Due to the Corona Virus, we are facing and economic crisis that no one could see coming except for maybe some crazy conspiracy nut living on a solar farm in the middle desert. I can see him now sitting on a mountain of toilet paper and N-95 masks cackling madly and pointing at everyone else saying “I told you this would happen. MWa hahahahahaha !!!“ OK crazy guy, you got one out of a thousand right, even a blind squirrel finds a nut sometimes.
So now you are forced to come up with a plan to get your team
and your business to the other side of this nightmare. Well here are a few ideas that may help you along the way. I call them the four rules for dealing with an economic crisis, but you can call them…. Actually you can call them whatever you want.
Rule 1: Strategically Plan….
1. The first item on the agenda is to evaluate all of the services you use for your company, and I do mean all of them. Reevaluating them may make the difference between hundreds of dollars saved, to thousands of dollars saved.
Electrical– Consider investing in greener technologies to reduce your long term electrical expense, you could also consider reducing the usage of those items.
Other services– Cellphone plans, where you buy coffee from, group buys.
2. Evaluate what you are selling and redirect the focus of your company to offer those high margin products first.
3. Evaluate your clients so that you can prioritize them and so that you know to jump whenever they call.
4. Find out who your top 10 percent best customers and create a specific profitable offering just for them.
Rule 2: Control your Cash-flow
1. Look at every expense and
do a ROI (Return on Investment) calculation. For example if I spend five dollars how many dollars do I make off of that? Doing this will allow you to create a Return on Investment ratio. This ratio can be used to focus on highly profitable areas of your business. This will also allow you recognize and cancel no/low profit areas of your business. In the book “Be a Service Ninja.” The principle is called Killing the Dead Dogs. Killing the Dead Dogs basically refers to the fact that just because your company is supposed to offer a specific service doesn’t mean it has to offer that specific service.
2. Time to renegotiate your contracts with your suppliers. Time to push for better pricing, and take the time to comparison shop with other similar suppliers. Distributors would rather lower their prices to keep customers instead of losing you to seek greener pastures. After that seek longer terms from your suppliers, are you Net-thirty right now, hey renegotiate to Net-60.
3. Utilize financing strategies that offer 0 percent financing. People love zero percent, and will buy more same as cash rather than pay any interest rate.
Rule 3: Manage your Debt
1. Use capitalization strategies (AKA Bill Paying strategies) to pay bills that are most beneficial at the time. Eventually you have to pay all your bills, but stretch out who you pay and when you pay them.
2. Renegotiate your debt and get better terms, the principle of this is the same as refinancing your house. You pay off the same loan at a different interest rate that way you end up paying significantly less.
3. Don’t take on new debt to do business as usual
4. Use extreme caution when using debt bridging (use of debt to cover short term cash flow dips.)
5. If at all possible you should attempt to refinance and consolidate debt so that you are paying a lower interest rate and only having to make one payment.
Rule 4: Control your Resources
1. Do not allow employees to get overtime and go as far as to cut their hours if you think that they may accidentally go over 40 hours, and if you need to save a few bucks send them home early a few days during the week.
2. Check your Inventory Turn, inventory must continue to turn quickly and if you cannot turn it, then you must restrict the rate on which you acquire inventory. You may need to reduce your stock level as well. Send some of the inventory back to the distributors and eliminate inventory that doesn’t turn, or turns slowly.
3. Conduct an analysis of the previous years to see how you grew out of the last financial dip so that you can make smart decisions about where this dip is going.
