Here's What Your Business Should Focus On As It Navigates The Coronavirus Pandemic
Three key areas businesses to focus on in these unprecedented times.
While it is critical to manage your P&L account by reducing any unnecessary operating costs, improving margins, and payroll cost, nothing is more critical to your business than the oxygen that we know as cash, which will be under tremendous pressure as revenues dry up during the economic slowdown we are being subject to today owing to the coronavirus pandemic. With this being the case, here are three key areas I'd recommend businesses to focus on in these unprecedented times.
First up would be your cash conversion cycle, which is a reference to how fast cash moves through your business, and into your bank account. In these times, when a lot of businesses are moving to an online environment, think of ways to speed cash through your business by improving your sales cycle, reducing inventory to free up cash, improving ways to deliver your product or service, and finally, improving your billing and payment cycle as well. The second area to focus on would be an analysis of all products and services that you provide, rank them in order of profitability, and then remove the least profitable from your portfolio.
The third area is to fine tune your labor's productivity. This is known as a labor efficiency ratio, where you calculate how much gross profit you earn per labor hour spent. The aim here is to increase this number by either increasing your gross profit, or reducing your labor cost. Finally, regarding cash, ensure that you are checking your cash balance daily, and have a rolling 12-month cash flow forecast in place consistently. This will identify any future time where cash may be short in supply.
Now, it is highly likely that your current business plan is completely redundant at this time, and this has a very paralyzing impact on any business as the leadership tries to work out what to do. Given the current remote working paradigm that many companies have put into place, it's now time to run your first virtual business planning session. This can be easily achieved by using platforms such as Zoom or other video conferencing apps.
The agenda for this session should be broken down into where do we want to be in December 2020 in terms of results and initiatives, then breaking this down into monthly targets. In order to achieve this, you must identify only the top three or five to 5 priorities that you will focus on during this time. Once these priorities have been set, it's very important to put the right key performance indicators in place to keep you on track, as well as to communicate these on a very regular basis with your team.
My final recommendation would be to establish an effective communication rhythm, and I'd suggest a morning virtual huddle with your team where you will celebrate successes from the day before, track your key numbers, identify each members priorities for the day, and flag areas where people are stuck and require support. This should take no more than 15 minutes every day.
Weekly hour-long virtual team meetings should be held, ideally at the beginning of the week where you will track your performance against the KPIs identified, share feedback from customers and suppliers, and use the rest of the hour solving the biggest issue facing the company that week. By forming these habits, you will not only ensure you will navigate these storming waters in a more controlled way, but it will also establish good routines for when this current crisis passes- which is the one thing we can be certain of.