How to keep your business alive during critical times.
By the time you read this, I’m hoping the dramatic and destructive events resulting from the COVID-19 pandemic are, for the most part, behind us. Yet, as I sit today pondering and typing at my computer on a morning in early April, we’re all currently embroiled in a fierce struggle against both the health and economic impact resulting from this devastating situation. So it seems fitting I address the topic of crisis management. Admittedly, you’re likely thinking timing is everything and this topic would have been nice to address in January. I agree. Something about 20/20 hindsight comes to mind. However, as a business leader, you’ll likely be in crisis management mode for the foreseeable months, trying to individually and collectively recover from this brutal and invasive challenge. It’s also probably fair to assume this might not be the last crisis you’ll have to manage throughout the rest of your business career.
I first learned of the Coronavirus in late January while on a ski vacation in Japan – a bucket list item my friends and I planned to celebrate a certain milestone birthday upon which I choose not to elaborate. One of my buddies on the trip happens to be a medical doctor and has done extensive research on the Ebola virus, its effects, the devastating loss it causes, etc. He was discussing this very topic with us the day before. At breakfast I was reading news online about the virus and what they were dealing with in Wuhan, China. Coincidentally, my friend speaks fluent Mandarin and was visiting with a family from Wuhan in the hotel lobby just the day before. Needless to say, he became very concerned and began following the news carefully. By the time we departed Japan the virus had become worldwide news. My doctor friend told us we’re all going to wear masks through all of our connections in the airports until we boarded our final plane headed for the US. Initially, I rolled my eyes just a little tiny bit, but deferred to his expertise and we all agreed to his plan. As you might imagine, by the time we arrived at the Tokyo airport at least 80 to 90 percent of the people traveling through were wearing masks. I had a hunch we were dealing with something a little more serious, but I truly had no idea how severe this would be.
I’m sure you all have a story about how you came to learn of, and eventually understand, the gravity of this pandemic. It’s truly been one of the most unusual circumstances of my lifetime – and I’m kind of an old man! My approach here is not to remind us of the tremendous difficulties we’ve been dealing with individually, as a nation, and worldwide. My intent is to share some of the ideas and plans my company put into place to deal with this crisis. My hope is we can all learn from this experience, and each other, and develop a better understanding of how to deal with difficult challenges. Like all of you, I have high hopes this is a once-in-a-lifetime crisis we never have to encounter again. However, I’m equally confident we’ll face more difficulties in the future that will require the best of our leadership skills. So with that, let me share two important points that will apply to any type of crisis management you might encounter.
The first significant decision we made as an executive team was to increase our communication to our employees dramatically via virtual meetings. Weekly meetings with this team evolved into meetings held almost every other day. Monthly leadership meetings (our department managers) and company-wide meetings are now being held weekly. Our leadership meeting is held on Thursday afternoons and is used for two primary purposes. One, to see how things are going within individual departments. Two, to discuss the messaging for our Friday all-staff meetings. We currently have approximately two-thirds of our employees working from home with the remaining one-third working in a spread-out fashion over a 24 hour shift. Our employees have been very grateful for this continuous communication.
While frequent communication in challenging times is critical, “the message” is even more important. In Jim Collins’ book “Good to Great,” one of the axioms he teaches us as business leaders is you must always “face the brutal facts.” That’s exactly what we’ve done with our staff. Because we’re already an open-book organization, sharing numbers is routine for our employees. However, sharing our cash projections based on our drop in revenue and what they mean to the survival of the business is not something they’re used to seeing. Frankly, it was initially unnerving to many of our employees, but as we walked through the numbers and shared our plan they began to understand, then appreciate, our honesty. They were then willing to make the necessary sacrifices to sustain our business. In short, we simplified our action plan to two primary objectives. One, do everything possible to ensure the health of each employee. Two, keep the business viable with the goal of saving everyone’s job. Although the plan to accomplish this often changes daily, the message to the staff remains consistent: let’s work together to achieve these two primary objectives.
Hope for the Best, but Plan for the Worst
When confronted with crisis management, leadership can take on many different faces. Some business leaders may take a somewhat passive or reactive approach, waiting for the circumstances to dictate what their next move should be. Others may choose to ignore or minimize the issues, playing down reality and waiting until outside factors force them into decisions. On the opposite side of the spectrum, some leaders may plow forward at break-neck speed, perhaps making rash decisions without processing all the available information. Landing somewhere in between these scenarios makes the most sense to me. Once we began to understand the implications of this pandemic and what it might mean to our business, our executive team immediately decided to adopt the following approach: “We hope for the best, but we plan for the worst.”
Your plan for the worst must begin with the principle of hoarding your cash. Perhaps, like our company, you learned a lesson or two about your cash flow 10 years ago when dealing with the terrible and damaging recession. I may have mentioned this, oh say, about 20-plus times in past articles, but let me again remind you that Cash is King. That truism is never more important to embrace than when the life of your business is in jeopardy. As such, our team immediately began putting together a cash flow plan for survival. Your plan may look somewhat different than ours, but here are some basic ideas to consider when mapping out your plan to hoard cash.
This is your company’s emergency survival kit:
- In regard to sales and revenue, build multiple scenarios, changing revenue assumptions from best case to worst case. This will help you determine what the most invasive changes might be based on sales and account collections. Sales by themselves won’t save your business. You have to collect the cash.
- Identify your most significant expenses and deal with them first.
- Payroll is likely the largest variable expense you have. Instead of jumping immediately to lay-offs, consider salary and wage reductions first. The advantage of doing salary/wage cuts across the board is everyone feels equal pain, which, while difficult, can also create some unity within your company. Saving jobs is always highly appreciated in any company and can build trust and morale in an otherwise difficult environment.
- Negotiate payment terms with your creditors and vendors. Your banker and landlord are much more interested in your shop staying in business over the next several years than getting your payments exactly on time. Negotiate with them. We’ve been able to defer more than 80 percent of our equipment loans with our bank for up to six months with no penalty during this pandemic. I also know of several companies negotiating their rent or lease payments for their facilities.
- You’ll likely be able to negotiate longer payment terms with your key suppliers. For example, if you typically pay your suppliers at 45 days you can likely stretch it to 60 days, or something along those lines. Again, they’re interested in your long-term viability above all else.
These are just a few ideas that may help you think through the challenges of managing your business during times of crisis. I definitely do not purport to have the answer to all problems. Your challenges are unique and will require some different courses of action, but the principles remain the same.
Communicate to all parties under your influence more than ever before. This includes your managers, staff, customers, creditors, vendors, accountants, bankers, etc. Did I leave anyone out? Ah yes, maybe your cleaning crew. You get the gist. Then make a plan to manage the cash in your business. Be flexible and smart enough to understand your plan might change weekly or even daily. But make a plan and then execute it to the best of your ability. This proactive approach may make the difference in the survival of your business.
Marty McGhie is CEO/partner of Signs.com, an online provider of custom signage based in Salt Lake City. You can email him at firstname.lastname@example.org.