One of my favorite quotes is from Royal Robbins, a pioneer of American rock climbing, who said, “When it’s been a long day of climbing, and I feel like I can’t go any farther, I concentrate on the next three feet. And then the next three feet; and then the next three feet. Pretty soon, I’m at the top.”
Conditions in the marketplace are extremely challenging. For many companies and their leadership teams, it feels like they are out on a ledge, on a mountain too tall to climb, with visibility so bad, one has no idea which route to take.
Things are changing so rapidly in the business landscape, yet it seems every day brings more questions than answers. Right now, we are all asking, “What will re-opening look like? What will customers do? How and when do we re-hire? When will the economy rebound?” We just do not know the answers yet.
In the face of that uncertainty, management teams can move their businesses forward by focusing on a few key things:
This is first and foremost. There are a lot of things out of our control, but we can control movement, momentum, and action forward just like Royal Robbins. What do the next three feet look like for your organization?
They have almost certainly changed. Assess their current state and carefully watch for changes over time. How healthy are they? Can they buy? Will they buy – just because you have a great deal to offer perhaps, will the customer take it at any price? How do you best reach them with what you have to offer?
There is no better time to have a clear plan, even though obstacles seem to constantly appear. No different than scaling that mountain when bad weather arises, you might have to take another route up, you might have to take an intentional pause, or possibly even go back down a bit. The key is planning ahead of time on the available options – have contingency plans throughout. It is highly unlikely the route will go exactly according to Plan A, but thinking ahead of time of possible options will make it much easier to nimbly shift when the storm comes, and also much easier for the team to follow.
An essential piece of that plan is cash flow. It needs to be on paper and go out at least the next 2 to 3 months. The goal is not to get it perfect; it is more of a compass to help with direction in making decisions. It will change frequently, and it needs to be reviewed as much as multiple times per week. When is cash likely to come in? (Be very conservative). Lay out the key buckets of expenses in the business. And make sure there is an understanding of any deferred expenses such as rent, loan payments, etc., that may have accumulated during the last few months. A great best practice is to compare forecast to actual – this can really help fine tune the process.
Having the right banker, CPA, lawyer and other strategic resources has arguably never been so important. They can provide you with key insight and resources, can help you strengthen your planning, and provide context on the broader market. You should not be alone in these uncertain times, and these partners are there to help you navigate. If they are not of help right now, find ones that will be. You will need them to reach the summit.
The journey is not going to be easy, but the opportunities will be abundant as the market rebounds. Even in this time of uncertainty, companies can take proactive steps to not only survive, but to thrive as well, even if just three feet at a time.
The Payroll Protection Program (PPP) has provided a lifeline to assist businesses through the economic confines caused by the COVID-19 pandemic. For many small businesses, confusion has been constant with respect to loan status, forgiveness and how to manage the loans once they are funded. There is a good bit of blanket guidance that has been put out by the SBA, accounting firms and law firms, but final details surrounding the program are still a moving target. Thus, the average business owner may well find themselves wondering what to do to manage the PPP funds for their individual business.
First, some quick background
The takeaway from this is that what has happened to a neighbor’s company may be very different from what happens to yours.
What to do?
The bottom line is to be intentional with decisions. Plan as though there will not be another lifeline on the horizon. Used properly, these PPP loans can be a great bridge to help companies navigate toward a rebound in the economy. Just beware the missteps that could make a tough situation even worse.
None of us could have expected the disruption to daily life that a sudden pandemic can cause. News changes by the minute, and countless businesses are faced with significant and, in many industries, severe pain.
There is no easy solution to a crisis, especially one with such a global macroeconomic impact. Standing still can be fatal, while taking action too extreme can cause more harm than good. While each business is unique, there are some best practices and positive steps businesses can take to hunker down, weather the storm, and make the best of a terrible situation.
Manage Cash Carefully and Proactively
Communicate with Stakeholders
Prioritize Needed Changes
Manage the Short Term and Long Term
This chaos will end at some point. However, we lack the crystal ball to know when and how. While survival in the short term is a must, it should be done in the context of future impact as well.
Pause on Non-Essential Decisions
The American entrepreneur is incredibly resilient and has long been the lifeblood of the economy. There is no stopping that role into the future. This too shall pass, but it no doubt will require extremely hard decisions, tenacity, and teamwork. Great opportunity awaits on the other side of a crisis. We will rise from this challenge as well. Stay safe and stay strong.
Accounting and finance are two commonly used words to describe functions within businesses. Let’s look at what they mean to small and mid-size businesses, some key differences between them and reasons why both are essential for long term success.
The most important point however for any small and mid-size business is a solid, intentional balance between the two.
A company weighted too heavily on accounting will be very reactive, making decisions on events that have already occurred and unable to alter results quickly.
A company weighted too heavily on finance will have wide variability in its forecasts, with little to no measuring stick to compare against, not to mention the risk of compliance issues.
What is it? Accounting is the recording, maintaining and reporting of a company’s financial information, or more simply, it describes where money came from and where it went over a period of time.
History – By definition, accounting is historical in nature, it is rear-looking and provides for a static snapshot of the business at a point in time. A P&L and Balance Sheet are exactly that, examples of a snapshot that accounting provides.
Compliance – Accounting services a key role in compliance for businesses. For anything from income and sales taxes, audits, stakeholder requirements for banks and investors and certainly for an eventual sale of a business, having logical, supportable records is essential to maximize benefit and avoid trouble.
Accuracy – In the same vein, a focus on accuracy is very important with accounting. Estimates are certainly part of the process, but a good general rule is to ensure accounting records are as accurate as reasonably possible given the size, resources and goals of the company.
Context – Accounting provides context for a business. It is often a baseline for the future and can be a key component of decision making.
What is it? Finance is the management of the resources of the organization to meet its objectives, or more simply where money will come from and will go.
The Future – In contrast, finance is forward looking, it is proactive and looking ahead. Forecasts, pro formas and budgets are all examples of financial tools. They are an attempt to look ahead to a point in time, weeks, months or even years ahead.
Outcomes – A key focus with finance is on outcomes, the “what if’s” based on decisions or events that affect a business. While the goal is to get as much precision as possible, the focus in finance is around reasonable possibilities, not perfection.
Needs – Finance includes a focus on how much capital a business will need and how much it will generate in the future. All small and mid-size businesses have finite resources, so making a well-informed decision on where/how to grow is key, and that can involve making difficult decisions between options based primarily on forecasted expectations.
Companies are naturally stronger in one of these areas given its personnel, systems, and business model. Many of the accounting and finance deliverables needed for a Fortune 500 company are not relevant for small to mid-size business. So, a key best practice is achieving the right blend of accounting and financial information to provide much needed visibility for company management and their needs over time.