Failing to take action because of a lack of data means you will not spot risks and could miss out on opportunities. Learn how automated metrics can help you maximize efficiency.
The latest economic figures should leave us all in no doubt about the severity of what’s in store. In the space of a couple of months, the UK’s economy has shrunk by more than 20%, enough to make the financial crisis of 2008 look like a walk in the park. A storm is coming and every business will need to get ready.
Key to the preparations will be data. Accessible and well presented.
Evidence from the past shows that those businesses which react earliest to a downturn have shown more stability than those which were slower to move. If you implement a plan early to improve your cost efficiency, you’ll have a better chance of not only surviving the coming storm but thriving.
The coming storm
The biggest challenge of the current situation is that it’s so full of uncertainty. This is a downturn like no other, and we don’t have too many examples to fall back on. One thing appears certain, though, that every organisation in the automotive industry will experience a downturn compared to where they would have been otherwise.
The only question is how bad it will be? We’d advise modelling three different scenarios.
- Modest downturn: This is a relatively short-lived recession in which economic activity bounces back almost as soon as lockdown restrictions are lifted.
- More severe recession: A serious and lasting recession which impacts business performance for years.
- Full-blown depression: A major economic crisis on the scale of the Great Depression.
Each scenario will present slightly different challenges, but you’ll still be focusing on two main objectives:
- Stabilise the business which will eventually protect it from downside risk and ensure that the necessary liquidity is readily available.
- Identify ways to capitalise on the downturn in the long term.
In short, you need to survive the immediate fallout and identify how you can grow in the future.
Automated metrics help you track and guide yourself through these two objectives which will, in turn, help your business stay strong during and after the crisis. Maximize efficiency with automated metrics
Automating data can maximise efficiency
Of course, identifying the challenge is the easy bit. Most businesses already understand that they need to prepare for the worst. What’s more difficult is whether you can find those efficiency and productivity improvements.
A lack of data leaves managers and business leaders having to make quick, vital, decisions based on an incomplete picture. They are left scrambling around trying to address symptoms without a full understanding of the underlying cause.
With automated metrics, on the other hand, you can maximize efficiency by:
1. Forecast the yield curve
One of the most closely watched indicators of an impending recession is the “yield curve.” This curve usually translates to the yield that different costs centres are producing for every penny put in.
The steepness of the yield curve should be an excellent indicator of a possible future economic crisis. Inflation tends to be positively related to activity and the expected inflation component may give you a clue about future growth.
2. Customer confidence index
The thinking behind this factor is simple: if your customers are confident, they will be more likely to spend. If not, they will retreat into their shell. Reduced spending is likely to lead to a more severe recession. However, your business can still sell to both types of customer.
Let’s look at these two scenarios through the lens of the automotive industry.
- The optimists
Customers who are enthusiastic will keep the business going. They will consider taking a car loan or use their savings. Demand will stay strong because these customers will still be making purchases.
The pessimists If your customers are pessimistic, they will not use their savings or make unnecessary spending. Demand for new or used cars is therefore likely to drop off. However, these customers might want to get more out of their older cars to extend their life.
They might want to make changes or buy new parts to make their car better or more efficient. This audience might not be willing to buy a new car, but they can still provide decent revenue.
3. Assisting the growth of hackers
Growth hacking is a term used to describe strategies focused solely on business growth. A growth hacker uses low-cost creative strategies to help businesses acquire and retain customers.
- Growth hackers focus solely on strategies which could help your business grow.
- They use low-cost innovative growth strategies.
- They analyse and test the effectiveness of these strategies.
With better data, you’ll be able to see how to set growth priorities, identify various channels for gaining customers, measure the success of your strategies and scale growth for the future.
4. Utilitarian resources allocation
Effective use of resources will be critical. During a growth phase, you’ll buy assets and recruit new members of staff. However, some of these may go underutilised. The arrival of an economic downturn is a good time to get rid of any unwanted resources which are not essential or driving value.
Automated data will help you calculate the live and average utilisation of inventory over the past year. You’ll see which assets are used regularly, and which are sitting idle.
You’ll also be able to evaluate the performance of your employees. Salaries are a major expense and, although nobody wants to cut jobs, you may have to cut back on that personnel who are not contributing to business performance for the good of the wider business.
Aside from salaries, another major factor is office space. You’ll be spending a huge amount of money on rent and maintaining office space. If you find practices are no longer cost-efficient, you can consider discarding them for the duration of the downturn.
5. Renewal of standard operating procedures (SOPs)
When a procedure is implemented, there has to be a continuous evaluation of its effectiveness. A procedure that does not help the business increase its effectiveness and efficiency need to either be removed or renewed. For this we need to understand:
- Why was the SOP established in the first place?
- Is it still relevant in the current period?
- Are there cheaper alternatives, to reduce expenses?
All these questions can be accurately answered with the automated data and then management can evaluate and make decisions keeping the past, present and future of the business in mind.
Exploring opportunities and reducing risk to maximize efficiency with Automatedmetrics
Thriving during a downturn is a major challenge. It requires much more diligence and skill than during times of economic growth. However, the rewards can be much bigger.
If your business adopts the right strategies during this time, it will not only survive but will be in a better position to thrive when the inevitable upturn comes.
This is what we help our clients with. At Automated Metrics, we take them through the entire process of understanding the crisis, analysing their position and identifying the best possible outcome.
We’ll help you focus on yield producing initiatives which help you prioritise each process, optimise the use of resources and identify those opportunities which might arise.
To find out more about Automated Metrics and how we can assist with crisis management, schedule a call today.