A few days ago, the Cape Chamber of Business posted a survey asking what have the member businesses done to mitigate the effects of the virus upon their businesses.
I surmise that the content of 90% of the responses is pretty much identical. Businesses are preparing by increasing hygiene, implementing work-at-home policies and in some cases, relaxing terms and conditions for their customers.
In this article (one of 3), we want to have a go at giving you a more detailed framework for how you can mitigate against the economic impacts of this situation. Every business will be different and will not be applicable to all, but we hope it will help a few people to at least reposition themselves on how to tackle this problem.
You need a Corona Virus strategy
By now most business have realised that the virus is going to have a negative impact on everything. Smaller to medium sized business will feel the pain faster and harder than larger ones.
The way that you go about creating your own Corona Virus strategy is the same as you would look at formulating any other strategy. That is that you should be following a simple Strategy Model that includes at least:
· the Objectives (outcomes) that you want to achieve, supported by
· the Tasks (actions) you’ll be implementing to get there and
· the Monitoring of your progress.
Obviously, you’ll need some kind of system to track your strategy and bring it to life (watch this space, we will be launching our own online platform soon!). If you don’t want to use a system, you can use good-old-fashioned Excel. Do not make the mistake of keeping your Corona Virus plan to yourself. Involve as many people as possible, as soon as possible.
The 3 R’s to mitigate your business against Corona Virus
We have picked out 3 Areas that we think are helpful in the preparation of your strategy:
· Restructure the business
· Reposition your product
· Redesign your marketing & sales channels
A lot of the Projects that you implement as part of your Corona Virus strategy are probably things you should have been doing anyway and have been putting off. A solid strategy now could move your business forward in the medium-long term rather than moping about lost opportunity costs.
Let’s look at the 3 R’s that we think you should be looking at:
R #1 – Restructure the business
There is no easy way to say this, but this virus is busy disrupting everything. Sales will drop in line with market confidence and you need to ensure that your cost structure is set-up appropriately to offset this. R #1 is all about survival and there are going to be some really difficult decisions to be made to set-up your business to weather this storm. You cannot hesitate in making these decisions, you need to cut costs where needed pretty much immediately.
Here are some of the Objectives that you may want to implement in this Area:
Objective – Staff headcount needs to match your customer demand
· Review and adjust sales headcount
· Review and adjust support headcount
· Review and adjust marketing headcount
· Reduce overall salary costs (the percentage is dependent upon your business model)
Reducing headcount is one of the hardest and most unpleasant things you must do in business. But your ability to make hard decisions will protect most of your people in the medium to long term. Be mindful of the Labour Regulations.
Restructuring your business isn’t just about headcount though, there are other ways to reduce costs without hurting your opportunities to grow: The main thing is to cut costs!
Objective – Minimise investment in non-essential systems
· Reduce non-essential software subscription costs
· Change annual subscriptions to monthly if renewing soon
· Reduce office costs to minimum levels
There are lots of ways to save costs in your business. You also want to start thinking about conserving your cash flow over the next few months, even if in the long term that means spending more money. When it comes to survival cash is always king!
Objective – Significant improvement in accounts receivable
· Create an accelerated process for debt collection
· Create an incentive program for early payments
· Reduce outstanding debts to minimal levels
The best thing is to stay positive. The above seems callous and drastic. But the thing is, so much of the actions we have suggested above is actions that you should have been doing anyway! The virus outbreak has taken away any excuses, any ambiguity and any room for delay. You must make your business stronger, whatever that means.