Change is a constant in business. When faced with exceptional events, as we have seen with the COVID-19 global pandemic, it is up to leaders to take a hard look at their tools, systems, process and strategies to redirect and get back on the path of success.
Steering a company during these challenging and uncertain times involves focusing on three things:
Visibility: what can you see right now?
Control: what can you control right now?
Agility: how agile can you be right now?
Not all businesses are affected equally during adverse times, but this framework will benefit leaders who understand they must significantly change their approach to keep the company as healthy as possible.Visibility: What can you see right now?
While access to capital is important at all times, it is even more so during a crisis. If your supply chain has been disrupted, this will have an immediate effect on your cash flow. With no reserves on hand to access, liquidity can become a problem.
If you are going through challenging times, the first thing to do is take a stock of resources on hand, liabilities and outstanding receivables. Based on this information you can take a guess estimate of how much cash you will need to sustain operations for various time frames. Consider how long it will be before you will be back to operating as normal, and factor this into your estimates.
With up-to-date information on hand you can determine what steps need to be taken to keep the business as healthy as possible.
Here is a visibility checklist to help you out:
- Update your balance sheet to determine total assets.
- Determine liabilities, considering which payments can be put off.
- Determine your short-term cash requirements.
- Evaluate receivables in light of current businesses conditions.
- Play out most-likely scenarios based on the figures on hand to quantify the impact to your profit and loss, cash flow and balance sheet of short, medium and long-term disruptions.
Control: What can you control right now?
While it can be all too tempting to focus on the negatives of your situation and things that are out of your hands, it is much more practical to focus on the areas you can control. There are three key areas to draw your attention to:
Many businesses operate on a 12-month budget cycle, but when faced with unforeseen challenges, the focus needs to shift to immediate priorities. Make payroll, cut costs and maintain liquidity.
The key is communication; the more you establish clear goals and objectives, the more your team understands where they stand and what they need to do. Now is the time to eliminate any inefficiencies by redesigning poor processes and automating tasks. This will put your company in a better position for long-term growth.
When faced with economic uncertainty, monitoring key performance indicators is vitally important. It needs to be done in real-time, so you can see what is happening as it happens and spot any issues while there is still time adjust.
- Make sure you address any late customer payments as quickly as possible, understanding they may also be affected.
- If you products and/or services are still in demand, ensure you can keep up supply.
- Look at your gross profit margin, customer satisfaction and general and administrative costs as a percentage of your current revenue.
When critical events occur, it can throw chaos into the wind with your employees and affect their productivity. Communication is key. Let them know what is happening, even when the news isn’t good. They will appreciate knowing the truth and knowing where they stand in the crisis. Retaining your employees will put you in a much better position moving forward. Here are some things to consider:
- If you need to cut down on labour costs, consider cutting hours or offering unpaid leave rather than layoffs. You can even look at reducing salaries based on ranges, so the lowest paid are least effected.
- Look at any Government programs that can help, like the ones mentioned above for the COVID-19 pandemic.
- If you do need to lay off workers, look at what support you can offer them.
Agility: How agile can you be right now?
It’s important to remember that while crises are challenging, they don’t last forever. Eventually, you will find a new normal at the end of it, and it is a matter of positioning yourself for success for when opportunities appear.
By following the steps above, you will now have a hand on the short-term issues. Now is it time to think of the future. A slowdown in the company could be the perfect opportunity to implement new and innovative ideas. You need to time your investments with an eye toward recovery, so you are in a position to take full advantage of the growth that will inevitably return.
Here are is a checklist to help you prepare:
- Speak to your employees. They know your business, they know your customers and may have some great ideas.
- Think about areas you can train your employees, so they have new skills when growth returns.
- Look at new ways to combine your products and services and how to enhance them.
- Rethink pricing strategies. Look at how software companies are succeeding with product-led growth.
- Analyse new markets you could break into.
- Wring out as many supply chain inefficiencies as possible.
Where to find help
If you are after some resources to help you plan out different scenarios during COVID-19, check these out:
- Inside Higher Ed offers a primer on running a tabletop exercise.
- PWC offers a comprehensive planning document for setting up a COVID-19 response.
- Bain & company provides crisis-response guidelines.
- A Wharton professor of operations, information and decisions analyses four possible scenarios.
Struggling to make ends meet? Consider all your options, including:
- Open conversations with credit providers about cash injections.
- Speak to your suppliers, landlords, lenders, tax authorities and insurers who all have a vested interested in your business and ask if they may be willing to help.
- Take a look at any Government Stimulus Packages you qualify for. During COVID-19, Federal Government Programs are helping support Australian businesses to manage cash flow challenges and retain employees through the JobKeeper and JobSeeker Payment Program, Cash Flow Boosts for Employers, Business Investment Backing, Temporary relief for financially distressed businesses. Individual states have also set up their own programs.
Eventually, the crises will come to an end and you will have the opportunity to grow the business. Managing through these times is an art and a science. You need to keep tight control of the cash and eagle eye on the balance sheet. Listen to employees, customers, shareholders and other stakeholders and openly communicate.
You can take some of the guessing out of the equation with NetSuite. We help businesses reduce uncertainty in uncertain times by providing real-time, anywhere, visibility and control of your financials, payroll, projects, inventory and suppliers. With this information, you will be in the best position to make smart decisions with confidence.