COVID – Regression or Progression?
“When the going gets tough, the tough get going.” So went the family mantra of Joseph Patrick Kennedy, self-made millionaire and father to President Kennedy. In his early 40s, during the carnage and economic woes of the Great Depression, he managed to increase his wealth 45-fold. So now as we face our own tough times and uncertainty, how should “the tough” stand up and take action?
As business advisers, we’re privileged to work with inspirational business leaders who have indeed stood up during the COVID-19 pandemic and swum against the tide. Here’s some of the lessons we can share from our experiences:
- Failing to plan = planning to fail
We’ve found that a solid strategic plan is the essential foundation to getting through a tough period. A plan that clearly articulates where the business will go, and how, will be far better than undirected frantic activity. However, having said that…
- Have a contingency plan
We love the way leading businesses have been able to rethink their operations, supply chain, market or product this year. Thinking outside the usual paradigm of their everyday business, true leaders have thought carefully about how they can use their existing limited resources to best advantage and adapted their businesses accordingly.
- Plan your finances
In difficult times it’s more important than ever to understand the financial position and have ready answers to questions such as:
- What are the costs to keep the doors open and what is my breakeven point of revenue?
- Even though my business model is profitable, are there cash ‘pain points’ where I will need assistance?
- What will cash flow look like without government assistance such as Cash Boost and JobKeeper?
- How will my business look if the COVID-19 impact is mild, moderate, or severe?
A good financial forecast is the first step. In our view, it should always be a ‘three-way’ forecast – that is, forecasting profit, cash and balance sheet to give a comprehensive picture. Further, you should be able to flex the model to look at multiple scenarios. We’ve found that the process of building a three-way forecast allows business owners to challenge their expenses and engage in better conversations with bankers, suppliers and service providers.
- Add to the war chest
Resilient businesses have made themselves stronger by planning their finances, so they accumulate cash savings in the face of the uncertainty we face. We don’t know how long this will last, or how severe it will be, so reserving funds where possible is wise.
- Work with the right people… and look after them
We’ve found that tough times can bring out the best in the team, especially if you work with the right people who dig in deep and pull together. COVID-19 has been a good opportunity for businesses to:
- See the calibre of their team and invest in looking after their good people;
- Try new things and innovate; and
- Benefit from working from home arrangements.
Businesses have strengthened despite social distancing, through good communication, keeping the team informed and taking the time to check in with them to listen.
- Manage your key relationships
While it can be tempting to avoid your banker’s call and not pick up the phone to speak with advisers, we have seen the best response is to engage more than ever with the external team. This includes suppliers, business advisers, marketing support and financiers. Keep them close and regularly update them, even with the bad news. It’ll increases everyone’s confidence in the future of the business.
Overall, these times have shown the importance of regular communication – with your team, with clients, with advisers. Having to work remotely forced the situation on many but those who have done it well have seen positive outcomes. Communication gives clarity, clarity gets results – keep those practices and the above in place.
Now’s not the time to panic – it’s a time to act.
If you’re interested to know more, please contact [email protected]