The 4 pillars of having a crisis-proof company
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It is the year 2007, a young entrepreneur who had his first successful business now runs his second company with confidence, a mortgage bank with 120 employees in the United States. What this young man does not know is that in just a few months the most severe economic crisis in decades will come, leaving him bankrupt, with a million dollars in debt and with deep problems in his personal life. You probably guessed it: this was me where it was one of the lowest points of my career.
Being a business leader is a wonderful thing, but at the same time, we carry enormous responsibilities as we make difficult decisions every day that define the direction of our organizations on which our teams, partners and investors depend.
The size of these responsibilities makes us skeptical and, the current situation that we are going through due to the pandemic, has led us to be even more so. The indicators show us that the economic situation is not favorable: drop in productive activity, closure of 1 million 10 thousand 857 SMEs in the country (INEGI), low public investment in fiscal stimuli (1% of GDP), fall in investment private sector in the country and a drop in consumption worldwide. It will take us years to recover economic growth prior to the pandemic, where we cannot rule out the impact of an eventual and severe crisis.
So what can we do in our companies to overcome this? As an entrepreneur and business advisor with more than 20 years of experience, with successes and failures, I have learned that the companies that will be able to scale out of this situation will be those that have a solid operating structure focused on 4 pillars:
Pillar 1: Team
Business success begins with the people who make it up: do you have the right people, in the right jobs, doing the right tasks? A great team starts from hiring, followed by training and constant coaching.
Underestimating proper hiring processes to recruit the best can be a significant waste of time and money. A study by the Hispanic Chamber of Commerce found that losses from poor hiring can range from 50% to 175% of a person's annual salary. Just think about it: you invest in recruiters, salaries, training, compensation, and time in the process. The most common mistake made by business leaders is having a rush to fill the vacancy and hire the first person to come to their door.
A great team is reflected in your happiness and your freedom. You have fun with them, you know that they are committed, responsible and resolve any conflict. You have the freedom to disconnect from the business because everyone knows what to do and how to do it.
- To learn more: Don't let crises affect your personal finances: How to make a plan to protect your money
How do you get the right people? Sell your vision, that is, your values and your dreams, that increases the reputation of your business and generates more and better applicants. Studies such as the "Millennium Impact Report" by Achieve Consulting and the "Millennium Survey" by Deloitte (2018), suggest that younger generations are more motivated to belong to companies that generate a positive impact on the world.
Pillar 2: Strategy
Can you communicate your strategy in a simple way? When I coach business leaders and ask them to tell me what their strategy is, it often takes them half an hour to explain it. That is the problem, they have been taught that strategy is something complex that requires large PowerPoint presentations when, in reality, it is something that must be communicated in a simple way so that any member of the team can understand and execute it.
That is the secret of a powerful strategy: define it in a one-page Strategic Plan that indicates where you are going, what you want to achieve, what are the priorities, what is the short, medium and long-term objective, have indicators (KPIs) , meters, and responsible for function. All this on one page!
A good strategy is reflected in your income and your growth. If your sales are not growing consistently, then you have a strategy problem. If your growth is not greater than that of your industry, you have a strategy problem. Even if your industry falls, you must stay above it.
With a strategic plan this precise you can quickly adapt to external factors and market dynamics, then nothing will shock or take you by surprise.
Pillar 3: Execution
Do you have systems and processes that run smoothly? That is, systems and processes that do not waste time and money with errors, lawsuits, problems, confusion and drama that drains your energy and that of your team.
Effective execution is reflected in your profits, in your margin growth and in your time: if you work 10 or 12 hours and it is still not enough to do what you need to do, then you need to focus on your execution.
To achieve efficient execution, define priorities for yourself as a leader, for your company and for each area of your team. You need to establish a rhythm of communication with daily meetings with your entire team of no more than 15 minutes where they discuss strategic problems and obstacles. It has data, in real time, in dashboards that allow you to visualize the performance of your company to make any adjustments.
Pillar 4: Cash
What are you doing to conserve, grow and make your cash more efficient? The most successful companies have 6 months of cash flow in cash, what do I mean by this? Take the monthly fixed expense of your business and multiply it by 6, that is the amount of cash you need to have on hand to withstand any storm or take advantage of a business opportunity.
To grow your cash, focus on your Conversion Cycles, that is, the time it takes for each peso to return to your pocket. Ask yourself how you can eliminate errors in your sales, delivery, production and collection cycle, and how you can shorten the times of return of your capital.
It also prevents cash flight - a recurring problem in companies - and have strict control over how it moves within your organization. It has daily reports to know how each weight is circulating, what has changed during the day and how much you have available.
It is in our hands to strengthen our companies. As leaders we have a great responsibility but, if you focus on these 4 pillars, you will have an operating structure solid enough to overcome and emerge stronger from any crisis situation.
If you want to learn more about the four pillars and apply exercises and practical tools that will help you implement them in your business, I invite you to download the free ebook The 12 Goals To Scale Your Business 10x . To download it, click on the following link .