We can paint two distinct pictures to evaluate the progress of businesses as they begin to recover from the setbacks of the past few months. One would illustrate what the data, numbers and business results show. What is in the bank and on the books? And while it is always important for owners to understand this information, right now, creating clarity is critical. The second picture would show the people. This one may be more complex. As forced shutdowns changed our business dynamics overnight, the impacts on people have been profound. From employees and their families, to customers and the wellbeing of owners themselves, the moving pieces of the pandemic response have left an emotional toll. For business owners, it’s equally important that this picture become clear.
For me, one story that uncovers the impact hits close to home. My dad, quickly approaching 85, is a physician who, after retiring from his practice at age 70, continues to work reviewing medical files for the state. He loved going into the office 2 to 3 days per week. His computer skills were minimal and in his line of work, that used to be acceptable. Overnight, he was forced to learn how to use a Microsoft laptop instead of an Apple desktop computer, had to trouble shoot printing and navigate ZOOM meetings, and work within these new protocols without the benefit of an IT resource on stand by. He still loves his job, but the last few months have been a big challenge.
Like my dad, it’s the people inside our businesses that have had to learn to expand, grow and quickly shift strategies to insure survival and continued profitability. And, for the first picture to show healthy business results, how we paint the second one will make all the difference.
These dual skill sets — and the ability of business owners to strategically navigate them — will separate the entrepreneurs that come successfully out of this downturn and those that may need to close up shop.
Create your own luck.
When we get into economic crisis mode I commonly see business owners stop, freeze and believe their business will be safe if they just hunker down. They believe that it’s too late to create a disaster recovery plan. And while it is true that the best time to plan for downturns is during the good times, there is no time like the present to set the ship aright. I encourage you to focus on the potential hiding in the shadows. The pandemic has provided many businesses the opportunity to evaluate costs and strategies. I say opportunity because it has forced us all to take a hard look at our businesses and determine what functions are working well, what functions need some improvement and what functions are not working at all. This honest assessment needs to include a review of systems, customers and staff. This is a daunting task when times are good, i.e. pre-pandemic, we so often find excuses to put it off. And after all, sales cure all, don’t they? Or do they?
Evaluate your systems.
Can you get the right information/KPIs from the systems you have in place? Are your systems efficient? Consider that since you’ve been living with them, you may be like a frog in a pot of water… unable to recognize that it’s started to boil. You’ve gradually developed work-arounds that eat time and profitability, but you think the cost or learning curve of newer systems is prohibitive.
The best time to evaluate and make changes is NOW. Make sure that as you migrate, the systems you choose interface with one another, i.e., banking and credit card transactions should load into your accounting system continuously or through a push function. The same is true with timekeeping and invoicing systems, as well as marketing and sales software to track prospects and customers.
Choosing the right systems will save you much more than your initial spend. You will be amazed how much you will save over time in both dollars and staff efficiency. What could you achieve by refocusing your staff to higher-level tasks and projects? The ROI is likely much better than you think.
One way to solidify this new behavior and thinking is to measure the outcomes. Do they match or exceed your estimates? Does the benefit align with the expenditure? Did you select the right system for the right price and an appropriate amount of effort? Consider hiring an expert who understands your business and can help you choose the right, industry specific system.
Understand Your People
The relationships between businesses and people are intricate. And let’s face it; businesses need all kinds of people, from the right employees to strong leaders and a loyal stream of customers. Take advantage of the changes brought by the downturn to take stock of the people who contribute to your success.
Ask yourself; have I spent enough time communicating with my clients or customers? Do I really know how their businesses are doing? Have I checked in on their emotional state or the status of their families? Take the extra time to continuously provide value in every interaction. Be ready and willing to switch to a plan B, understanding how to be more helpful, whether that means special pricing, a payment plan or a reduced contract. When you show up as a partner and invest in the relationship, they will continue to be there to support your business as well.
Take seriously the contract you’ve made with your employees. Once they are hired, you have an obligation to ensure their gainful employment and support their ability to contribute to their family and personal needs. The pandemic has created new realities for almost everyone; from remote working challenges like my dad is navigating, to health fears and safety concerns, childcare obstacles and eldercare duties. It’s time to factor in the responsibility you bear for both their physical and psychological safety as part of your team.
Look for redundancies before you bring on new staff or bring your team back from furlough and remain aware of right-sizing workloads to create a sustainable balance for each person. That said, do be continuously recruiting for the future. This is different from overstaffing. Network for the future as your company grows or people exit, looking for new energy, ideas and skills in people who are a good fit for your culture.
And don’t forget yourself. We only have so much gas in the tank and when we run hard for 4+ months — it takes its toll. I think that’s where many business owners are today. Worn out, weary and with a tank that is on E. Take some time to slow down, step away, and truly give yourself some recovery time.
Know your profitability
Sometimes relationships with clients get in the way of making profitable business decisions. If you run a service business, there are specific metrics you need to track to measure the profitability of every client. What are those drivers for your business? If you are not sure, seek data from industry peers or financial professionals.
Begin by understanding what standard accounting reports and metrics tell the story of your business. Many owners are looking at the wrong line items, or focusing solely on cash flow as the key indicator of financial success. You’ll also need to customize reports that automatically pull data that track against the goals you have set for your team.
With this information in-hand, sort your clients/customers in buckets based on what you uncover; A, B, C, & D. As challenging as these decisions can be, you need a plan to migrate out of clients/customers in the D bucket. This is your least profitable business and it’s likely you need to free your time and energy for better-fit prospects.
For non-service businesses and those with multiple revenue streams, evaluate your profitability for each revenue stream. Work toward eliminating any revenue streams that are not profitable. Work smarter; not harder.
With these tools at the ready it becomes easier to read trends and forecast future earnings and profitability. Which, in turn, helps you to manage your cash and assets more effectively today. The sooner you get these things in place, the better you will recover from the current downturn and increase your chances of thriving in 2020. The business owners who make proactive, progressive decisions will come out on top.
What will your pictures show?
