August 17, 2022


Skillful Business Crafters

How Supply Chain Chaos Is Triggering Small-Business Pivot 2.0

As President of the Americas, Tony Ward leads Xero’s businesses in the United States and Canada.

For small-business owners who’ve been balancing on the edge since the pandemic hit, the effect of a broken supply chain has to feel like being handed an anvil. It’s without question the forcing event for the next survival “pivot” they’ll have to make. The issue is that this latest anvil — the pandemic’s cascading disruption of production and distribution systems — lands on small businesses as the make-or-break holiday season looms into view.

Nearly 70% of small businesses in the U.S. consider the winter holiday season their top revenue opportunity. But as the holiday season approaches, the supply chain mess means they can’t sell what they don’t have; they can’t assemble what they can’t procure; and they can’t get their product to market if their buyers are farther away than the distance the average farm-to-table carrot has to travel.

The solution isn’t imminent. Pandemic quarantines have cut into factory production, closed shipping ports, and backlogged rail and trucking capacity so completely that supply chain analysts are forecasting disruptions that could last for years. That’s a tough outlook for owners and their staff who have held on this long — through adaptation, resilience and self-sacrifice. They’ve gotten very good at calculating how to buy time, in relatively short bursts. 

They calculated how to stretch payroll, negotiate with creditors, what to delay, reduce or abandon; how to extend hours, accommodate remote work, digitize customer transactions and fundamentally change it all when the unimaginable happened, and physical proximity among humans was no longer available.

Last year, those who bought enough time to see the holiday season were rewarded. Retail spending increased 8.3%, more than double the average holiday season increases over the previous five years, according to the National Retail Federation.

That included an almost 24% increase in online and other non-store sales. The shift to online was underway well before March 2020, for sure. But the virus became an unmistakable inflection point in the proof case for digital transactions.

It was the center of the first major “pivot” — a word that strikes me as a monumentally understated way to describe the creativity and effort involved in repositioning a business and how it makes money. But so be it.

Pivot 1.0 was about the digitization of the “front office,” the transformation of what happens at the point of customer contact, including a lot of the more straightforward actions such as extending hours or beginning a delivery service.

Pivot 2.0 will be different. Dealing with this level of global uncertainty shifts the action to the “back office” and all the nitty gritty operational work of optimized inventory management, demand forecasting, cash flow management, contracting and procurement.

Three Points For Owners Plotting The Next Stage Of Their Survival Strategy

First, Covid-19 created a rush to digital technology and cloud adoption as the foundations of access to data and applications, business insight, resiliency, security and data integrity. What was once a choice became a mandate. That only intensifies in a world becoming increasingly unpredictable.

Second, making decisions on information technology isn’t necessarily the home field expertise of a gym owner, brewer, home builder or life coach. As the adaptations shift from front-office interactions to back-office operations, small-business owners have to grant themselves permission to let go of the old notion that because they started a business on their own, they have to go it alone forever. Especially in a world where the degree of difficulty is this high, attempting to be a stand-alone source of correct choices on everything from real estate and taxes, to government assistance and every relevant app is a bad play. Open up, and take advantage of the expertise of attorneys, accountants, tech geeks and bookkeepers.

Third, think locally, and act locally. The pandemic exposed the downsides of global supply chains and just-in-time inventory management approaches. Rethinking the size of the markets you serve and which supply your operations — less distance on both fronts — limits the threat of delays, increases control and reinforces the local economy. 

Performing another set of minor miracles might salvage the upcoming holiday season for many of the people who make their living in small businesses. On a personal note, if you can help over the coming weeks by prioritizing small businesses in your holiday spending, this is the year to do it. That choice might just help a small business buy enough time to make their next big pivot, one more time.

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