By Curt Nelson, President & CEO, EDC
As I observe the global events these past few weeks, it’s very clear that being proactive and staying ahead of the curve is critical to successfully navigating this turbulent environment for both our businesses and those it supports. The biggest mistake made by businesses that ultimately fail is that they do not take action in a timely manner and hang on too long to current business scenarios and processes.
I can pass along the following suggestions that are the result of my personal experience leading a business through the 2001 dot-com bust and 9/11 attacks, while simultaneously sustaining a 60% drop in revenue of $42M to $17M:
- Immediately build two cash-based budgets for the balance of 2020, with month by month detail.
a. Budget one – based upon your products and the related market impact expected, reduce your revenue starting immediately by a realistic amount and plan for that level of impact through the end of the year. Do not assume that this situation will resolve itself sooner than 12/31/20 – if it does you can ramp up accordingly.
b. Budget two – same as above but with a much more significant impact to monthly sales revenue. - At the same time – take a close look at your accounts receivable and make a realistic projection regarding its viability – will you collect it all?
- Based on both budget projections, and any AR adjustments, you will now be able to see the impact on your cash if you do nothing to adjust your expenses, with the second model showing you your worst case scenario.
- Next, understand if you have the needed cash or related cash vehicles (Line of Credit, etc.) to manage through both budgets.
- Then, for each budget, review your expenses per month and make the needed adjustments to maximize your ability to sustain performance and not overspend your available cash. This will take hard work and will require tough decisions regarding personnel, selling expenses, development, etc.
- Once complete, you will have two projected budgets with a clear understanding of what you will need to adjust and when you will need to do so to sustain healthy operations, all based upon revenue impact.
- Now you will need to:
a. Identify at what revenue point you will execute the needed expense reductions
b. Monitor revenue impact weekly
c. Take action timely - Monthly, going forward, review each of the two budgets above and based upon the evolving market reality, keep adjusting them up or down to guide your business in the most effective manner possible.
- Daily / weekly / monthly communicate, communicate, communicate with your team, your vendors, your customers and your lenders / investors. Keep people informed, minimize surprises, instill confidence, and lead through this time.
- Lastly – don’t be afraid to ask for help
When it comes to your business and its ability to support families, now and into the future, remember that “the needs of the many outweigh the needs of the few or the one” and your ability to plan well and take action timely will be critical to the long-term viability of your business.
If you need help with any of the above planning, please reach out to us at EDC and we will be happy to help. Contact Christie Remley (cremley@edcinc.org / 319-480-1103).
