If you manage this right, you could even turn this into an opportunity.
We all know by now that the world has faced a once in a lifetime event with COVID-19. While the loss of life has not equalled to WW2 or other major wars-the health, social, economic and personal consequences have been immense. Governments have been doing their best for the welfare of their citizens and the businesses, but that will never be enough. As we can see, even the developed countries have been caught flatfooted.
As a owner or leader of a business, one has no choice but to step up to the occasion and provide the best business decisioning and leadership you are capable off. No business school would have prepared you for this scenario, and past data and experiences will only have limited validity. just remember one thing - all actions you take have to address 3 stakeholders - shareholders, customers, and employees. Taking care of only one or two won't do the trick.
So here goes
1. Protect revenue and collections
Most businesses will have 3 to 6 months visibility on revenue and collections. Do your very best to protect them. If money is due to you, in a calm and balanced manner go through a process of collecting the funds. Offer discounts or part payments options wherever you can. Don't disrupt services if a payment is late unless it involves significant capex or opex. Renegotiate contract terms if you have to. If contracts are due for renewal, renew as quickly as you can and accept as many change,as many changes as feasible to close a contract. This Is not a time to be a smart negotiator. Time is of essence. Those in retail, hospitality, food service businesses will be hurting a lot as store fronts would have shut down. Also, online currently will only be an option in some countries. While they also have my sympathy, they have a little less sympathy from me. Remember they generally operate in a negative working capital model if they are running their business right. Most/ all their sales is cash whereas they pay their suppliers on credit terms and in many cases consignment sales So. their suppliers are more in trouble then they are. Have mercy on them.
2. Manage cash flow. Like you have never done before.
To start with, one will have to assume that most of the cash coming is for services or products already provided or being provided. Assume the collection days double the average. Do not assume any new revenue streams. Then look at your outflows. Use the approach of zero-based budgeting. Firstly, protect as much of your payroll as you can. Try to minimize layoffs. Drop salary payments to each employee by 30%-50%. Anything lower than that does not have a meaningful impact. No bonuses, no increments. Defer all new hires. Force paid and unpaid leave. Try your best to stay within the labour guidelines of law. Then look at your rental expenses and attempt to eliminate/defer/discount without pattern Ming a force majeure (this may not work beyond a point). Work with your landlords. Every other line item is up for grabs. Initiatives and programs with no short term financial impact need to be postponed, put on hold. My payments to such vendors need to be discounted or part paid or deferred. Do as much of this nicely, working with the vendors as much as possible.
3. Maximise usage of government support
Every qovernment has announced incentives at a city, state, federal level.Some have made so many, it's hard to keep track.There could be changes in law that work in your favor. They may accelerate tax refunds. They may defer/eliminate/reduce tax payments. They may provide capital. They may force the banks to provide capital or accept delayed payments without penalties. They may cover part of your wages or increase unemployment benefits. It is important that all opportunities are carefully studied and fully implemented. Even In a normal year, there are often tax breaks/incentives that we don't take advantage enough. Besides smart people like Donald Trump! This is the time to do it.
4. Customer first
Most businesses pride themselves in having repeat customers, high cross-sell and upsell. Even B2C businesses die for customer loyalty. So, one has to assume your existing customers are the ones that will be the first that return to you when the downturn is done. Customer expectations focus around brand, relationship management and product/service offering. Excel In all these areas even during the downturn. Keep your brand alive through regular communication, stay in touch with your customer for service and lucky sales during the downturn, and ensure your product/service levels during the downturn exceed expectations. Offer special terms where needed. Customers will always remember that you took care of them when the chips were down.
5. Inventory management & product rationalisation
In all my years Of consulting experience, I have often seen excess inventory- at least 30%. Often resulting from 3 things -excess SKU's, too many suppliers, Door supply chain and inventory management competencies. This is a golden opportunity to clean up. Get rid of excess inventory with discounting or bundling or disposing in secondary/wholesale markets. Look at the data and Only Order your best or fast sellers for the balance part of the year, shrink your supplier base by 30-50%as it will also give you better pricing, and significantly improve your logistics competencies - especially people and technology.
6. Digital is king
Its going to be new world when this is over. Customer habits would have significantly changed. Even the older demographics will now be used to digital channels for sales and service. Existing digital solutions would have evolved and new ones would have shown up. End of server arms- everything in the cloud. Even your employees will be more digital savvy. This could be your black swan moment.
The mantra of communication is - know what to say to whom, when, and how. Don't under communicate or over communicate. Do not give false reassurances to employees. Everybody in the firm needs to be grown up about this. Explain clearly what your business continuity plan is, and that you are doing your level best to protect people's employment and payroll. Ask for their support. Ask for them to step beyond the all of duty. You need their help to win this battle. Need to communicate with the clients also. Ask about their personal well being. Offer to help formally or informally. Share ideas. Keep lines of communication open. Don't push sales. As I said earlier, clients or potential clients will always remember those who stayed close in their hour of difficulty.
8. Positive thinking
To be honest, this is probably the hardest out of the top 10 list to deliver on consistently. It's always hard to control the mind. In such situations, negative thinking is bound to flourish. Mind control is key. That can only come by working hard (empty minds automatically move to negative thoughts). Combine this with yoga and meditation (I recommend Deepok Chopro's 21 day abundance meditation youtube video). Burn energy. Do a hobby - cook or sing or dance :). And lastly, think of this being the once in a lifetime opportunity to transform your business. You always wanted to run a start-up - right? Well, this maybe it.
With so much being said, written and debated about digital journeys and transformations and the benefits they drive, the question that still deserves an honest answer is this: do all digital transformations programs necessarily result in achieving their intended goals? There are several global banks that have suffered from, or are being challenged by, the growing expectations on digital performance that are simultaneously also constrained by ground realities. When digital banking does not necessarily drive customer satisfaction, more often than not there are a few obvious – but addressable – reasons that are key to look out for.
9. New business model
Great opportunity to transform your business model. What is the customer mix that is of real value to you? Which customers are not profitable in spite of doing your best? Fix your customer segmentation. Then look at your offering. Eliminate products that provide low contribution of revenue or profit. They've had their chance and its over. Add the innovative products that you always wanted to add but were too preoccupied managing your existing ones that did not add value. Clean up your marketing cost-focus most of it on performance marketing. Most importantly completely transform your sales engine. Maximize digital. Approach must be that I will only do it physically if there is no digital solution. Clean up your supply chain. Rationalize your vendors. Enhance your digital assets.And lastly clean up your organization. Release 20-30% of headcount based on lack of performance or age or business units that have been shut down. You've always known your tail. You've just not had the guts to stamp on. This is literally a God given opportunity to build your 2.0 Business Model.
10. Don't forget your shareholder
Lastly, a few words for your investor and shareholder. Don't forget about them. While they may be willing to walk away from this year's dividend, don't blow their capital. I saw some loss making large start-ups making statements like they are protecting all employment and there will be no salary cuts in their firms. Really? So, while their investors are having to clean house and behave, these guys will still splurge. Get real guys. This is WW3.The days of cheap or free capital are over - for everybody.
So hopefully the ideas above are useful. Good luck in implementing them, and building your 2.0 business model. More importantly stay safe.