Navigating through a Crisis – Immediate Steps to Take
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
- Know exactly what you have on hand, today and tomorrow. Put in on paper as best as possible
- What cash is committed already that has to go out the door? What accounts receivable are potentially in jeopardy – either in timing or payment altogether? What access to capital do you have from a bank line of credit? Investors may be willing to provide short term capital as well. You almost certainly want to obtain all capital you can get your hands on.
- Cut controllable, non-essential expenses wherever possible.
- Exhaust these options to identify how much cash you will have to work with to manage through, as this is likely an overriding guide to other decisions that need to be made.
Communicate with Stakeholders
- It is never pleasant to deliver bad news, but time and time again, through multiple crises including this one, we have seen firsthand how proactive communication can make all the difference. This means lenders, vendors, landlords, investors, insurance brokers, etc.
- Be open, and honest, and not afraid to ask for help from them and craft a solution together. They are partners in your business too.
- Reach out to customers as well. They might be looking for payment plans from you. Far better to know their situation as soon as possible, and it will also improve retention and market share, as this will be ignored by some of the competition.
Prioritize Needed Changes
- Crises like we are in now create some of the toughest decision points businesses have to make. The conversation around what cuts and changes may need to occur to ensure the doors stay open, while necessary, is very painful.
- The key is to keep as many options open as possible. Take a look through all the uses of cash in the business and where possible, prioritize and group into categories. There will be immediate cuts, but likely 2 or 3 different categories – 1) non-negotiable, 2) need to have but the business would exist without, and then other areas that the business could trim back on where needed for survival. This A, B, C list, for example, can apply to vendors, departments, positions or other expenses.
- Prioritizing like this forms the basis for a game plan that also allows for different actions down the road if needed, instead of taking one swift action, thereby firing all the bullets in the gun at the same time.
- Maybe instead of cutting staff, hours could be cut back. Perhaps vendors could be negotiated with on current payment terms, even if purchasing down the road has to eventually change if the business situation does not improve. To be clear, this does not mean to dip a toe in the water around tough decisions – it means exploring “what ifs” going forward.
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.
- A business with cash tied up in inventory right now should have a plan in place so that once consumption increases again, that inventory can be sold and turned into cash.
- Plenty of companies in history have missed the “rebound” and failed in the long term. Don’t put all the eggs into survival today to run into trouble tomorrow. The sustainability conversations will be different near term and long, but the overall plan should contemplate both.
Pause on Non-Essential Decisions
- This is a time for critical decision making. Plans prior to the crisis that are not mission critical to the business at this moment, for example a planned investment, hire, or product change, likely should be paused at least until there is better clarity on the real picture of the business.
- Crises create a lot of noise, not all of which may be permanent. Often best to let the dust settle.
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.