in , , , ,

Leading Your Business Into A Post-COVID-19 World

As I write this article in mid-April, I am wondering what our world will look like in one month. Hopefully, plans for “Opening Up America Again” and “North Dakota Smart Restart” in ND are well underway, and many North Dakota small businesses such as restaurants, salons, health clubs and others have been able to reopen, at least on a limited basis, and staff have been able to return to work.  

One thing is certain: Even when all businesses are allowed to reopen, the world will never be the same again. Every small business owner is wondering, what’s going to happen to my business? What’s changed (or likely to change) as a result of this health crisis? What will that “new normal” look like for my business and industry? And what adjustments will be needed to ensure short- and long-term viability? How you respond to those questions now may well define the trajectory of your business in the future. 

While there is no single cure-all, there are steps you can take to navigate through these uncertain and challenging times and position the business for growth. Here are some ideas and suggestions:

Take stock of your business

The first step is to confront reality without giving up hope. Business owners need to identify and manage any weaknesses in their business or industry, while being open to new opportunities that may emerge. 

  • Stay close to your customers. Understand who they are, why they buy your product or service (value proposition), their paying habits and loyalty/price sensitivity.
  • Evaluate and measure the impact the crisis has had on your business by looking at your key business indicators during the past 60-90 days. Create a graph showing these indicators and update it at least weekly.
  • Develop strategies that aim to boost your cash position and/or profitability without starving the business of essential investment in marketing or inventory. Keep looking for underlying improvements; don’t just cut costs.
  • Consider new solutions to existing problems; be flexible and willing to adapt to changes.

Improve your cash position

The importance of sound financial management cannot be overemphasized, especially in times of crisis. While profits may be the measure of success, it is cash that determines survival of the business. Costs need to be controlled to a level consistent with your business needs. Identify expenses that are essential to keep your business running; don’t cut these costs. Review business processes to see whether some expenses can be eliminated. Longer-term and recurring savings are better than short-term wins.

  • Prepare a rolling 13-week direct cash flow/break-even forecast. Determine how much cash you will need to fund working capital and make up for any shortfall. Calculate your burn rate (cash received – cash paid out) and your cash runway (cash balance/burn rate). You can download a free cash flow projection template here.
  • Work with your lender to restructure/extend any long term debt to reduce your monthly debt service and activate any available lines of credit.
  • Take advantage of government programs or other loans or grants that make sense (I assume by now those businesses that were eligible for the SBA EIDL or PPP loan programs have already applied and many have received funding).
  • Keep the right amount of inventory. Identify items you must always have in stock and slow-moving items you can sell.
  • Reduce the amount of time needed to collect your accounts receivables; get deposits or upfront payments from customers when possible.
  • Make full use of your terms of credit with suppliers; negotiate extended payment/credit terms.
  • Only pay sales commissions when payment is received.
  • Consider repairing or leasing rather than purchasing equipment.
  • Liquidate assets you don’t need anymore.
  • Consider which variable and fixed expenses are essential to your business. Can you reduce any non-essential expenses?
  • Be flexible in your staffing arrangements while working to retain good staff.
  • Keep tabs on your personal and business credit card.
  • Take modest personal draws and wages.

Improve sales and profitability of your business

In normal times, you can have fairly straight forward expectations about how your business is going to work. But, in uncertain times, you have to throw those expectations out the window. This is where forecasting and budgeting are crucial for the survival of your business. 

I recommend creating multiple sales and expense forecasts to explore different scenarios – a best case, middle and worst case – depending on the duration of the crisis and how long it takes your business and industry to rebound. Use the middle case as your budget, and compare actual numbers from your financial statements to measure variances and adjust accordingly. You can download a free financial projection template at: score.org/resource/financial-projections-template. Or you can use a subscription-based automated solution such as LivePlan: liveplan.com. Regardless of what tool you decide to use, consider the following:

  • How has your revenue mix changed with the COVID-19 crisis?
  • What is your gross profit margin on each product or service you sell? What are your most profitable products and services? Focus on selling more of these items.
  • Try to avoid discounting prices if at all possible. Remember if you have a 15% gross profit margin and you cut prices by 10% you will need to increase sales 3x.
  • What problem does your product/service solve? How does your product or service meet your customer’s needs or deliver value?
  • What makes your company/product/service unique?
  • What are the things you need to generate revenue again? (inventory, staffing)
  • Is there a direct correlation between sales and marketing? What are your most cost-effective marketing and promotional strategies? How can you reduce your customer acquisition cost while maintaining ROI?
  • How can you leverage your strengths and core competencies to offer new solutions in response to changing customer needs? Keep a positive “opportunity in adversity” mindset.

Ask for help

And finally, seek out help; don’t try to do it alone. You should be in frequent communication with your accountant, banker, insurance agent and other advisers. If you would like free, confidential assistance in developing your business recovery plan and projected cash flow, please contact your nearest ND SBDC service center, ND Women’s Business Center, SCORE office or Veteran’s Business Outreach Center of the Dakotas. 

While the uncertainty can cause anxiety, by being proactive and staying close to your customers, finances and operational efficiencies, you can ride out the storm and even emerge a stronger company. Use this time as an opportunity to step back and take a critical look at your organization, refocus and be willing to reallocate resources to seize emerging opportunities. When things pick up again, you’ll be in an even better position for growth.

What do you think?

-1 points
Upvote Downvote
Avatar

Written by Paul Smith

Steve Dusek

6 Tips For Remote Working

How Ladybosses Are Navigating COVID-19