Six Steps To Take When Leading Your Business Through A Crisis
When it comes to your enterprise today, it is all about survival, and to survive, you need to know your business inside and out.
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This is war.
Forget 2019. Forget 2018. In fact, forget every leadership lesson you've learned in the past 10 years, because the person leading the company then was a different person to the one who needs to lead the company now.
The old you was a peacetime leader who was encouraged to take a big picture view, to focus on the long-term, to develop the team, and to put in place systems and processes to ensure the company operates seamlessly. This is great when things are moving along at a consistent pace, and you have an idea about what tomorrow holds- but that approach won't work today.
The new you needs to be a wartime leader, to have a sense of urgency, and to be able to make decisions quickly and decisively. At the same time, you need to be adaptable to a constantly changing scenario, and be willing to change direction should new information come in.
Today, it is all about survival, and to survive, you need to know your business inside and out. If you've built a strong team and culture, and built systems and processes inside the company during the good times, then you'll be happily reaping the rewards now. If you haven't, then it doesn't matter, because it's too late to worry about it now.
If you were fortunate (or unfortunate) enough to have been leading your company through the 2008/2009 global financial crisis, then now is time to dust off your playbook, and consider what you learned back then (and have probably forgotten since). For those of you who haven't had the pleasure of leading through a crisis, the tips below may be of help:
1. Act now
Regardless of your view of the situation, or how bad the impact has been on your business so far, unless you're one of the lucky few businesses that are thriving off this situation, you can pretty much guarantee it's going to be tough. In fact, it's going to be tougher than you can even imagine, so don't hesitate with making decisions to safeguard your business. Now is the time to put a freeze on all discretionary spending. Speak to your suppliers about discounts or payment deferrals. Review your marketing and research and development spend. I don't agree with cutting or reducing the latter "strategic" spend for many businesses as this is an investment, but it is worth seeing if some elements can be deferred so long as they don't impact your revenue-generating capabilities. The actions you take here are the easy low-hanging fruit, so to speak, but if you cut your unnecessary expenses now, you won't regret it later.
2. Make forecasts, not predictions
No one knows how bad or how long this will last, and you need to be at one with this uncertainty. That doesn't mean you should be indecisive. You should plan for the worst, and hope for the best. Plan on this crisis to last for a minimum of three months, but then rolling into summer, so assume it will be six months before business starts to return to normal. Run the following three forecast scenarios on your cashflow.
- Scenario 1: If all your revenue stopped now, and no one paid you, but you maintained your outgoings, how long can you survive on what's in the bank alone?
- Scenario 2: If all your revenue stopped now, your receivables continued to come in, and you maintain the same outgoings, how long can you survive?
- Scenario 3: If all your revenue stopped now, your receivables continued to come in, and you reduced your outgoings, how long can you survive?
These should lay out some fairly bleak base level scenarios for you to help guide decisions. Then, you can move onto revenue forecasts. Assume the revenue you're bringing in now is what you can expect for the next six months, or even that it will decline further. How does this change your scenarios? Then, create a plan for each scenario for how aggressively you should respond to each, and create set trigger levels to pull the lever for each scenario.
These plans may involve headcount reductions, paid/unpaid vacations, or implementing pay deferrals- I am an advocate of a deferral rather than an outright cut, as it leaves your team with an element of hope as well as an opportunity to band together to have the opportunity to ensure it's not lost. The point here is to plan for the worst, so you have a clear plan to take immediate action on. You'll continually update these models with latest information, but you don't need to revisit the decisions again and again– just the timing and severity of them.
3. Distinguish between cash versus revenue
Make a clear distinction between actions you need to take to protect your cashflow, which is the lifeblood of the company, and actions you take to generate revenue. Yes, your core focus is to ensure the company lives to fight another day, but if the moves you make put you out of the game from the start, and kill your revenue-generating capacity, you may as well pack it up now.
Likewise, if you start aggressively discounting and extending credit to drive revenue, you may well accelerate your demise. Whilst revenue is important, cash is even more important, so look at your operations, in particular, your balance sheet, and try to find hidden sources of cash that might be locked up in inventory or assets that can be freed up to keep the company running. Do you have surplus stock that you've sat on for years? Now might be the time to liquidate it, because that cash is worth more than having a warehouse full of unsold goods. What other levers can you pull to ensure you win the biggest share of a smaller pie?
4. Work on your internal communications
Communicate confidently and frequently. Your team is worried, for their health, for their jobs, for their families. Silence breeds uncertainty, so don't let them fill the void with guesses– keep the information flow coming, even if it's just to provide assurance that you're not sticking your head in the sand. They're all looking to you for guidance and assurance, and now is when you need to be out the front with your team. This is hard enough when you're physically there, but much harder when you're all working from home. Get on Zoom calls weekly, if not daily, with your team, and make sure they're okay and focused. If you follow agile/scrum methodologies, your daily huddle with the team will help maintain focus and velocity within the team, even if you're not physically together.
5. Remember your business is still all about your customers, not you
Many companies are focused on sending or posting generic messages that are essentially no more than a company policy on how they're handling the crisis. Or they're beating on the same door, with the same products, in the same way they have always done. Before going down the path of yet another generic mail that isn't particularly relevant to anyone, or another sales call to chase down revenue, put yourself in the customer's shoes. Why would they care about your call? What are they going through? How can you help them through this now, or when things open back up again? What makes your communication any different from the hundreds of others they're receiving? Put yourself in their shoes, understand what they need, and how you can support them, regardless of whether there is any immediate financial benefit. The customers you help and respect during this time will be the ones that help you come out of this on top.
6. Look to the future
This crisis will pass, and the companies that survive will come out the other side stronger, leaner, and more efficient than they were going into it. In every crisis, there's opportunity, and if you've got on top of the aforementioned five areas, now, you can take a moment to step back from the battlefield, and look for opportunities. Are there opportunities to gain market share, or take out a competitor who runs less efficiently than you? Is there a new business model that you can turn towards- new product lines, or sources of revenue to diversify? If you've taken the steps to protect the downside, you may have a war chest that can be deployed to acquire struggling businesses coming out the back of this. Remember, in all wars, there's profit.
Above all, through this period, maintain your positivity, and treat this as an opportunity to prove to yourself what you can achieve. It's easy to lead in the good times; it's much harder to lead in the bad times. But it's most certainly more rewarding, and it will build greater character and resilience than you ever knew you had. And when things do turn around, and business returns –whenever that is– any future crisis will pale in comparison. So, when the good times return and you have to swap your battle helmet for your baseball cap again, don't forget to file your notes from this current period- after all, remember that the wartime leader can well be called on again in the future, and when they do, you'll be ready.