Friends,
At the end of March, I took my 2020 business and personal goals and put them aside. It was clear, everything had changed and the year I planned was not the year that would be. While it’s still jarring to recall how quickly it all changed, I’m increasingly excited to see how the great entrepreneurial spirit is alive and well and how tomorrow’s successful businesses are already emerging.
For example, in this article I learned there have been 500,000 applications for an employer identification number since mid-March according to the Census Bureau. That is down 20% from a year ago, though 500,000 nonetheless.
A pandemic, it turns out, isn’t the worst time to start a business.
Whether you’re starting a new business or already have one, there is a pathway to a successful 2020 and some good answers to questions about how small businesses pivot and find opportunity in all of this. Planning for the future in a time of uncertainty is possible and here is how we are executing the rest of 2020 in three stages.
Stage One, Speed to Acceptance. Timeframe: Now
Acceptance isn’t just something you think about; rather it is an operating habit in your business. Companies need to have a way of constantly checking the reality of the circumstance. That is often done through a dashboard of sales metrics, financial results, and market statistics, though it’s also about keeping a good pulse on the team and company culture. Acceptance is not passive, it’s practical and is the gateway to successful change.
For example, a lesson I took away from 2008 is how critical it is to rapidly accept and implement cost-cutting during a market shift. We applied that in March and as soon as it became clear our revenue was dropping precipitously we immediately accepted that fact and went into action. We didn’t study it, wonder why, or resist the momentum of the downward spiral. Instead we immediately realized we needed to cut costs by 40-60% within one week. To do so we:
Went through every P&L, every bank statement, and credit card account to identify what would go.
Looked carefully at our revenue generators and cut anything that didn’t have a clear return.
Evaluated our team to determine how we would handle staffing costs and made some difficult decisions as a team to share the burden.
While we were still stunned emotionally, that didn’t keep us from taking fast action and the team came together in a new and inspiring way to accept the reality of the circumstance within 10 days. We saved precious cash as a result of our speed to accept the situation and get into action.
I want to emphasize, speed to acceptance is also about managing liquidity. What I mean by that is when revenue drops, expenses must drop at a faster rate. In this phase, it’s important to:
Ensure you’re making more money than you’re spending.
Double the amount you’re putting away in cash reserves.
Create a dashboard of key vital signs to measure so you know the state of the business and the state of your cash on hand at all times.
Stage Two, Pivot. Timeframe: This Summer
Hopefully acceptance has also created an opportunity of deep introspection and a resulting assessment of strengths, weaknesses, resources, and passions. The opportunity for a broad and across the board reset may be one of the greatest gifts of this time and so use this summer to pivot and try new things.
Pivoting often requires changing up the team to make sure it’s the team you want to roll with into the future. In my leadership positions we are looking at every team member with a critical eye and asking — does this person have the skillset and mindset to roll with the punches and create value for the team and market going forward? One thing the last 20 years has taught me is the team that got you here is not necessarily the team that will take you to the next level. That’s not a bad thing, that’s simply acknowledging that life evolves and our teams need to match that evolution.
Additionally, make sure you are:
Bringing energy and enthusiasm of a start-up to your businesses, even if you’re not a start-up. Essentially we are all start-ups right now and need to get back to the basics. This can be hard if you’re feeling dreary about things, though the reality is to manage a business right now the leader needs to be on the field and managing at a day to day level. Personally, I haven’t been this busy in years. I’m in the weeds everywhere, making sure I’m providing perspective and guidance down to the $10 charge on the company AMEX I found yesterday, to speaking directly with customers to negotiate pricing, to coaching the team live while they do it.
Playing with new marketing messages, testing new products. No one knows what’s going to work just yet and you can use that to your advantage for a while.
Continuing cost management by not letting enthusiasm get ahead of cash flow as things seem better moving into June.
Addressing all long term liabilities and renegotiating leases and debts to make sure you can handle the costs going forward with reduced revenue. At the same time be sure to finish any government assistance program applications such as the Paycheck Protection Program or Economic Injury Disaster Assistance Loan programs.
In Stage Two, don’t forget to set some new goals for yourself and your business and measure them. While we are in for a long period of reduced revenue and unexpected challenges, don’t throw away your earlier ambitions. Keep a close eye on your dashboard of vital signs but press forward and find some reasonable risks to take.
For example, I’m making a big investment in a content team and in addition to the operating businesses, figuring out how to add value with a leadership platform and a suite of products and services to help small businesses. I’m doing this for two reasons. First, my view is that business leaders today need to effectively communicate with their own media platforms. Second, because rebuilding our community of small businesses will require a new approach to entrepreneurism. The old system is broken, I’m investing in figuring out what a successful small business looks like post-pandemic.
Stage Three, Evaluate your Metrics and Reassess. Timeframe: This Fall
Hopefully by fall we’ll all know a lot more than we know now about what’s working in the pandemic era. Fall is always the time for us to recast our budgets, and revise the plan, and begin setting our sights on 2021, and this fall that takes on added meaning. Here’s how I’m thinking about the fall of 2020 right now.
If we’ve done it right all summer, our dashboard of vital signs should be in really good shape and help guide us into 2021. I’m tweaking my dashboard constantly with an eye to the future.
I want the better financial habits we built over the summer to stick which means continuing the review of the P&Ls, AMEX, and all bills weekly.
I expect fall will also be the time to hire, prudently, and cautiously.
As summer starts I am acknowledging that we are in the most challenging period of time our society has faced in a generation and that feels heavy. At the same time our 2020 goals are back. I know that by executing practically, with flexibility and an opportunistic eye for the future, combined with a healthy dose of compassion for myself and my fellow humans, we will be better because of these challenges.