How Businesses Should Prepare to Navigate the Next 18 Months
Perhaps like you, I often get the feeling that our health and political leaders are unable to talk about life beyond the next two weeks. From a business owner’s standpoint, this is an impossible situation. In the absence of a safe and effective vaccine, it is my view that society will be partially open and partially closed for the next 18 months. While this may be a harsh reality to face, it is time for businesses, particularly manufacturing, to plan accordingly. The three year plan most businesses had in place in December 2019 is now irrelevant due to the high degree of economic uncertainty that is in front of us.
Having lived through 33 manufacturing budget cycles, here are the steps I would recommend to navigate this uncertainty:
#1 Return to basics. Put as many of your business expenses on a variable basis as possible. Expenses untethered to revenue will sink the ship.
#2 Scrub all capital budgets. Cash generation and preservation will be critical to survival. New equipment should be purchased only as a last resort.
#3 Prepare your team to preserve the business for the long-term. This includes discussing job sharing, pay cuts, and furloughs. Reward associates with what may be the most powerful compensation you have: frequent thanks and genuine recognition. You will find new and powerful leaders in this crisis. If possible, set up an employee hardship fund to cover basic monthly expenses of employees who may be experiencing a real crisis, e.g., spouse laid off already, can’t pay utility or health insurance bills, etc.
#4 Gather critical market data. Re-survey your customers for how they will manage their businesses going forward and adjust accordingly.
#5 Take on debt only if there is a high probability of being able to pay it back. This will give you staying power if the crisis extends into 2022. Although a vaccine that works most of the time is probable, it is not a given. Creating a business that is resilient is wiser than trying to time the recovery.