We’re in the eye of the storm of a global pandemic and consequent financial meltdown. As managers and business owners, we have suddenly been confronted with a new global economic reality. Almost overnight our businesses have gone from confident to chaos. It will likely be one of the most challenging business climates that we will ever face.
We have been through economic crises before. The way to get through to the other side is to admit that the world has changed and that we need to 1) take immediate action to protect against losses and 2) plan for recovery and growth. The best part about crises is that they always end, and the companies that take the time to think differently and act proactively, emerge as the future winners.
In this blog post we look at the first step – taking immediate action to protect against losses.
Remember the Golden Rule
He who has the gold makes the rules. Immediately analyse and change your business plans in order to protect cash. This means looking hard at your inventory levels and liquidating obsolete stock and slow movers. If you have stock in shops that are not in convenient locations, consolidate the stock to one place and start selling online. Even if you don’t have a website there are routes to online markets. This will not only help with sales, but also ensure its security in case of break-ins.
Next take a hard look at what you will need for the summer and holiday seasons. Review all outstanding purchase orders that can still be amended and reduce/cancel/renegotiate where possible.
Finally, renegotiate leases and other contracts. There is nothing wrong with asking. Many of your vendors will be in the same situation as you, so they will appreciate your position.
Run the Lifeboat Drill
This will be the hardest part of the job. First look department by department and see what functions that you can cut – your accounting people are probably important in order to collect cash and pay bills, but your tax people probably aren’t at the moment. Protect your engineering and product teams where possible. They are the ones that you will look to for help in innovating your way to recovery.
Take advantage of the government’s furlough program where the work is currently unnecessary but will be required in the foreseeable future. If making permanent cuts, try to do it just once and be as generous as possible. Having to lay off people remotely will be especially hard. As the accounting firms used to say: make someone’s first day and last day their best day. Make sure they remember you in a positive way. It will pay off when you start to rehire later.
Take good care of the people who are staying with the business. They will likely be in shock from the loss of their colleagues and the situation in general. Make sure to motivate and communicate with them directly and often. Give them the tools, guidance and coaching they need for their increased workloads. Learn more about preparing to work from home in our previous blog post here.
The Government is Looking to Help. Let It
The UK government took early steps to help companies with rates holidays, employee and contractor furlough programs and loan schemes. It’s incredibly generous, far reaching and designed to keep your business in business through the lockdown. Don’t wait. Start applying for all government assistance that is available to you even if you don’t think you will need it.
Cash is king, and it is having cash in the bank that will enable you to not only survive, but to make investments in new growth engines. Often the winners in markets are simply just the last company standing when coming out of a recession.
In part 2 we will talk about making your plan for recovery and growth. We haven’t reached the peak in the UK yet – so it maybe too early to talk about positive changes – but in the next couple of weeks it will peak, we will have more testing and we will have more good news about people returning to work.
Do you have more ideas? Talk to Sparkstone