[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