Many small business owners are struggling with increasing costs specific to Direct Labor increases, cost of Healthcare Benefits that were just added to attract team members, signing bonuses for new hires, Inflation and Raw Material cost increases. In most cases the customer will not accept any pass through of cost which puts 100% of the risk on the small business that is working hard to survive.
How do you as a business owner navigate through this difficulty? How can a small business mitigate the risks discussed above? How can a business owner turn this difficult scenario into an opportunity to reinvent the business?
All good questions!
The bottom line is change in a business is typically only enabled when the current duress puts the viability of the business at risk. The best businesses are taking this opportunity to retool, pivot and reinvent business as they know it! In manufacturing businesses, the greatest opportunity to offset increasing costs is to focus on the processes and radically redefine manufacturing. In ALL manufacturing businesses there are opportunities to reduce waste, improve productivity, reduce inventory and most important is the potential to shift the culture of the business. At times like this team members are looking for leadership and direction. This will attract new team members and retain team members.
Continuous Improvement (CI) is often misunderstood, and often business owners believe that this is an Automotive tool that would not apply to their business. I have seen CI implemented successfully in many industries. Personal experiences would include Automotive but also Food, Aviation and Aerospace. Proper implementation of CI will offset increasing costs as discussed, change the projection of your business, and create Enterprise Value for the owner. The proper implementation of CI will improve the Enterprise Value at the time of sale of the business by as much 200%.
