“Choices are the hinges of destiny.” – Edwin Markham
This current Coronavirus crisis is my fourth such recession/shock/crash I have been through in my career (Makes me feel a bit old writing that). Many people are correctly writing and speaking about how we will get through this together (We will) and how everything will return to normal (Less sure about that). Given my background and the focus of my work, I feel compelled to share some important lessons that I have learned, often the hard way, about managing businesses through crises both large and small.
My hope is this will, virtually, shake you by the shoulders so you will take decisive action today and not wait to see what happens. I also want to snap you out of feeling stuck or trapped by the news and uncertainty that surrounds this pandemic. While it may be right to, as the famous saying goes, “Keep calm and carry on” I would implore you to keep calm and take action. Without panic. Now.
There are two phases here. The first one is survival. IF you get the survival part right, you will be able to move on to revival.
In nearly every past crisis, the business I was running was not immediately impacted. So I felt relief and I waited. Big mistake. When a good portion of any economy takes a shock it will eventually trickle down to you. Unless you are in the Purell, toilet paper or hospital masks/supplies business it is going to hit you at some point. Harder than you think.
In the late ’90s, corporate America was laying off employees in extraordinary numbers. My business just charged a small fee so, I thought, we would fall under the radar. I kept moving forward with business as usual. At some point, the CFO’s of our clients could not cut staff anymore and turned their attention to every other expense and, eventually, they got to us. Competitors of all sizes were not waiting around like I was and started offering fees 50-75% lower than what we were charging to our clients. One by one our best clients came to show me these proposals and asked me to match it, or else. I complied, cursed my competitors and made less revenue while my costs and workload were the same. Crushing.
My competitors were right. They were reacting to what is and not what was. They went on the attack while I was hunkering down and hoping this would all pass. News alert, hope is not a strategy.
My pride in my fees and clinging to a business structure that was no longer relevant was my weakness.
As much as your market is changing right now is equal to how much opportunity exists right in front of you. Will you lament what was or leap into what is? How you answer this question will tell me a lot about the fate of your business.
Let’s get even more specific:
Know your numbers – You need a financial roadmap first so you know what must be done. Grab your CFO, bookkeeper or your Quickbooks reports and model out what the rest of the year will look like for you. The worst-case scenario is a better place to start than wishful thinking. If you have not been totally shut down, there are moves that you can make, even though they will require many hard choices, that will reduce your losses.
Over and over I have learned that waiting for a few months will generate losses that you cannot come back from. If there is something you think you can wait for a few months to do, please learn from my past pain and do it right away.
“How can I help?” – This is the time to get on a video call with every one of your clients, prospects and vendors and ask two very simple questions: How can I help? and what do you need? Do not wait for them to call you to deliver bad news or question your fees. Be their partner in every possible way even if they never thought of you that way.
You may need to help them for free for a while. You may need to slash your fees and costs or defer it. Do it. If you are proactive, you will have the chance to negotiate creative ways to make those fees back when things get better.
From this process, you will learn the economics and state of your market that is now your reality. You must use that reality to rapidly transform your business to take advantage of the new playing field.
Will you need to offer more service for the same price or the same service for half of the price? If you have become obsolete, what else do they need that you could deliver? If you can get clarity about what you are facing then you can find creative solutions to create a company that can attack the market based on what it needs.
Take a lesson from my old competitors and dive for new business. You now have the capacity to take on any and all work and you can innovate. Drop every closely held belief of what business you think you are in so you can see a new future.
$1.00 less – Now combine your clear-eyed projections for the revenues you will have for the rest of the year and what your customers/clients are telling you. Your next move is to figure out how to make your expenses at least $1.00 less than that projected revenue number. How? Imagine every current employee and expense are pieces on a chessboard. Take them all off and put them to the side. Next, design a business that can operate for $1.00 less than your revenue. What positions do you need and what expenses are required? Now put only those chess pieces back on the board. The raw reality is that some pieces will not make it back to the board and that means letting people go. Years ago, with 150 in staff, I did this exercise with my CFO and we sat in the conference room until late into the night until we eventually got there. If you have enough revenue, there is a version of your business that can spend at least $1.00 less than you take in. Find it and then make it real.
Your job right now is to save the company and as many jobs as you can. I know how hard laying people off is. I have had clients who felt there is more honor is everyone going down with the ship together. It isn’t.
The other outcome by resetting the business for the worst-case scenario is that you only have to do this once. Slowly cutting staff a little at a time destroys morale. Get it all over with and then you can explain to your team that it is done, explain the plan, why you had to make these changes and how you will all work together to get things moving in a better direction.
Constraints force innovation: My old business charged an average of $120.00 per transaction and it was clear to me that our fees were going to drop to $60.00 per transaction for the exact same work (That is what the market was telling me loud and clear). I could yell at how that was not valuing our work or figure out how to have a business that could deliver superior service at $60.00 with profit. When I finally got over my pride and answered that question it generated a novel approach to using the Internet (In its earliest days) that increased our productivity by a factor of 10.
When nobody is asking you to increase efficiency or are questioning your fees you keep rolling along with the status quo. If you rethink your business as if you were starting it today, you will be amazed at how many savings and inefficiencies you have been ignoring. I did this with a client last year and saved over $3 million dollars in expenses, focused the activities of the business to its strengths AND increased the level of service to customers.
Attack – Once you know you are going to survive, now is the best time to do everything you need to make noise about your faster and more innovative business that you have created. In the same way that the world’s best investors will tell you this is the time to buy stocks, you need to invest in this dip in your business. How can you position your business to go on offense? That new service you have been wanting to offer? Launch it. All the content you know you should be putting out so more potential clients know about you? Write it, record it and spread it across social media. You will likely have 3-4 months of a real lull to do it. Now is the time.
If you aggressively increased efficiency and lowered your costs, you may be able to go after new business with a lower fee. Better yet, use the constraints of this moment to innovate a whole different pricing model that your potential clients desperately need right now.
Disrupt your own business as if you were the rebel outsider that is going to topple every company that is not taking action to change at this moment.
Let me say it again, the survival and revival of your business will depend on whether you aggressively reshape your business to the world as it will be and not try to operate some smaller version of your old business through these times.
I realize our government officials are saying everything will come roaring back as soon as we hear this virus is under control. While we have never experienced this type of crisis before, I am certain that nothing will be the same.
Businesses were riding high just a month ago. Hiring as fast as they could and enjoying big profits and their large expensive offices. This shock will leave a long echo. Long after this is over, businesses will have realized they can operate with a lot less staff and with lower expenses. They will not be so quick to just add them all back on. The unemployment numbers will flip right back to where they were last month.
Once clients taste a lower fee they will less open to raising it later (See innovating your pricing model above). They will have learned the power of putting pressure on expenses and will continue to do so for some time to come. While over the long haul it may change back as they get fat again, it is many years away so do not bet your business on a speedy recovery.
I know reading all of this is not reassuring but I am not a rainbows and unicorns kind of guy when it comes to business. I desperately want every business to survive this and I have 20+ years of experience that tells me what actually works.
- Know your real numbers
- $1.00 less
- Get connected to your customers
- Wipe the chessboard clean
- Reshape your business based on what will be (Constraints create innovation)
I am certain you can do all of the steps I outlined above. Will you do it today and get it done this week? It all comes down to speed and determination to do what must be done.
Keep calm. Take action.
Free office hours: If your business is suffering, please get in touch with me and we can talk it through. This can be fixed if you take action. I have added a bunch of free strategy calls to my calendar to help as many businesses as I can. Please take advantage of it. Contact me via my website. I am happy to strategize a clear roadmap with you, provide a candid perspective, give you a kick in the ass or all of the above.
Above all else, stay safe. Stay connected with family and friends. Stay calm. Keep moving forward.