Takeaways From the COVID-19 Pandemic
authors Dan Luck | June 16, 2020
I haven’t heard the words “you’re grounded” since they were issued during my teenage years by my parents. But now, decades later, I’ve heard the same decree, this time from our national, state and local governments. Overnight, our personal and business lives have been turned upside down. Regular activities and routines are everything but that now. We wake up each morning yearning for a return to normalcy yet fear that more bad news is yet to come.
Most of us were unprepared for this. Many have never experienced the unsettling times that confront us today. Fewer have a history of how to navigate these current uncharted waters.
I’m no expert in predicting the future. By the time this column is published, COVID-19 may well be in the rearview mirror, or we may still be dealing with the public-health crisis and all the destructive forces being imposed on our lives and businesses.
Behind us or not, the impact of the coronavirus pandemic will linger for a long time. And the lessons learned certainly can join all the lessons gained from previous experiences. The key is: what did we learn? Did we learn anything? And are we bold enough to weave those lessons into the everyday fabric of conducting business?
As we gather ourselves and dust off from the virus, it’s time to execute at least the three following lessons learned. Each one represents a critical step in keeping your kitchen and bath dealership healthy and positioning it for success moving forward.
Budget, Budget, Budget
You need a budget for your business. If you don’t have one, develop one now.
A significant lesson from the current pandemic is that those business owners who had a budget were able to adjust far quicker than those without one. They knew firsthand the significance of every expense line item – for example, what needed trimming, like activities that do not add value to a client, and what areas were too sacred to touch.
Several areas make up a budget: revenue, expenses, net profit and the gross profit dollars required to fund all the costs, including your owner’s market-rate salary and the desired net profit. If you don’t have a budget, relax; it’s never too late to start. Today is a new day. Take the first step. Commit to one.
Frankly, it’s not enough to have merely one budget. Sure, one is far better than none. But two or more are even better. When “best case,” “moderate case” and “worst case” scenarios are developed, a series of action steps can be generated based on those budgets.
A best- or moderate-case budget is beneficial because it provides the insight to take decisive action if income levels return rather quickly, or if new opportunities present themselves.
A worst-case budget allows you to streamline your business to its absolute core if necessary, and provides ready-to-access tools to leverage if the economy goes south in a hurry. With secondary budgets, action steps taken now, not later, provide the nimbleness to react quickly and develop a road map to follow.
A secondary budget should take into consideration a series of “what-if” scenarios. For example, in today’s climate, what if the rebound from this crisis takes longer than the experts predict? What if your pipeline is depleted, and it’s taking longer to develop or jump-start? How will you react if team members you’ve furloughed have found other employment elsewhere?
A secondary budget also prepares for unexpected outcomes that you have no control over – for example, another downturn in the economy, either nationally or locally, or the loss of a significant producer on your team.
Shortly after the start of the last recession, the most significant sales producer in my dealership decided to quit. I didn’t realize it at the time, but she decided to start her own business to compete with me in my local market. I wasn’t prepared for that, had no backup plan and chose to ignore the fact that this was happening to me. That lack of pre-planning for a “what-if” possibility had a severe financial impact on my company, one that took several years to overcome.
In summary, a readily available back-up budget protects from a sudden loss of revenue and enables you to make the necessary expense adjustments quickly.
Contingency Funds Are a Must
Our businesses are cyclical, either cash-rich with deposits or cash-poor with bills to pay.
When we’re writing contracts regularly, cash as the lifeblood of any business is strong. Vendors get paid on time, cash discounts are taken, payroll is met and there’s money in the bank. But any downturn or unexpected calamity places a strain on cash. Those with cash reserves, from hefty net profits during the good years, weather the storm far better than those without these necessary funds.
COVID-19 reminds us of the importance of a rainy-day fund. Cash reserves in place are vital in riding out any financial storm or a disaster like a pandemic.
During any economic fallout, the goal should lie in achieving a positive cash flow, not necessarily to make a healthy net profit. Experts have long been advising that a business should have a liquid portfolio that’s equal to 12 months of overhead expenses. “Liquid” means that the money is readily assessable within three to four days.
For many, that counsel is numbing and seemingly impossible to achieve. Yet, the chilling impact the pandemic caused on small businesses across our nation is a reminder of how vital a rainy-day fund is.
Strategize and Plan
One of the first steps I took when it appeared that the coronavirus had staying power was to develop a short-term strategy, a course of action to survive the crisis and come out the other end whole.
As a trained guide in the strategic planning process, this concept is not new to me. However, the required length in this crisis was new. Instead of a more traditional long-term plan of two to three years, the pandemic taught me to narrow the focus to days, not months or years. A 60-day, 90-day or 120-day strategic plan was needed in this new climate.
This short-term strategy focused on adjusting the message to clients and prospects that fit the current situation. It required immediate attention to sales forecasting, cash flow and crisis management.
During a strategy session conducted last fall, our team identified specific action initiatives that would propel our business forward. The pandemic forced us to re-evaluate those initiatives and weigh them against the current situation. To our surprise, many of the actions that were planned actually passed the test. Others, we placed on hold, so the essential items received full attention.
The cliché “don’t let a crisis go to waste” especially rings true with what we’ve experienced these past several months. It would be a shame if we didn’t pay close attention to these three key lessons this pandemic taught us and didn’t apply them in our business immediately. Leveraging lessons learned can make us stronger, grow faster and prepare us to weather the next storm. ▪