Smaller Industry Firms Continue to Face Challenges

The timber and forest products industry has many opportunities and threats on the horizon. While industry giants like Weyerhaeuser and West Fraser have vast resources to adapt and survive threats, smaller firms confront a more uncertain future. The owners and managers of these smaller enterprises can experience high levels of stress associated with increasing competitive pressures and fears of declining revenues and profits.

How bad can this stress and fear become? I long ago had an extended conversation with a friend and small business owner who claimed that he would do just about anything to keep his “baby” alive. He admitted that his despondency and desperation with his declining business had eventually led him to instances of tax evasion and customer fraud. We also read occasional accounts of business-related causes for individual mental health crises and suicides.    

There are certainly personal and family risks for those running a small business. Perhaps the most important resource for them is having a personal support system of a few family members, industry friends, or advisors with whom they can openly discuss, and possibly discharge, some of their frustrations. Among the possible reasons for their worries or concerns are the following threats that many smaller companies are currently encountering:

* Technology Adoption: Advanced technologies like precision forestry and remote sensing will continue to transform the industry. Many smaller companies can struggle to implement costly innovations and can risk decreased competitiveness.

* Sustainable Practices and Industry Regulations: Sustainable forestry management practices are becoming more the norm, and smaller firms can have limited resources and take more time to meet industry standards. Industry regulations, influenced more by inputs from larger companies, can be burdensome for smaller operations.

* Market Access and Supply Chains: Geographical market diversification can help companies buffer downturns in particular regional markets. Smaller enterprises often have difficulties expanding their market reach and developing robust supply chains.

* Workforce and Skills: The industry faces shortages of certain types of skilled labor. Smaller organizations can lack effective recruitment means, comprehensive training programs, and adequate career development opportunities. This can lead to lower productivity and higher turnover rates for more talented employees.

* Leadership Succession: Many smaller and family-run businesses have uncertainties or problems when experienced managers retire. Effective leadership transitions are needed for long-term success.

* Financial Constraints: Smaller firms often struggle to access tailored financing options. Financial institutions may view them as higher risks, leading to less credit availability and higher borrowing costs.

These and other threats confronting smaller production, supply, and services firms in the industry can seem intimidating or downright discouraging. So, how might smaller outfits strategically position themselves to try to navigate through many of these threats and find emerging opportunities? These basic approaches are often recommended.   

* Collaborate and Network: Consider partnering with other small firms within and beyond existing industry associations and sharing knowledge about changing market conditions and potential adaptation strategies. Try to work together to inform policymakers about the unique challenges of smaller operations.

* Expand Market Research: Look beyond local markets to identify global trends and opportunities. Utilize free or low-cost generative AI tools and other means to gather available industry information. Possibly hire part-time researchers, such as college students or retired professionals, to supplement in-house capabilities for research and AI assistance.

* Find Possibly Underserved Market Niches: Try to identify an alternative or additional niche where your firm might eventually be able to compete. Start by defining your existing and potentially unique capabilities, whether these are product quality, service advantages, or other attributes.

* Modernize Your Marketing and Customer Engagement: Develop a stronger brand identity. Enhance your online presence through a user-friendly website and social media. Explore possible e-commerce options to reach a broader audience. Use storytelling and compelling narratives to showcase your commitment to the environment and community.

* Improve Financial Management: Explore new funding sources, including government programs and alternative private financing. Try to benchmark your financial practices against top competitors. Focus on effective forecasting, budgeting, and cash flow analysis.

* Prioritize Risk Management: Develop better risk assessment and mitigation strategies. Remember that smaller firms often have less cushion to absorb unexpected setbacks.

I could certainly add to these possible initiatives. One consideration is updating quality controls related to your operations and services. Another is trying to improve your employee work culture.

Careful analysis of what seem to be your existing company weaknesses should help you identify one or a few higher-priority concerns upon which to focus for the near future. That concentrated approach is usually more practical than scatter shooting at all or many activities and spreading your limited resources too thin

After identifying one or several areas for strategic focus, next try to set clear and achievable objectives. These should be specific, measurable, and time-defined objectives. Don’t forget, also, to assign responsibilities to certain individuals or groups for each of these objectives.      

I would further suggest that small business owners think about refreshing their knowledge of strategic management. Simply requesting a sample profile of a strategic plan for a small firm in their niche of the industry from a free chatbot such as ChatGPT 4o or Perplexity might be helpful. A quick review of a recent book on strategic management for small businesses could spark a few ideas also about how to improve a firm’s chances of survival, even under possibly adverse industry conditions.