Adapting to Evolving Market Demands and Business Models
By Hector E. Aguililla, CPA
The pandemic and subsequent years of economic uncertainty have proven that change is the one constant that business leaders must accept and must continually prepare for not only to survive, but also to thrive over the long term.
Changes may involve modifications to specific segments of a business, such as: narrowing or expanding geographic distribution, products and service offerings; implementing new marketing and sales strategies; upgrading technology; or establishing new processes to comply with the latest regulations. Other times it calls for businesses to make drastic departures from their established strategies and to construct a new model from the ground up.
In both cases, businesses must evolve with the times and identify additional revenue streams to remain viable.
Risk Mitigation and Value Enhancements
Businesses do not change strategies overnight. Rather, their evolution requires a significant investment of time and resources and careful planning to conduct a 360-degree view of current operations, analyze feasible strategies, develop and implement plans, and allow employees, customers, business partners and all stakeholders the appropriate time to adapt. Doing so successfully is a team process and requires the counsel of trusted business partners, including accountants, lawyers, business consultants and branding specialists. By relying on the experience and expertise of these professionals, businesses may align proposed transformations with appropriate legal and tax strategies that serve to mitigate risks and enhance value opportunities.
Along the path to transformation, businesses should consider the following questions to help design a game plan that they may turn into an operating reality:
- Will diversification require a merger, acquisition or partnering to bring about intended change? If yes, how will the transaction be structured? Will the new structure require a review or audit?
- How can businesses be structured to optimize capital, improve tax efficiencies and minimize liabilities?
- How will businesses ensure that corporate strategies align with tax strategies?
- Will businesses need to divest themselves of current assets and, if yes, how will they do so and can they write off those assets?
- Will businesses need to invest in new assets, systems and technologies to improve productivity and sustain efficiency?
- Does implementation of new assets bring with it tax credits from which businesses may benefit?
- Will companies need to hire additional staff or outsource specific roles and responsibilities? If yes, how will they be integrated into the existing business structure?
- Are there newer or better technologies available to reduce costs and improve operating and management efficiencies, including product development, manufacturing, inventory management, logistics, payment processing and sales and marketing?
- Will new business models face international, federal, state and industry regulations with which companies will need to comply?
- How will businesses implement new protocols, rights and pricing terms?
- How will businesses structure their internal controls, including segregating duties and managing, recognizing and reporting transactions?
- How will businesses monitor implementation of new plans and maintain intended goals?
- How will businesses roll out the new strategy and gain buy-in from employees, customers and business partners?
Focus on the Future
Business model reviews and transformations are vital tools in the management-planning process. Often, market changes occur so quickly that businesses never see them coming. As a result, opportunities may be overlooked and previous strengths may morph into future weaknesses overnight. To avoid this common trap, businesses must keep an eye to the future, remain diligent in their constant efforts to challenge the status quo and work with their advisors to implement changes in the most efficient ways possible. Their survival depends on it.
Hector E. Aguililla, CPA