Wartime requires a different business playbook, because what got you here, won’t get you out.
It’s easy to pat ourselves on the back during peacetime and say that we’ve done a great job. But during wartime, like now, we need to rise to the occasion more than ever.
We know that doing nothing in the face of what is happening is a non-starter.
We know that people are scared and afraid.
Not just of sickness, health, and death. But because people are losing their livelihoods overnight. And losing their livelihoods can mean financial despair for a lifetime.
The world is literally shifting beneath our feet.
We are at the beginning stages of at least a prolonged contraction, if not a deep recession. People are changing their behaviors, their patterns of consumption, and how they save. They are even changing how they socially behave.
In companies, marketing is changing; even sales is changing. Our businesses are going to have to not only keep up, but lead the way.
It’s our responsibility as Executives to devise a wartime business playbook that not only defends against the down, but also has an offensive strategy for the future.
We’re going to walk through the seven areas in your business that I believe are crucial to address after you finish reading.
1. Keep Yourself, Your Employees, Customers, and Supply Chain Safe
Everyone has moved their workplaces to virtual to protect the health of their employees. But beyond virtual, make sure that your team is practicing social distancing and all the best practices like hand washing, avoiding your face, and wiping down surfaces.
Help minimize the time your employees are spending outside of their homes. Even something small, like helping your staff with Instacart fees, will ensure that they are safe and healthy. The safer and healthier they are, the more reliable and better your business will be.
You want to do the same for your customers and keep them protected as well. Then if you also have interactions with your supply chain, make sure you’re practicing all the safety guidelines with them too.
Ultimately, right now is not just a matter of taking care of yourself. You have to take a 360-degree look at everybody that touches your business and make sure that you’re providing the best measures to stay safe.
2. Build Your Business Playbook’s Downside Scenarios
Nobody is certain what the long term economic impacts of COVID-19 will be.
However, as I’m writing this, our most recent unemployment filing rate jumped up to 6.6 million. The week prior it was 3.2 million, and the previous record before that was 675,000. Everybody is seeing a massive amount of layoffs of full and part-time employees, and that doesn’t count contractors.
When you look at the big picture, it’s hard to deny that there is going to be a recession to some degree.
Whether it’s a quick contraction or a deep recession is still uncertain and to be determined. But what we do know is that in any scenario, you should be prepared and have an action plan.
A quick and efficient way to do this is to create downside milestones with three different revenue tiers:
Tier One: Discretionary Cuts
The first revenue milestone is one that triggers basic cost-cutting. Look to cut costs in areas that have the least impact on your business with the highest dollar amount. This includes downgrading the scope of certain services.
Tier Two: Severe Decline
The second revenue milestone is one that triggers a more severe response, one larger than discretionary cost-cutting. This phase requires the reallocation and cutting of resources that you may determine to be fairly critical to your business. It also includes executive payroll cuts, shifting compensation structures to be more variable, eliminating services, and universal pay cuts.
Tier Three: Liquidity Crisis
The last revenue milestone is one that marks a complete liquidity crisis. In addition to pay cuts, furloughs can be utilized if your employees are willing not to collect unemployment, and you can pull through in a short-term blip. Also, there will be voluntary dismissals where you incentivize and let people quit by providing them with a great reference or actively helping them find another job. Finally, you’ll have to let people go.
The whole point of these tiers is to give you a defensive plan to keep your business alive because the bottom line is: you can rebuild a business from a skeleton, but you can’t rebuild it from ashes.
I highly recommend being transparent about your plan with your team.
I was transparent with my team with what the three tiers are and the actions that would happen if we hit each tier. Surprisingly, when I shared this with my team, they were appreciative of knowing what would happen at each level rather than feeling blindsided if they got laid off. They also got motivated to play offense so these scenarios never happen.
They would rather know upfront what’s going to happen because then together we can fight as a team to not let it happen.
In other words, tell your team exactly what the plan is. The amount of clarity and understanding you’ll provide will make sure everyone is on the same page and inspire your team to work together and hard to keep the business running.
3. Retain and Nurture Your Customers
Reach out to all of your customers in an open conversation and ask how their businesses or livelihoods are being affected by the pandemic. Their business and their life will either directly or indirectly translate to how your business works with them.
How the pandemic affects them means you need to:
- Help with additional value add services—things that you weren’t necessarily doing before, but you’re willing and able to do at no added cost.
- Reduce your scope or price in order for them to curtail some of their costs. But at the same time, get as much of the core services or products that they need from you as possible.
However, the effects could mean they simply can’t work with or buy from you in the foreseeable future. If this is the case, then allow them to go on pause.
They may temporarily suspend working with you, but as they recoup funds from the CARES Act or their business takes an upward turn, then they may want to re-engage you. It’s better to put them on pause than it is to completely terminate their agreement and fight for termination clauses.
When you’re having these conversations, always act from a position of strength and try to identify what’s helpful for them.
You can’t control what’s happening to their business or control the decisions they make. All you can do is offer your help. The cards are going to fall how they fall.
Try to identify what’s helpful for them.
More than likely, it’s going to come down to either something very bottom-line oriented, meaning help you generate revenue or cut costs for them. It’s an opportunity to pick up business, but effectively it’s to understand what they need and see how you can better serve them.
So, what kinds of services can you adjust either for a fee or add on at no added cost?
Some great examples I recommend implementing are webinars, workshops, and masterclasses where you can host and teach them something to help their business stay afloat in these uncertain times.
4. Build New Operation Plans
On the operations side, you want to look for three things in particular. What you can:
To clarify, you’re not just looking at your internal operations. You’re also looking at your supply chain.
So, what processes can you stop doing that take up perhaps more resources than you can afford today?
They might be things that seem vital, but you can still survive without. It’s effectively asking yourself, can you amputate a limb? You’ll live but without an arm.
In other words, look around for the processes that you can eliminate to help you get as lean as possible.
When you are eliminating, identify your failure modes, or all the negative consequences as a result of the process cut.
What you need to do is make a list of five things that can potentially happen because you’ve eliminated a process and measured their severity on a 10-point scale. Then you can focus your attention on how you would handle the extremely severe cases when the process is cut.
Automating processes is trickier than eliminating them since the cost-benefit is an upside-down U-curve.
Because to initially automate a process, you need to invest in building out the automation. It requires a cash outlay while you’re still paying the staff that’s doing it manually. Over time as your automation grows, you can let go of the people the automation was created to replace, and your costs will come down.
But you have to be willing to endure the capital outlay and the change in management that the automation requires.
Now, if you look at automation projects and determine that you don’t need to lay anyone off, but instead, automation would make your team more efficient, the automation is worth considering.
However, those projects may take low priority right now if you don’t have the capital for free up. If you’re going to free up capital and you’re asking how you’re going to deploy that capital to get an ROI, then you have to play smart. Automation may not be in your best interest if you’re not going to lay people off, and your team can still handle the process.
Delegation can be internal or external, and right now, you can probably find third party partners with the scale to execute work for less than you could do internally.
For example, Flow’s live chat agents are managing live chat on behalf of several clients. We can take a client on as low as $425 a month, but for somebody to implement live chat from scratch on their own, they would have to pay a full-time employee to manage the chat in real-time, drive revenue, and provide support at lower costs.
Outsourcing live chat to a US-based live chat agency like Flow is just one way you could delegate to third parties and do it in a way that’s cost-effective and helps your revenue.
Related: Live Chat ROI Calculator
5. Reduce Costs
For years I used to build and run procurement operating centers globally. So when it comes time to analyze spending and cutting costs, I’d say I’m a fair expert. Here are the steps you should take to systematically decide where you’re going to cut costs in a way that’s logical and effective:
Step 1: Sort Your Expenses in Descending Order
You want to organize your major spend categories in a way where it’s easy to analyze your cash flow and decide where you can cut costs in those categories.
Step 2: Analyze and Cut Your Indirect Costs (SG&As) Before Direct Spend
Reducing your indirect costs has the least amount of consequences to your business compared to your direct spending. Thus, see where you can cut in your SG&As before you reduce your direct expenditures.
I recommend you do a quick strategic sourcing process so you can negotiate more cost-effective contracts for specific categories of spend. Establish what your baseline costs are, identify suppliers to go out to market with, then do an RFP. Make sure to talk to your current vendor, letting them know that you need to cut costs, and if they can’t come to the table, then you can’t take it to market.
Step 3: If Needed, Cut Direct Spend Including Payroll
After you reduce your indirect costs, then look at your direct spend categories. More than likely, the most significant dollar amount here will be your payroll.
So reducing payroll costs is going to be a juggling act of how much you need to cut relative to how much you spend. You can utilize a mix of the following strategies to help:
- Cut executive salaries
- Implement broad stroke pay cuts across the whole business
- Reduce employee benefit packages
- Reduce hours of non-exempt employees
It’s also important to note that if you do broad stroke pay cuts, that you don’t have to put a promise on returning pay since it’s all dependent on how the business does.
6. Apply for the EIDL and PPP Today
Since the CARES Act passed, every business owner who qualifies should apply for the EIDL, or Economic Injury Disaster Loan Program. The EIDL is effectively a $10,000 grant, but the funds are limited, and it’s a first-come, first-serve basis. So apply literally today.
The PPP, or Paycheck Protection Plan is a program intended to provide small businesses with eight weeks of cash flow to support their employees through federally guaranteed loans. Apply for this one today as well, but you’ll need to have some documents ready in order to apply. I recommend using this PPP calculator AVL Growth Partners put together that includes what documents you need as well as calculating the figures you need to fill out the application.
7. Most Importantly, Play The Game!
Right now, we have a new competitor called solvency. And it’s put everybody on defense.
John Keynes sums it up nicely, “Markets can stay irrational longer than you can stay solvent.”
The question is, can you stay solvent?
Moving through and beyond this pandemic and recession is a matter of executing a new defensive playbook while still strategically making offensive moves.
Business is a game you chose to play.
As the player, you chose to accept the risks and unforeseen circumstances, like the one we’re currently in.
It’s inherently a part of the risk in business.
Remember, you chose this, so don’t feel or become a victim of the circumstances.
You chose this, so it’s your responsibility to play and to be a great player.
When you’re a great player, you do a few things really well. You take care of yourself, and you take care of your team, but you make sure you take care of your business too.
Right now, my purpose is to help you develop your business playbook, to become a better player so you can use the opportunities to grow and emerge stronger.
One of the best ways to become a better player is to get in the zone or flow state, every day.
This is why I held a free masterclass, “Flow at Work,” to teach people how to achieve more in one day they have in one week and recorded it as a free tool for you to implement as well.
Some resources on my blog that could also be helpful to you are:
- Small Businesses Should Hire Apprentices. Especially Now.
- How to Trust Your Gut Feeling
- How to Heal Unresolved Conflicts
- How to Legit Control Your Thoughts
- High Vibes 101: A Practical Guide For Emerging Leaders
Please use this guide to implement your wartime business playbook and if there are any other ways that I can help or serve you, feel free to reach out to me at any time.