Part I – 5 Steps to take in a CRISIS
While we wished major catastrophes and crisis would not occur, they have and will continue, despite all our hopes and prayers. When they do occur, we quickly realize how fallible we are. For some organizations, they can handle the storm, some longer than others. For many, they just don’t have the cash and diversified revenue streams to whether it out. Unfortunately, too many find themselves in a crisis ill-prepared, thus this first writing in a series of three. The ideal situation is to have thought through your contingency plans before a crisis hits (that’s Part III). Part II will cover what to do after a crisis. We begin with Part I – 5 steps to take in a crisis.
1) Remain calm.
Now, more than ever, everyone is watching and listening to how leadership reacts. How you speak and act gives permission for others to do the same. People need leaders that help navigate the crisis with calm and purpose. Lead swiftly and with compassion.
2) Create a line item for crisis expenses.
Charge time and expense to this one item for easy tracking. There are two reasons for this: 1) if any relief becomes available, having details of the financial impact incurred in one expense category will make it easier and more convincing to obtain relief; 2) when it comes time for lending review, you’ll have an easy way to show the anomaly and impact to your business that would otherwise have not occurred.
3) Communicate to your team, suppliers, and customers.
Be brief with specific actionable information addressing their top concerns. (Are you still operating? How will you advise if things change? What can you offer by way of relief?). Balance optimism with reality. Anything less won’t be heard. Inform your team they may be able to defer personal payment of loans, including mortgage, car, college, and credit cards (every bit can help).
4) Explore alternative means of revenue streams.
The engine is built, the team that drives the engine is in place – is there any way to repurpose resources to provide value to the market that hasn’t been considered before? For some, an online product may be valuable. For others, selling other products and services could be valuable. Consider this: now is a great time to develop an annual recurring revenue stream. While it may not sell now, consider it for later.
5) Design a stepped expense reduction plan.
The reality is that when business is going well (financial growth with stability of cash positive), inefficiencies can creep in and remain hidden. Now is the time to put everything on the table and ask the leadership team of each department to come up with cost reduction measures (including process inefficiencies and unnecessary expenses). And certainly, staffing can’t be ignored and employee layoffs or furloughs may be necessary. While its honorable to want to keep all employees on the payroll, you may not have any choice but to do so to keep the business open and have the ability to hire back once the crisis dissipates. If you’re considering a loan and you’re a service business, be careful; you’ll have to generate additional revenue to service the debt. If necessary, reach out to the landlord to request deferred payment. And for those onerous contracts you have in place, now would be a good time to get out of them. Make the cuts and changes now you should have done earlier.
Start by creating a plan based on a short duration of the crisis and a long duration of the crisis. Pending your cash position and forecast, this may be the time to invest in the organization and work diligently to position for growth on the back side of the crisis.
Note to leadership: It is not possible to craft up an exacting ‘how to guide’ to deal with crisis that meets all needs of every organization. This article attempts to provide basic fundamental components of steps to take, regardless of the company. Using this as a basis in which to develop your plan of action is really what drives my writing; to give some concrete steps to take. As mentioned early on, develop a crisis plan so that the next time an event occurs, you’re ready – instinctively.