Actions To Take Now
I’ve been reaching out to my clients and network in the last few weeks and many of you have asked what I think about the current situation.
Simply put, I’m pretty realistic about it, this event developed quickly, first reports about the Corona virus outbreak were available early January, though mostly limited to China. Many US companies without close supply chain ties to Asia, didn’t pay too much attention, and tonight the City and County of San Francisco has issued a Public Health Order requiring that residents remain in place, with the only exception being for essential needs. Only essential government services to remain open, such as transit, police, fire, and healthcare services, as well as essential stores like grocery markets, pharmacies, banks, and gas stations. The Order is effective as of midnight on Tuesday, March 17th and is effective until April 7th, 2020, or until it is extended. For many businesses this means at least 3 weeks without new revenue.
No matter how we got here, and while the reason for the event might seem unprecedented, what we might be faced with in the next month to come, is not so new, however it will have a different twist from other economic downturns we’ve seen in the past.
Like many of you, I’ve seen more than one crisis in the course of my career and here are some thoughts about how to prepare for what’s to come, because one thing is for sure:
Prepare for the worse, and be thankful if it doesn’t come to it, the wait and see approach is a non-starter.
Here are 5 Steps to consider for planning and preparation:
1. Protect your employees and customers
a. Follow the most conservative CDC protocols
b. frequently communicate potential impacts to customers
c. Reduce or eliminate all non-essential travel
d. Shift to alternative working arrangements (zoom or equivalent are easy to use online meeting tools)
e. Define your sick-leave policy
f. “Over-communicate” with full transparency
2. Make contingency, scenario, and cash planning a recurring topic in your senior leadership meeting (if you are running on EOS®, this should be an IDS topic in your Level 10 Meetings™ EVERY WEEK)
a. Stress test your P&L and liquidity in scenarios:
i. Missing the Q2 quarterly goal by 10%-20%
ii. Severe downturn (50% loss in profit)
b. Prepare an alternate Accountability Chart for various contingencies.
i. When we planned your growth, we looked forward six to twelve months and determined key functions, who is critical to your success, and whether each seat was filled with a Right Person.
ii. Now, first do your People Analyzers again and know who is a Right Person in a Right Seat. Second, prepare an Accountability Chart to reflect the structure you will need IF your business revenue declines in scenario I and II.
iii. Keep this in your drawer until needed.
3. Obsess about weekly cash forecasting
a. At all times, know how much cash you have, how much you will need, when you will need it, and where it will come from. Examine your lines of credit, and ensure they will be there for you
b. We EOS® companies think in 90-day periods -- 13 weeks at a glance in our Scorecards. That’s short term. Long term is beyond 90 days.
c. Ask your CFO or controller to give you a weekly rolling 13 week cashflow model
d. Watch your Scorecards with new diligence. As an EOS® Company, this is your early warning system that will forecast any trouble.
4. Stay focused and completely disciplined.
a. Take a customer centric view to this situation – how will you build trust, loyalty and market share through and beyond this crisis?
b. Build specific revenue mitigation actions for core revenue stream declines
c. Build contingency operational plans for all aspects of business (front line facilities, costs, variable labor staffing).
DON’T DO THIS:
5. Be the leader your company, family, and community needs.
a. Get full team aligned with the true severity of the COVID-19 situation, and worst-case financial scenarios
b. Set safety as #1 priority
c. And cash conservation and liquidity a close #2
d. Avoid inaction, “wait and see” could damage the company
e. This needs to be done in days, not weeks
f. Take care of your own health and balance
Some final thoughts; some of you chose to invest in EOS® for a reason, because it makes you more efficient as a team, drives you toward the vision you have collectively, making sure you are staying on track. Most importantly, it makes you and your entire company better at solving issues and seeing opportunities, so recognize you made this investment not just for growth and expansion, but also for protection of your business and teams. Use it!