Determining Your Comeback Scenarios:
As lockdowns are eased and your customers awaken, there is the opportunity for you to thrive. Most likely your business has suffered some damage but so have your competitors. Especially important lessons learned during the recovery from “the great recession” were how best to emerge from a setback. Those who chose to: cut costs → reacted → resumed past practices did not thrive. Those who cut costs → adjusted → planned new strategy → invested did 76% better growth over the next five years. In the current environment, we recommend already cut costs → adjusted to current market → plan alternative scenarios → invest. This leads to rationalize → prioritize → capitalize.
It is important to recognize multiple scenarios for recovery and identify pivot point triggers to know when to change. We suggest looking at the recovery two ways: first a slower U-shaped recovery taking six months and second, a W-shaped recovery where there are local shutdowns in November/December with the next flu season and an over-reaction by local governments. It is critical to know how you will survive a possible second shut down.
Putting the Tools in Place:
Preparing your comeback strategies and processes takes some detailed planning. We recommend the following steps:
- Develop a 12-month detailed financial plan to know how your cash flow will look. Do it for the two scenarios we suggest or any multiple of likely events you foresee.
- Analyze your customers, competitors, and suppliers to determine where underserved niches may exist. Examine if you can afford to invest in these areas to expand your revenue and profits.
- Analyze the parts of your business to determine the most profitable areas. This leads to prioritizing where you should use your limited capital. Many firms discontinue lines of business or leave portions of their market where they were not making money. We saw companies reducing the size jobs they would bid for better margins, stopped offering services that were commoditized with miniscule margins, and let go employees that were low performers.
- Through these steps you will determine your highest, best use of your capital. After your prioritization, squeeze the most cash you can to invest in new areas or to expand in your higher margin opportunities.
Making Your Comeback Stronger:
- If you have successfully determined where your opportunities are and you have an idea of potential cash flows, put actions in place now to rebound before others do. Communicate to your customers and prospects the new vitality that your company has. Have a short-term marketing campaign that trumpets your new energy!
- New procedures and policies need to be distributed to all employees so everyone knows their responsibilities and new rules of operations. Solicit employee ideas as you develop new processes for their buy-in.
- Frequently review progress on newly implemented processes to determine what is working. Review financial results to determine if your scenarios remain likely and be prepared to pivot if they are not. If you have alternative actions already planned, the decision to change is easier and timelier.
C Squared Solutions provides fractional CFOs and COOs for businesses in nearly all industries. We offer four hours free consultation to help you with the analysis and planning of these steps. Give us a call and let us discuss your concerns.