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Albert Einstein famously said, "In the middle of difficulty lies opportunity."
The economic impact of the COVID-19 crisis has been vastly different across business and industry. Restaurants, retail, and travel have been decimated, while most food processors, grocers, and medical equipment companies are booming like never before. For the rest, there is a notable impact, but the big question is how long and how deep will this crisis last?
Many experts predict that the economy will slowly build momentum over the coming months as stimulus funding takes effect and businesses adapt to new processes of operation. Once a vaccine is widely introduced, will the economy roar once again? Many think so. However, no one can be certain what the next couple of years will really look like. So how do you lead your business, make key decisions, and manage finite resources during this time of uncertainty?
While these are certainly historic and unprecedented events, it is not the first time our country has seen tough times. There are countless examples of great companies that have endured extreme struggles and emerged stronger. For this to happen in your organization, there is no perfect formula. The optimal strategy will differ by business and industry, as every enterprise has its unique trials and opportunities.
Managing your business during uncertain times can be challenging; however, the following are key recommendations that can make the difference for both your short-term stability and long-term success.
Strong leaders emerge in tough times. While you may not have all the answers, transparency and ongoing communication can go a long way toward minimizing panic and steadying the ship. Your team will be most influenced by its leaders, including your ability to remain calm and confident as each of you navigate this new reality for your business.
Outlining a near-term strategic plan that every team member can understand and participate in is a great first step. While you can't promise it will be easy or guarantee the outcome, instilling a sense of "we're in this together" and "we will put in the hard work as a team" can be galvanizing.
Also, by showing empathy and humanity toward the difficult circumstances your people are facing, you can further cement your team and motivate them to fight past obstacles and win. Your people will always be your greatest asset, so continue investing in them.
The same type of proactive communication is critical with your customers and suppliers, as well. Ensure that your customers are well informed on how your operations may have changed, how it may impact them, and what they can expect moving forward. You must reassure your customers that you will continue to deliver. Without this confidence, they may determine they need to find support elsewhere. It is times like this — delivering under pressure — that can result in "customers for life." If you are not able to continue serving all your customers, proactive transparency goes a long way. You may be able to assist them in finding alternative solutions to bridge any gaps. They will remember how you put their needs first and helped them, which may help you restore them as customers when things return to some state of "normal."
Preparing an in-depth cash flow model that forecasts cash requirements over the next week, month, quarter, and year is a must. This will allow you to simulate various scenarios ranging from worst-case, most likely, and favorable outcomes. Each week, take the time to compare your actual cash flow to your plan, and then update the plan.
In the near term, non-essential spending should be limited or eliminated completely. Ensure that adequate controls around purchasing are in place so that only the "right" expenditures are made. Revisit credit policies and stay on top of collections. Be cautious about selling to customers who can't pay.
Do you have any older, slow-moving inventory? Any old accounts receivable you have not been able to collect? Or idle equipment you could sell? Consider selling old inventory/equipment at a discount or offering customers a discount to settle up old accounts.
You may not recover all of your costs, but thawing these frozen assets could boost your cash position and help you through this period. You also may want to consider offering early payment discounts on current sales, as well.
If layoffs, furloughs, or pay cuts become a necessity, be transparent and decisive. Don't drag it out and fuel the uncertainty for your team. Take the actions needed, and reassure remaining employees of your plan moving forward.
For those business leaders with the strongest balance sheets, economic instability can be a golden opportunity to invest for growth, when everyone else is retreating. The cost of debt capital is low, particularly via the new SBA programs.
You also may want to consider restructuring debt in order to help cash flow. Low interest rates and the possibility for extended payment terms can provide significant near-term relief. There is also the possibility of adding a minority equity partner for growth capital and/or personal liquidity needed during this time.
Have you lost any major customers to a key competitor in recent years? Or lost out on new business to a great new prospect? Now could be one of the best times to revisit those opportunities and initiate communication with prospects. While your competitors may be struggling to serve customer needs, showing your ability to deliver and support them during difficult times can go a long way in the eyes of the customer. Even if it is just a check-in, letting prospects know you are thinking of them during this time is a plus.
With change and disruption, there always comes new opportunity. The needs of the marketplace are different now. What new products or services can you provide that meet the pressing needs of today? Is there a strategic pivot you can make in order to respond to these needs?
Most companies are playing defense right now. There is tremendous opportunity out there for those willing to play offense too.
Do your employees have the ability to continue to be highly functioning in this environment? Do you have the technology tools in place to communicate and serve your customers from anywhere at any time?
Consider forming a task force within your management team whose sole objective is operational efficiency in the new work environment. Look for bottlenecks and any areas where tools are lacking or processes need updating. There are a host of virtual communication tools available today. Ensure your people have the tools and resources needed to deliver excellence. As you add new technology solutions, stay on top of cybersecurity risks.
As we saw during the last recession, some of your competitors may become distressed. Some may not survive. As the economy eventually stabilizes, you may have significant opportunity to expand. There may be key acquisition opportunities at valuations you would not have expected. There may also be many talented employees suddenly in the job market who can be hired to strengthen your team.
Keeping tabs on and even reaching out to your key competitors during times like these can generate new opportunities for your business.
In times of crisis, we can end up in survival mode, taking things day by day. There are times when this may be necessary. But as you take the steps needed to stabilize your organization and your team, keep one eye on the immediate, near-term needs of the business and the other eye on the future. Remember the vision and your plan of how to get there. You may take a detour or head down new paths, but with your sight on the horizon, remain focused on the ultimate destination. Look for little victories along the way, and embrace the journey.
Delap has been supporting local companies in the pursuit of their goals for over 87 years. If we can be of help to you as you lead your company through the uncertainty of today, please reach out to your Delap advisor or contact us.