John F. Kennedy once shared with the nation that the Chinese written word for crises is comprised of two characters: one representing danger, the other opportunity. The challenges caused by the COVID-19 outbreak may not feel opportunistic. Effective leadership during a crisis, however, reinforces trust and confidence in all of your business relations—from employees to customers and creditors.
The way you react during a crisis lays the foundation for effective recovery after it’s over. In fact, it can even present opportunities for growth—but only if your business survives the catastrophe. That means sustaining operation with reduced or totally interrupted cashflow.
The ideas and principles that follow can help your business survive a cash starved economy.
Think Before You Act
Take time to thoughtfully asses your unique situation. This sounds obvious but is often overlooked during emergencies. Our instinct is to act when crashing markets syphon precious liquidity out of our assets and orders are being postponed or cancelled. Plot out your worst-case scenario and triage accordingly.
Problem solve holistically.
What can you do to help your customers weather their situation? What untapped market base may be experiencing similar challenges? The 2001 startup airline Airtran grew during the recession following 9/11. They acquired discounted assets and served the market segment that bigger airlines couldn’t because of larger losses.
Set expectations for your staff. Don’t alarm them. Panic is infectious. Do be honest and direct about the challenges you will all face together. In many ways, your people are your business. You will all need the same balance of optimism, urgency, and resolve when facing the ever-changing daily trials. Learn more about leading staff through uncertainty here.
Act now. Act decisively.
Reduce or eliminate cash outflows. Stop all discretionary spending. Negotiate with utility providers, suppliers, and vendors. Cut all expenses that are not essential to your business. Reduce your hours of operation. Reduce or forego your own salary for as long as possible. Tighten extended credit while discounting advance or transactional payments as deeply as possible. Consider invoice discounting. A third party pays you up front for your customer invoices, less a commission, and collects the money from your customers. Cashflow is the objective now and is more important than margins. No cash, no profit.
Brainstorm solutions for offsetting your most pressing liabilities. When was the last time you refinanced your debt? What is your current aggregate interest rate for all loans? Can it be consolidated or reduced? Thoroughly review all contractual agreements and insurance contracts for contingencies like disaster clauses or business interruption coverage. Research and stay abreast of local and federal government relief efforts like low interest loans and aid. Can you offset liabilities with real assets? Divesting stagnate inventory and recently cancelled orders generates desperately needed cashflow, even if at a cost or moderate loss basis. Negotiate timelines for payables and not just for interest free extensions. Request early payment discounts.
Catastrophe doesn’t favor the idle. The actions you’ve taken shouldn’t be treated as transient or contingencies. They are the new norm—or at least they are for the time being. No one has any way of knowing when the economic winds will change, including you.
Be proactive in all your relationships.
In addition to your existing marketing and media plan, incorporate a more personal and direct contact approach, like teleconferencing or personal email. Check in on the people you do business with at all levels and support them. Ask if they’re okay. Share the sense that you’re all in this together, because you are. When it’s all over, they won’t forget your personal touch during such a stressful and challenging time. That retains value regardless of the outcome of your situation.
Be kind to yourself and others.
Maintaining a business without cashflow for any period is a monumental task so ensure you are employing good self-care so you are in a good position to captain the ship through stormy seas. And keep in mind the adage, “This too will pass.”