using more temps in the office to fill short-term needs, and we have outsourced more elements of our business, such as payroll, hosting services, and graphic design. Hedging our decisions through investments in variable, rather than fixed, costs allows us to be nimble.
Team effort. Options come from transparent communication with a committed team. My goal is to have the entire team on the lookout, not only for risks and new opportunities but for creative reinvention strategies as well. To achieve that goal, they need the authority to think creatively, which requires knowing where the company is heading and understanding the decisions we make. And they need to be committed — to doing what’s best for the business, to breaking out of traditional boundaries, to wearing multiple hats. Team members need to become “utility players,” adding value in myriad positions.
Every business is affected by forces that it cannot control — competition, the economy, even the weather. Effectively positioning around these externalities, especially in such uncertain times, is a competitive advantage. We are following the path of flexibility through options — a mouse dancing in the moonlight.

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