By Martin Gurney, partner at Haines Watts
The coronavirus pandemic and constant theorising of worst-case scenarios in 2020 prompted businesses to scale back their growth trajectories and postpone usual strategic planning.
Now, as restrictions lift, many business owners have put growth plans back on their list of priorities. While there is no one-size-fits all advice for kickstarting business growth planning, there is one thing all owners can harness to make these a reality – business confidence.
The metric has come a long way since John Maynard Keynes coined the term “animal spirits” to describe the emotional mindsets of businesses leaders.
Going far beyond sentiment, business confidence is measured and reported on as an indicator of business owners’ expectations and intentions for the months ahead. It surveys their business activities including investments, recruitment, pricing strategies and their balance sheets.
How confidence plays a part in long term goals
Surveying businesses across the United Kingdom, Statistica calculated a 102.3 business confidence index score in May 2021.* This shows business confidence is at one of the highest levels on record for the UK and represents an 8.2% increase on the same time last year, which sat at 94.6.
As we begin to see partial resolutions to political controversies like Brexit, and we have a realistic view of coronavirus’ impact, business owners are in a far better position to make informed decisions.
With leaders looking at the coming months with optimism and confidence, it will be clear to see which businesses are resuming growth plans, as spending, investment, and recruitment all ramp up back to healthy levels.
Why your business strategy should go beyond simply ‘hoping for the best’
For months now businesses have been protecting themselves against the projected worst-case scenarios by operating on cost reduction methods. Government interventions such as the furlough scheme and continuity loans also helped to tide businesses over until economic recovery allowed a return to normal operations.
What I have noticed as the most common approach to self-preservation is dialling back cost and effort without switching off income streams. By suspending activity temporarily, they are preserving the momentum and structure required for sustainable growth. These income channels take considerable time to establish, so walking away from them creates a huge lead time to get started up again.
Whilst a necessary precaution, working under these circumstances and fearing the endangerment of businesses for such a long time risks putting leaders in a continued state of concern that makes them reluctant to push for growth again.
When people are nervous about economic conditions, they change their behavioural patterns and it creates a self-fulfilling prophecy. People stop spending and then businesses they usually support collapse, and this confirms their fears.
The path towards sustainable business growth
Behaving with confidence is key to getting your business back to its full strength and prevents further unnecessary damage to the economy.
The UK is economically more robust than people fear it is. The government has made reasonable contributions to keep the economy relatively stable and many businesses have moved passed the major interruptions caused by restrictions and dips in the economy. Whilst various hard-hit sectors such as hospitality have a long way to full recovery, the general feeling is that we are no longer looking at a full economic collapse.
With recovery in sight, the key to sustainable business growth is confidence. If business leaders and consumers alike believe that recovery is on the horizon, then they will interact within the economy in their usual manner and that spending will help the economy recover.
When business owners are overly cautious and stop investment in their futures, they lose momentum, and their trajectories slow down. Picking back up gets harder as the months go by, especially when other businesses are quicker off the block and take a larger slice of market share.
A lesson for future goal setting
Thinking back to March 2020, the outlook was grim. Even the steadiest business hands who have seen multiple economic downturns were shocked.
As we come out the other side of the pandemic, we can see that even within the hardest-hit key sectors, things have turned out much better than anticipated. Economic measures put in place were unprecedented and the breadth and depth of support has brought about an all-time high of business confidence.
This period should act as a reminder that the UK economy is robust and that worst case scenarios are just that. The best business leaders will plan for disaster but not be held hostage by it. Business strategy is built on calculated risk, and confidence is key to seeing potential for growth.