If you want to make your business more valuable, take this advice: work on your business, not in it! You can’t be in the midst of small, everyday activities and still be able to bring more business into the company (which is what you’re meant to be doing as the business owner). Long term, if you stick to what you’re supposed to be doing your company will not only be much more profitable, it will be more valuable! Valuable as in: if you ever sell your company, the buyer will be more interested in taking over a position that’s working on a business, not working in it. Make this the standard for your business practices now to make your business more valuable!
There’s no doubt about it—one of the best ways to grow a business is by keeping an eye out for new and exciting oppurtunities like a new product or service you can provide. But we business owners need to remember that if we can’t be great at it, we shouldn’t be doing it. If you can’t perform a new service correctly, or if your employees don’t have the proper skillset to carry it out, the new idea that seemed like it would lead to big bucks will only lead to big loss for you and your business. As long as you keep an eye out, new oppurtunities that fall under your own skillset will present themselves in time, don’t try to force things that just don’t fit into existance. Instead, you should invest your time and effort in doing what you already do well, and doing it better.
Don’t fall prey to the number one threat to businesses everywhere! What is the number one reason businesses fail? It’s bad decision making! How do you escape the trap of poor decision making? Clearly it’s done with the power of GOOD decision making! Always take care of customers, always know your customers, add value to your products and services at a consistant rate, have a strategic growth plan, and pay attention to financial management. These basics should guide all decision making in your business, and no decisions you make for your business should contradict them. The right decisions make all the difference between your business failing and your business succeeding!
We all have fear, but know that customers aren’t going anywhere, they’re just temporarily on the sidelines. Consumers won’t abandon the idea of buying again, and despite the negative feelings we may have now, we need to be inspired by the possibility of great things on the other side of this.
We entrepreneurs need to be leaders. People are looking to us to provide faith and hope. Despite our own fear and despite how difficult it is, our employees, our customers, and our suppliers are all depending on us.
So let’s talk about what to do. First off, make sure your IT and technology are working, you need a solid internet connection. Acquire a communication method such as zoom or slack so you can meet and communicate with your employees. Make sure your antivirus software is in good working order. Make sure email and your provider (such as Constant Contact or Mailchimp) are all in good working order. Identify employees that can work from home. Develop a plan to enable them to work from home.
Speaking of employees, at this point I must give you the standard disclaimer that every situation is different when it comes to what to do with your employees, so I fully admit to generalizing a bit here. However, I believe you can still use what I am about to say as a guideline.
There are three main scenarios:
The first is if you are completely closed with no revenue. Let’s say you are off 70 to 100% versus the same period last year. You likely need to lay off everyone with the exception of your general manager. You’ll want to try to keep that one person to bounce ideas off of or to help you create ideas even if they’re working part time or less. One of the things you need to do at this time no matter what revenue stage your business is in is work on projects that you haven’t been able to get to that will improve your product, process, and efficiency. Having a general manager or some right hand person that you can collaborate with can help tremendously in this process.
The second scenario is that you have some revenue coming in, let’s say you’re 30 to 70% off versus the same period of time last year. In this case you need to lay off most of your direct labor and just keep enough of your best direct labor to do the lower volume. Some businesses have to go into a person’s home, and in that case, it’s up to the customer to accept your employees in their homes and it is also up to the employees to work while being exposed to other people. We have to allow both customers and employees to make these personal decisions. We also need to lay off administrative staff with the possible exception of one who will be able to help you with financial statements and gathering data from your business performance like bookkeepers.
The third scenario is if you are only off 10 to 30% versus the same period last year. In this case you may need to lay off some of your least effective direct labor workers. It’s usually best to do this because you will be able to test a smaller head count to see how effective it is because ineffective employees are not usually missed much. Once again, both employees and customers need to decide whether to enter/accept entering customers’ homes. You may also need to lay off administrative staff or at least reduce their hours with the possible exception of one who will be able to help you with financial statements and gathering data for your business like bookkeepers.
It’s critical that you engage and communicate with your customers. Update them regularly, and make sure if you are a business that goes into homes that they understand you are taking health precautions. Consistently let them know what your business is doing to get back into a routine and if you are a B2B company call them frequently to ask how their business is doing. Email and social media work well here, and even telephone is good. Let’s never forget the telephone, especially for our best customers. Communicate tips and advice that your product and industry offers to your customers. Publish content on the internet-you have time now!
Call suppliers, vendors, and landlords to ask for extended or creative terms. The vast majority of people are afraid to do this, but speaking from experience I can tell you that it is much better to communicate and ask for concessions than it is to ignore your suppliers, vendors, and landlords completely. Make sure to tell them right at the beginning that you have no intention of backing out of paying them, this will get them to really engage in the conversation. One strategy you can use on landlords is called Blend And Extend. In a Blend And Extend strategy, if you think you are going to need 2-3 months’ rent relief, you propose to take those dollars and spread them evenly over the remaining months of the lease. If the lease only has one year left you can do the Blend And Extend, or ask to extend the lease a year or more.
A similar strategy works with vendors and suppliers. If you can’t pay them now, see if you can stretch the amount due out over time. There are several creative ways to pay the amount owed over time. I have seen some companies propose delayed payments and when business came back, they let the vendor charge a slightly higher price for future goods until the balance was paid off. While you are talking with suppliers ask them what supply chain lines are going to be halted or delayed that will impact your revenues.
Call customers who owe you money (hopefully they were proactive and called you!) and ask them when they can pay. If they can’t pay in full now, offer them a payment plan, especially if they are a good customer. You have to be flexible as well, as there is a delicate balance here.
Communicate with your employees. Provide daily updates via zoom or videos for your staff. Use the telephone with your employees as well. Ask them how they’re coping with the pandemic. Be compassionate about their situation as they may have been laid off. You can also have a remote staff meeting with personnel whether they got laid off or not and if you’re going to pay them for their time, let them know now that you will be paying them for their time when they get back. Have brainstorming sessions with your staff on how you might mitigate risk, increase profit margins, increase opportunity and increase customer value. Figure out how to push your higher margin product in a way that adds more value to them, so that if the margin diminishes a bit due to the added value your over all margins will not be as impacted.
Communicate with your bank and make them aware of the status of your business. Your banker knows there is an economic crisis. Be candid about your situation, even if your credit line is fully extended. The bank will appreciate your call. You also may get some priority in the processing of the CARES Act Loan since there is going to be an inordinate number of applications. You will not regret making this call. If you do not have a banking relationship, make one now with the commercial bankers at your bank.
The main strategy through out this crisis is to buy time and preserve cash.
As long as you are operating you must advertise and promote. Remember to negotiate prices with advertisers. Know that advertisers are making deals and you want to make one of them. You might be wondering why I am strongly advocating for you to advertise and promote during economic turmoil. It all comes down to my personal experience during what had been called Black Monday back in 1987, when I was in the ski business. The stock market went down very significantly and there was panic and worry for weeks as the market continued its nosedive. Everyone was downsizing and cutting back on their expenses, especially in advertising. No business at all was advertising, including my competitors in he ski business. I knew there were still consumers with money who wanted to buy, and that the only life preserver for my business was more customers and more sales. So I reduced expenses, but NOT in advertising. This was a defining moment for me. I negotiated lower prices with advertisers and kept advertising at a high level. My sales were still off, but only by 5% while my competitors and many other retailers were off anywhere from 30-40%. In today’s economic turmoil, I retain this same attitude. On Monday, March 16th when the stock market went down almost 3000 points and Corona Virus was the only thing on people’s minds I sent out a mailing to prospects in the trades. I am still planning on launching my internet strategy in a few weeks, spending more advertising money than I ever have at Next Step CFO. In 1987, I learned that when your business is in a state of emergency, you promote despite all the negative emotions you may feel, and despite the psychological difficulty you may have spending money during an economic crisis.
So now what do you work on? Those projects—you know, the ones you thought about doing but never got around to? Now is the time to work on those projects that could never be prioritized before that will improve your product, process, and efficiency. See if you can train certain coach-able managers or employees to help them perform better and figure out how to do it remotely.
Come up with ways to add more value to the customer. You need to have REAL value to your customers now more than ever. Figure out how to offer things like warranties or free service or bundling products to make packages. Get creative!
Look into the CARES(Corona virus Aid Relief and Economic Security)Act Loan. In this loan package there are forgiveness provisions and there is no personal liability which needs to be considered when contemplating this loan. All of your other loans and credit card debt very likely have personal liability. This loan does not. Get your tax returns ready so you can expeditiously apply. Make sure your tax returns and financial statements are accurate and credible.
Finally, have a contracted CFO(Chief Financial Officer) help you with things like a 13 week cash flow projection, forecast-ed P & L, balance sheet and cash flow that can do multiple what-if scenarios to account for uncertainty, and understand how many days or weeks of cash reserve you have at all times including your line of credit. Have your CFO run your business and cash flow forecast at 15%, 30%, and 50% revenue drop and sales needed to break even.
I hope I was able to give you a few ideas on how to approach your business during this very challenging time. Remember, this is our defining moment. Stay safe and stay healthy.
Back when I was in the Ski Business, I went through what had been called Black Monday. October 19, 1987. The stock market went down very significantly and there was panic and worry for weeks as the market continued to nose dive. Everybody was downsizing and cutting back on their expenses, especially advertising. They were all recoiling.
No Small businesses at all were advertising, including my competitors in the ski business. I decided that there were still people with money. I decided that there were consumers that still wanted to buy. I decided that the only life preserver for the business was more customers and more sales. I reduced expenses but not advertising. This was a defining moment for me. I negotiated lower prices with advertisers and I kept advertising at a high level. My sales were still off, but only 5% while my competitors and many others who pulled back their advertising were of 30-40%. Today in the midst of this new economic turmoil I still have the same attitude. On Monday March 16th, the day the stock market went down almost 3000 points and the Corona Virus was the only thing on people’s minds I sent out a mailing to prospects in the trades. I am also preparing to launch my internet strategy in a few weeks and spend more money on advertising than I ever have at Next Step CFO. You see, I learned that when your business is in a state of emergency you promote despite all the negative emotions you may feel. Now, I know some of you had to temporarily close your business, and believe me, my heart aches over that. But you need to take this opportunity to plan your comeback. Catch up on projects that you didn’t have a chance to get to that will improve your product, your process and efficiency. Provide some additional training to coachable employees with potential, and most importantly, stay engaged with your customers and clients.
60 million people work in small businesses. Businesses like ours. You know, we business owners have an opportunity. An opportunity to shine. Great heroes and great heroines, great leaders and great profits will be made during this time. We can either recoil and stop promoting like my competitors did in 1987 or despite how difficult it is, advertise and engage and add even more value to the customers we serve. How do we serve at a higher level? One of my clients in the screen printing and embroidery business had a big sale every year at the St. Patrick’s day parade. So what did he do? He heavily promoted a green t-shirt with the words “2020 St Patrick’s Day Parade Dorchester Mass” over which were large red letters saying “Cancelled”. He sold a ton of them.
We small business owners have a responsibility. As entrepreneurs people are depending on us to pave the way. They are depending on us to give them faith and hope in this time of great adversity. And it doesn’t matter what position your business is in. My question to you and me is this. Are we going to recoil, or are we going to take advantage of an opportunity to lead, an opportunity to provide hope, an opportunity to find and create more value for our customers, an opportunity to be an inspiration to our children and to the people we serve? I know entrepreneurs, and I believe you will provide faith and hope, I believe you will create more value for your customers than they could ever dream possible, and most importantly as a result of this manifestation of strength you’ll become more of an inspiration to your children than they could dream possible. This is a defining moment. BE WELL. BE SAFE. BE HEALTHY.
Have you ever noticed, when you want to bring more understanding to something, you express it in numbers? For example, “On a scale of 1-10, how did you like that movie?”, “What percent do you think the probability is that you will get that client?” “How many viewers tuned in to your webinar?”. A numerical answer to these questions create a greater understanding than if you answered the questions without numbers. My name is Michael Barbarita from Next Step CFO, bringing you outsourced CFO services with the Know Your Numbers Minute. Numbers bring clarity to all things, especially in business. Numbers create a better understanding of why certain business conditions exist, or the mere discovery of a certain problem in an area of the business. Tracking Metrics is the perfect tool to bring clarity and understanding to what is happening in your business. Tracking metrics are financial parameters that evaluate the performance and productivity of a business, because remember, the most successful business owners know their numbers!
In 1900, if you asked 1000 people if it was possible to fly, how many people would have said yes? Probably two, and they would have been hauled off in strait jackets. If you asked the same question today, only two would say no, and they would be considered crazy. The point is that in 1900, two people, Orville and Wilbur Wright had the conviction and belief that man would fly, despite what others thought. The founder of a startup must possess the same conviction and belief. My name is Michael Barbarita from Next Step CFO, providing outsourced CFO services with the know your numbers minute. If you are starting a business and you don’t believe that your product or service is great, despite what others think, you are going to have a rough road ahead of you. It all starts with undying faith and belief in what you are providing. And remember, the most successful business owners know their numbers.
Lately, I’ve been thinking about humility and its role in affective business leadership. Being open about our weaknesses seems counter intuitive to many and yet it is often one of the key difference makers between affective and ineffective leadership. My name is Michael Barbarita from Next Step CFO providing outsourced CFO services with your know your numbers minute. Some leadership thoughts to consider: One, show you are human by selectively revealing your weaknesses. Two, care passionately about your employees and their work. Three, dare to be different, capitalizing on your uniqueness. Think about applying these thoughts in your day to day management and remember, the most successful business owners know their numbers!
An injection of capital into a business can be as temporary as an injection of sugar from a snickers bar if proper financial management is not in place.
My name is Michael Barbarita from Next Step CFO providing outsourced CFO Services with your know your numbers minute.
Proper financial management starts with managing cash flow. One of the basic things that you can do to get clarity on cash flow is invoice on time and have an accounts receivable collection policy.
Click on the “Learn More” link right inside this video for another video of one of the strategies I use in collecting accounts receivable. If consistently applied you will find that over time your collection of accounts receivable will be faster.
And remember, the most successful business owners know their numbers.
Matt Young, Jack Clark, Edgar Renteria and Julio Lugo are just a few of many examples of Red Sox Free Agents that didn’t work out. Most baseball experts would argue that the Red Sox didn’t want to admit they made a mistake and kept these players too long. The Red Sox didn’t cut their losses.
My name is Michael Barbarita from Next Step CFO providing outsourced CFO Services with your know your numbers minute.
Many business owners keep unproductive employees way too long. The proper strategy is to put together an exit plan for these slackers as fast as possible and cut your losses.
The moral of the story. Hire Slow; meaning take your time on the front end, fire fast and cut your losses.
And remember, the most successful business owners know their numbers.