10 Lessons for your Business During Pandemic
Updated: Apr 24, 2020
1. Stay put on cash, do not invest in mergers and avoidable marketing spends
Even though some might argue that it is a buyers’ market. But take a step back and think. Is it? There are a few sectors which are witnessing an increase in their subscriber base. But Renewable Energy is certainly not one of them. Therefore, what is cheap today, might get cheaper tomorrow. Furthermore, do not add to any new elements of recurring costs associated with an aggressive takeover / acquisition.
Review the market situation and your own liquidity position before getting tempted by the proposition of taking down a business rival. Further, this is not the best time for marketing. Try to sell your media space and curtail all expenses pertaining to development of new (expensive) content. Another way of creatively utilizing this period is to have your marketing team work on trainings and internal hygiene.
2. Invest in employee morale and motivation
Remember your strengths that brought you success during normal business cycles. Your employees are your key assets. A motivated lot will help you recover faster when the business recovers to normal. Committed employees
will work at the peak of their efficiencies for extra hours when this lock-down ends. They will generate leads, convert leads to orders and orders to sales at a rate that was never seen before.
Therefore, salaries and trainings given to employees during this period are likely to generate great returns for the future.
3. Engage with your clients – it costs nothing
With slowdown in new demand and difficulty in conversion of leads to sales, it is always a great opportunity to look at existing customers. Reach out to them for feedback, up-sells, referrals. You will be surprised to see the results.
4. Diversify – look for alternative vendors especially overseas vendors
Are you still stuck in your hometown / state / country? It is time to look for vendors across the globe. Look around at companies and countries that have done well to beat the Corona crisis. Explore vendor tie-ups in the emerging countries and they will provide you with the critical business continuity even as some functions become non-operative in your area of work.
There is always a neighboring state where business has not come to a standstill. This is the time to explore the un-chartered territory and leverage your global network for delivering the fresh demand.
5. Explore outsourcing partners and strengthen your BCP
Did your outsourcing partner let you down? Most companies have experienced a drop in the service levels and violation of SLAs by their partners. Lack of a BCP or a strong infrastructure has exposed some of the vendors and left you wondering where you went wrong. Do not worry. Just look for partners having stronger BCP. Sounds tough! Then create an alternate vendor partner who will give you a natural back-up in tough times.
6. Reduce fixed recurring costs even at the cost of margins
There are a lot of bargains in the market which contractually bind you for longer period of subscriptions in return of a discount. It is time to review. Go for a higher variable cost per unit rather than a minimum commitment of expense. Get rid of your minimum guarantees on travel bookings, hotel rooms, fleet operators, designing partners etc. and look for vendors who are happy to work with zero fixed commitments.
7. Initiate cost reduction talks with suppliers
A supplier who does not understand the need of the hour is clearly a bad supplier. Engage with your partners and suppliers to explore possibilities of cost reduction. Have them share their cost-sheets with you and review their margins.
Try and renegotiate the operating expenses and absorbed costs for as long as the lockdown continues. This will give you valuable savings for lasting the extra mile.
8. Renegotiate contracts and revise force-majeure definitions
Force-majeure (FM) is a critical clause forming part of all contracts and agreements. If you are already beyond the stage where you can make regular payments, then this is not for you. However, those who are planning proactively to avoid cash crunch, they must quickly reach out to their vendors for revision of conditions where FM shall apply.
Further, try and ensure that FM invocation should not have the effect of terminating your contracts. You still want to do business. Therefore, redraft your contracts and service agreements to give you that extra leverage of delaying payment / affording differed payments, non-payment of minimum guarantee amounts, rental payments etc.
9. Plan for the worst case.
Even though we all hope for a better tomorrow, it is most prudent to plan for the worst. Have your CFO build alternative scenarios and project business continuity in each of the cases. You should have ready plans and scenarios for business continuity of at-least six months without any cash flow visibility. You will be surprised to see how a disciplined and prepared finance organization can emerge victorious against the most operationally effective firm during these critical times.
10. Have another look at your Balance Sheet for Cash Flows
You might actually be surprised how your balance sheet is sitting on a pile of cash. All that is needed is to get creative. There are several aged debtors who have been waiting for a discount / settlement offer. Un-reconciled accounts leading to payment delays / disputes require just the extra push. Long term investments must be liquidated or kept handy for borrowing overdrafts. Then there is always a long unsold inventory, take a decision to scrap it or realise discounted prices. This is the time to go back to the basic lessons in the Finance Classes where you were taught the importance of cash-flow over profitability.
It is actually a good time to take the brave decision of offering discounts, writing off unrecoverable balances, scrapping inventories & idle assets. The exceptional one-time losses will not irk the investors, auditors and revenue department during this crisis. All you need to remember is what does not kill you will make you stronger!