The world is in turmoil and the current state of the world will quickly cause financial losses. You may already be seeing signs of an early decline.
In times of uncertainty, business often slows to a crawl. Business owners and their clients don’t make decisions in times of fear. In fact, it can be dangerous to make huge decisions during times of extreme prosperity or decline.
But there are some things you can do to stop the financial losses and even create opportunities to make your firm stronger.
Here are five steps you can take right away to increase your financial stability both short and long-term:
1. Collect Cash
Focus on collections like crazy right now. Cash is King! Use any free time to call clients and establish terms to get paid as fast as possible. The key reason that most A&E firms went out of business in 2008 was because of huge accounts receivable they couldn’t collect. Also, keep a tight control on utilization. The primary cause of low profit margins is not keeping employees billable (not just busy).
2. Reach out to your best clients
Your clients’ lives are being disrupted too. Find out their biggest concerns and see how you can alleviate some stress or give advice about reducing losses on their projects. Even if there is nothing you can do in the short term to help them, they will remember that you were there for them and willing to help. Here are some ideas for retaining your best clients.
3. Communicate with staff
Your staff are extremely fearful right now and need strong leadership. This requires communicating frequently with confidence about your concern for their well-being – both physically and financially. Try to find ways to get employees involved in helping minimize losses including strengthening work processes and reducing inefficiencies. Ask your employees for feedback – they might have some great ideas that you had not yet considered.
4. Create contingency plans
Try to map out different scenarios about how the impact of the COVID-19 virus could impact your firm. Look at the worst case, probable case and best case scenarios, and carefully plan your steps to keep business moving, secure new business and retain employees.
5. Look for opportunities
Look for business opportunities including ways you can reduce losses for clients and instill confidence in the eventual recovery of their projects. Focus on those industries and markets that are least impacted by the current lock-down and see where your firm can divert resources. Also, consider that clients that have employees working at home may need your help to “design” solutions to their current project challenges.
One of the mistakes I saw many firms make in 2008-2009 was to cut costs so drastically – especially in marketing – that they severely hurt their firm’s ability to recover quickly when the economy improved. The firms that actually increased their marketing during the last recession ended up recovering much faster and had a competitive advantage. This is a Culture Trap that I define in my book, Find the Lost Dollars.
The billionaire Warren Buffet made most of his fortune during the economic downturn in 2008. Having been through at least four prior recessions and crisis myself, I believe we will all get through this if we stay calm and try to be creative rather than reactive. Take this time to work on your business and make the changes you have been putting off.
“No matter how difficult the situation is, it won’t last forever. What follows the night is the day. What follows the winter is the spring.”
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