The rapid spread of COVID-19 is massively impacting humanity and businesses around the globe. As the pandemic proliferates like wildfire, disrupting business activities and transforming the way they are done, many companies are in a financial predicament.
The novel coronavirus is testing business leaders to the limit, assessing their ability to manage a crisis, which is an inevitable part of their role. In fact, according to PwC’s Global Crisis Survey, nearly 69 percent of leaders have experienced at least one corporate crisis in the last five years in their companies.
Here I give you 5 tips that will prove to be quite effective when it comes to saving businesses that are on the verge of failure:
1. Assess the Damage
Businesses don’t crash overnight so the first thing you need to do when you find your business going through a turbulent period, is to find out exactly how much trouble it is in. Tackling a problem isn’t possible if you’re not ready to look it directly in the eye.
As a matter of fact, it is easy to overlook the signs when you’re busy with your day-to-day operations. So it’s important to make some effort to identify the areas where the business is cutting out and spot the discrepancies leading up to the problems. Look closely at the crucial aspects of your business; in case you find any hiccups around them, start looking for faster and smarter solutions.
2. Do Not Hide from the Truth
As the company leader of a failing business, you must be planning a turnaround mission, but you need to ensure you are realistic about the timeline you set for yourself. Puzzle out if your strategies and plans are working and if the business is even turning around.
Failing to look realistically at the problems that your company is facing will translate to your timeline being off and your new strategy flawed.
3. Invest in Employee Trust
In times of trouble, perhaps one of the most profitable investments you can make is to demonstrate absolute trust in your employees and work together as team to solve problems. As a leader, you need to ensure you provide the right direction and motivation to your team, so they can achieve business KPI targets with optimal efficiency. Communicate the business vision clearly and set small targets in order to ensure they are aligned with the desired business objectives. In fact, your employees may even share some valuable information and advice regarding saving your failing company.
4. Cut Costs and Manage Cash Flow
You will likely have to reduce your costs if you want to stay in business. Get rid of all discretionary spending, such as the company holiday party or summer outing. Next, try to lower non-people costs as much as you can. For instance, see if you can reduce your utilities or if the landlord is willing to reduce rent for some time.
When your business is not doing well, you may also have to make the difficult decision of laying off people or reducing their compensation. While austerity measures can be very difficult, it is better to keep some people employed than to have everyone lose their jobs when the company shuts down.
Simultaneously, you need to track cash flows on a weekly basis, which you can obviously move to monthly once your business achieves stability. Keep an eye on working capital and prioritize converting receivables into cash inflows. Communicate any delay in payments to your creditors and form an effective strategy to get advancement payments from your debtors or and follow up with slow-paying customers.
5. Don’t Use the Economy as an Excuse
Whether you’re running your own business in a recession or a time of plenty, economy shouldn’t propel you to shut the doors of your company. It’s true that the changes within the economy will affect your business, but the truth is people will continue to buy your product or use your service if it’s worth purchasing, so you need to put your customers’ needs first and revitalize your marketing efforts.
If you’re not fully sure about what your customers want, don’t hesitate to ask. Check in with them regardless of how your business is doing – struggling or successful – to ensure you and your customers are on the same page. There are several low cost ways to reach your customers like directly emailing or marketing yourself via social media (LinkedIn, Facebook, Twitter, Instagram).