[Editor's
Note: Many business owners have spent years building value in their businesses.
A number had been planning to exit in 2020 or 2021. Now, people are fearful
that the value that took years to build, may erode over a few months. While
this combined health and economic crisis is more complex than other economic
downturns, let's look at what we have learned from other periods of uncertainty
and put in place the steps that will help preserve value. -dpm]
Fear,
Uncertainty, and Doubt - These conditions can shake even the most confident business
owner and CEO.
- Fear
of the unknown.
- Uncertainty
about the future
- Doubt
about the appropriate path
Principles we learned
in previous downturns:
- Focus
on business fundamentals
- Control
what you can
- Pay
attention to relationships
- Communicate,
Communicate, Communicate
- Look
for opportunities
Here are ten things to keep in mind in order to preserve
value:
1. Conserve cash- This event could have
lingering effects on consumer confidence and recovery could well take several
quarters.
- Liquidate
surplus finished goods inventory if applicable - turn it into cash
- Manage
receivables closely
- Watch
Cash Flow - Daily
2. Change the way you
operate
- Systematically Examine expenses
- Not
just the level, but the processes and the vendors
- Eliminate
some expenses for the next 90-180 days (especially discretionary)
- Process
mapping to determine if there are unnecessary steps, cost, or waste
- Give
your suppliers/providers the ability to offer good ideas, not just be an
order taker
- Eliminate
some positions - Take the opportunity to trim the underperformers
- Cut
wages if necessary (start w/ top management)
- Accounts
Receivable - "Pre-collection" activities
- More
frequent invoicing
- Seek
extended terms from suppliers (Talk with them - don't just stretch them
out)
3. Keep your banker
informed of your plans especially as circumstances change
- Overcommunicate with your banker
- What
new communication is required - type/ frequency/ form?
- What
new reporting is required?
- Do
you understand bank and regulatory requirements and their impact on
financial lending instruments?
- How
can you streamline your reporting function for timely and accurate
reports?
- How
has the environment changed your relationship with your bank?
- What
policy and procedure updates are necessary to meet lender requirements?
4. Demonstrate
leadership as a CEO or Business owner
- Be visible - Communicate with employees what you
know; be honest about what you don't know; Be frank, but show confidence
- Maintain
high expectations
- Require
accountability
- Reinforce
your culture
- Control
what you can
5. Communicate with
customers and suppliers
- Tailor offerings to your customer's needs, not
yours (saves $, flexible payments, simplify, lowers risk, solves
problems)
- Use
this opportunity to strengthen relationships - People want to do business
with someone they know and trust
- Keep
in touch with suppliers; some may be in trouble
6. Upgrade talent
7. Develop scenarios
and plans for the future new normal
- Things will not be the same. No one can
accurately predict the future, so we need to anticipate and be prepared
for different views of the future environment
8. Be prepared for
the upturn
9. Look for
opportunities created by uncertainty - perhaps a merger or acquisition, new partnerships, etc.
10. Importance of
Acting NOW
- Most
significant competitive gains occur during downturns
- Competitors
are sleeping - internally-focused
- Look
for ways to reinvigorate your company and employees
- Get
on the front side of this; Not acting will make things worse
- Never
waste the great opportunity of a downturn
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