Coming Out Of The Covid HazeJune 27, 2021
What should your business focus on, now that Covid is subsiding?
Masks. Gloves. Disinfecting sprays. Dodging the virus. Sickness. Tragedy. Loss.
You were blessed if you were fortunate to not experience personal loss, or business loss.
Businesses were impacted, some destroyed. And for some it was about change. Pivoting. The New Normal. For some it was a bonanza. It depended on what industry you were in and individual circumstances.
Regardless, we can all agree, it’s been a long 16 or 17 months.
Performance, responsiveness and results always matter and they are more important than ever, with businesses recovering and coming out of Covid.
If Covid has taught us anything, it’s the importance of anticipating what’s potentially coming around the curve, even if it seems unlikely or remote.
And, being prepared for the unknowns, planning for the challenging times.
Whether they are publicly-held, privately-held, or private equity-held companies, businesses have had one C, Covid-19, giving them another C, Challenge, in the form of two other C’s, Crisis and Chaos, and what’s most needed, even after Covid, is another C, Control. Calm (yet another C) comes from feeling in Control.
Businesses can feel back in control by focusing on what what we call the “Covid Rebound Six C’s:”
Covid Rebound #1. Manage Cash. Forecast inflows, outflows, based on a worst-case scenario. Be conservative. Liquidity is your lifeline. Manage raw materials and inventory more closely and convert them to cash through incentive pricing and volume discounts to customers. Having a cash buffer can help mitigate the challenges of the next unforeseen situation that hopefully doesn’t arrive.
Covid Rebound #2. Manage Costs. Keep a lid on all unnecessary expenses. List expenses and categories of expenses in terms of priorities — taxes, utilities, payroll, e.g. Prioritize, prioritize. Learn which costs are direct and indirect costs associated with revenue generation and performing core work and providing core services and products to customers.
Covid Rebound #3. Manage Credit. Reach out to creditors and continue to ask for relief and flexibility. Stretch out obligations and payments in installments. Ask for interest only payments. Don’t buy what you can lease. Don’t lease what you can rent. Don’t take on new debt unless it is absolutely necessary. Take advantage of low interest rates to refinance, cut borrowing costs, cut interest expense and boost cash flow.
Covid Rebound #4. Manage Communications. Communicate with stakeholders. Stakeholders include your vendors, customers, employees, your advisors and service providers, and anyone who pays your business or anyone your business pays. What is your message coming out of Covid? It’s also a great idea to communicate with your competitors to share resources, best practices, and establish common goals and understanding.
Covid Rebound #5. Manage Continuity of Core Operations. Make a list of what must keep happening, on what level, when, why, and where. Group personnel into key core personnel and nonessential — hint, look at the categories of labor — generally direct and indirect employees in manufacturing and service are critical to output, where SG&A employees are generally linked to sales and administration. Ensure that you still have a business. Don’t slack on things like taxes, registrations, permits, regulations, compliance. Continue core, scaled back operations. Focus on what is absolutely necessary.
Covid Rebound #6. Manage Customer Expectations. Speak with customers regularly and offer to help them, and, ask for their help. How you treat your customers in a time of crisis, when their crisis is your crisis, determines what kind of relationship you’ll have with each other long into the future.
There have thankfully been financial support resources out there, but aside of those programs which are, or may soon be, exhausted, managers and business owners will be best served by strengthening the fundamentals of the business, managing stakeholder relationships, innovating through new and different ways to generate revenue, provide products and services, and most importantly, communicating proactively with “upstream” (vendors, lenders, e.g.) and “downstream” (customers, business partners) and by paying attention, the “Six C’s” can ensure a stabilization and eventual rebound.
It’s best to learn from the pandemic, by continuing to be Conservative, Cautious. Creative and Consistent.