Attention Business Owners: We have now entered a brand-new world where doing what we have always done will just not cut it. The COVID-19 health crisis and its resulting global economic impact means we need to prioritise some critical steps that will position us to not only survive what’s coming at us, but also position us to thrive when the market inevitably bounces back
To be clear, this is not a generic range of steps to ‘improve’ your business, but more critical steps that will stop you from closing your doors. That’s the first goal to survive well …… so that you are still around to thrive when this crisis passes so ignore them at your peril.
Here are 6 ‘critical steps’ to implement immediately in your business
- CASH IS KING
- develop a 13 week rolling cash forecast immediately and be conservative not optimistic
- as the business owner focus on cash balance daily and ensure cash forecast assumptions are executed and realised. You don’t have to create the forecast but you have to own the assumptions and execution
- follow up all accounts receivables and have some candid discussions with customers – no BS discussion so you know where you stand. Take your rose coloured glasses off!
- request extended payment terms from suppliers immediately
- request extended payment terms from government bodies (income tax, GST etc)
- contact banks you have loans with and find out what relaxation is available
- contact landlords and advise you need credit terms / rental abatement immediately
- access any government assistance / handouts available
- liquidate slow moving inventory immediately even at massive discounts as cash is crucial
DEVELOP A JUGAAD MINDSET
- “jugaad” in Hindi means a flexible approach to problem solving that uses limited resources in an innovative way.
- if cash is king then frugality is queen so implement a frugal ‘jugaad’ approach to every aspect of your business.
- create a jugaad footing in your business and model this yourself as business owner by giving up non-essentials. It needs to start with you the business owner
- rather than a “do more with less” mindset, change this to “do better with less”
- as business owner set jugaad parameters and insist on execution eg ‘reduce costs by 50% and improve customer satisfaction’
- engage with customers on what is critical and what isn’t and remove all unnecessary bells and whistles
- implement the 80/20 rule, drill down and determine the most important 20% across all areas of your business
review every P&L line item and place one of 3 letters alongside each expense
- “P” for Profit where that expense directly attributes to profit
- “R” for Reduce where the expense is valid in generating profit but potentially can be reduced with a less expensive option
- “U” for Unnecessary where the expense adds nothing in generating your profit
- Immediately seek more cost effective “R” options and eliminate all “U” expenses … now!
- be brutally honest and include the same exercise for staff
- this will take discipline and resolve with no excuses and self-justification on why a “U” should be retained
RETAIN “A” PLAYERS
- evaluate who are your “A” team players who directly generate profit and make all other roles redundant immediately.
- Don’t reduce wages – it sounds fair but kills morale. Either keep them or move them on
- use the “P”, “R”, & “U” exercise for each staff member and their role contribution
- incentivize your A team and set aggressive targets with attractive rewards
- where practical, lock them in with equity options so they commit to stay through this and come out the other side
- create a war room footing with daily huddles (15-30 mins. max) to motivate and reinforce priorities. No excuses for non attendance. Focus on outcomes not discussion
- reward frugal jugaad thinking that builds profitability – this has to be the new norm
REVIEW & OVER SERVICE YOUR CUSTOMER BASE
- dissect your sales volume by customer into 2 groups
- Group 1 – list out your top 20% of customers in sales volume
- Group 2 – list out your bottom 20% of customers in sales volume
- further dissect your profit contribution by customer into 2 groups
- Group 1 – list out your top 20% of customers in profit contribution
- Group 2 – list out your bottom 20% of customers in profit contribution
- immediately cease working with customers that appear in Group 2 in both categories. They are burning your cash and you need to remove them
- assess the balance 60% of customers that can easily be upgraded into group 1 customers and if not also stop dealing with these customers
- review Group 1 in both categories and proceed to clone these customers
- over service Group 1 customers and engage with them on how you can do ‘better with less’
SYSTEMIZE FOR EFFICIENCY
- review every process in your business and determine how you can implement a business system to improve efficiency
- document the business flow and look for options to eliminate excess, automate where possible, improve customer experience
- institutionalize the new systems in operations manuals / playbooks
- train all current and future team members to execute on these playbooks
The temptation for most business owners when economic crisis occurs is to either cut costs to the bone to survive, or alternately, continue to over invest in marketing dollars to maintain market share. Neither is right or wrong but implementing the above defensive and offensive steps will allow you to be real at a time that requires frugality whilst keeping your focus on capturing market share when the market rebounds
Bottom line is, we will get through the other side of this and those businesses that aggressively take a ‘first mover advantage’ and implement the above steps will be best positioned to take advantage of the inevitable upsurge once we are through this.
Trust me, we will bounce back from this but there will be inevitable casualties. The way we do business will be indelibly changed forever and the businesses that survive having addressed all of the above will be best positioned to thrive once the shackles come off.
They will possess a much leaner cost base, a more innovative product or service offering, a committed and enthusiastic team of A players, an engaged customer base that delivers Group 1 customer category sales and profit volume, and a business that has systems in place that positions them for rapid expansion once the economic tide changes[/et_pb_text]