From financial challenges, to an evolving labor market triggering severe staffing shortages, companies have been forced to navigate unsettled waters over the last two years. Acknowledging a “vicious kind of cycle” in the Memphis economy, Small Business Council chairperson Dotty Summerfield Giusti told The Washington Post: “There’s an enormous amount of uncertainty.” Your ability to rise to the challenge is going to depend to a great degree on the legwork you put in before it occurs.
It’s imperative to make sure you have the resources and relationships in place now, and are positioned to work through your checklist of actions to take immediately upon disruption.
1. Four Principles of Stability
The following are the core principles of a stable business, which should be in place before a crisis hits:
People: Having the right people in the right seats, doing the right things. This applies to vendors and customers, as well as your employees.
Strategy: You should always have a strategy capable of driving sustainable growth. Regularly spend time thinking strategically: think, plan, act and learn from your mistakes.
Execution: Your processes are running without drama, and you’re creating industry-leading profitability.
Cash: You have consistent and multiple ways of generating cash. Revenue and cash aren’t the same thing – and remember, growth sucks cash out the door.
When it comes to strategy, be aware of the difference between revenue (sales) and gross margin (revenue after the cost of goods sold has been deducted.
2. Make Your Banker Your Friend
and More Money Tips
At the very least, develop a solid relationship with your banker or investment agency.
Know your daily cash in and out and your specific ideal cash reserve. Build your understanding of cash needs 30, 60 and 90 days out, as well as on a rolling basis.
Know your liquidity needs, and use this knowledge to get the right mix of CDs, money market accounts, treasuries, investment accounts and so on. Work with your banker or investment agency to find significantly more yield with less risk and high liquidity.
12 Operations Steps for When Crisis Hits
Increase your prices.
Sell more or double down.
Engage your employees in discovering cost savings and revenue generators.
Cut to the bone on your operating costs.
Carry less inventory.
Tighten your collections activities and accounts.
Talk to your bank: Request a credit line sooner than you need it. Find an SBA expert for help on achieving a loan or lender (no fee).
Review the last three years of your tax returns: 90% of small businesses overpay their taxes and may be due a refund. Take advantage of relief available in the given environment – get as much forgiven as possible.
Understand what can be written off in the current crisis.
Expect unexpected costs or price increases.
Be more open to innovation: What can you do that is related to what you’ve done but is more needed now? Who else can you serve, teach or reach out to for collaboration?