If you started or led a business in the last three years, you have had to deal with the COVID pandemic, the return of Inflation and now the Ukraine invasion. You are definitely managing in Turbulent Times.
The same holds true for companies that have been around forever. However, the difference between them and you is that these companies have seen turbulent times before. They have experienced managing when long-term planning means how to make next week’s payroll.
During the last 125 years, American companies faced similar global situations (Spanish Flu, Great Depression, WW II and many others). However, never did they face a combination of three at the same time.
When you look at more recent times there were various bubbles bursting, such as real estate and dot.com, along with financial crises in 2008, that resulted in a major recession. Many companies failed, but there also were a lot of survivors. The survivors developed a range of techniques and tools that helped their survival.
The rest of this post will focus on five techniques you can use to get through next year and beyond. It will give you a better probability to come out of this period in better condition than you are in now.
Five Techniques to help you now!
Cash is King
This statement holds true in good times and turbulent times. As a founder, this is the time to examine all your expenses and eliminate things that are not absolutely critical. Do you really need to have a box at the local arena?
Check on your subscription costs – SaaS costs have a way of creeping up and adding up. The same goes for your non-production related expenses – look at everything.
As a rule of thumb, you want cash to equal 24 days of sales, per Michael Dell in his book: Play Nice, but Win. Personally, I like Steve Job’s rule of having enough cash to operate a year without any revenue.
For more on cash see: Preparing for the next recession!
Photo Credit: Inc. Magazine
In most companies, 20% of customers are 80% of sales. During turbulent times, it is good to remember that not every customer is profitable. So this is a good time to have a high level review. You want to make sure that those 20% of your customers are also the ones accounting for 80% of your profit.
This is a good time to clean up your customer base. I am a strong proponent of only selling to customers where each order is profitable and where you get paid in time. For the slow payers that are profitable, tighten up your payment terms and enforce them. For prompt payers that cost you money, change their price or ask them to find another vendor. There is no point in losing money with every shipment while hoping things will get better.
Finally, for the customers you want to keep – it is an opportunity to show them that you want them. As the senior person in your company, you need to know these customers as individuals. That means you need to visit them in person!
Keep in mind: A customer that costs you money or is unnecessarily difficult to deal with will kill your company or your employee morale.
Photo Credit: CNBC
The last two years have certainly brought attention to the “Supply Chain”. Whether or not you bring in components from Europe or an entire product from China, you have seen a huge increase in freight and significant increases in transit time. If you are getting everything in the United States, you found out that truckers have become essential workers. So what can you do?
As with your customers, you need to review every one of your suppliers for reliability, cost effectiveness and how easy they are to do business with. Do not limit yourself to your product suppliers, but also put a light on your service providers. That is an area where a lot of small invoices can add up to real money.
Photo Credit: https://www.justhoopinc.com/
Your team will be critical in turbulent times and COVID has demonstrated that clearly. Now more than ever you need to be sure that you can count on your team to execute. As leader, your job is to facilitate this to the best of your abilities.
However you also need to make sure that every team member carries their weight. These days you no longer have the luxury of time to coach them or wait till they grow into their role. If somebody does not measure up, or is bad for morale, you will have to terminate them as quickly as possible.
Hire carefully, empower people to do their tasks and pay them well. If that means offering flex-time in production, hybrid work, fully remote or parental leave, be prepared to handle it. The last two years have shown that it is now possible for small and large companies. Great employees committed to your company greatly enhance your ability to pivot when needed and improve your chances of survival.
Resilience – the ultimate asset!
COVID, Inflation and Ukraine – if you survived the last two years, then you have resilience. It is a popular business word but what does it mean?
To me, resilience starts with getting up after some event has knocked you down and then adapting to the new circumstances in order to come out on top. Do not lose the vision of your goal, but do not expect to get there in a straight line. The next fiasco is just around the corner.
A great example of resilience is what the people of the Ukraine are showing while being invaded by a much bigger country. They have not lost the vision of their homeland and they are willing to do whatever it takes to persevere!