Adjusting your business to the New Normal
A mentor once said, “It doesn’t matter if you fall, so long as you fall forward.” It sounds like pretty good advice as we stumble into 2021.
2020 was a tough one, no doubt about it. Bad businesses failed. Good businesses failed. Many of us struggled. Some of us were spared. There’s no way to overstate the economic and personal impact of 2020. Those who thrived were positioned optimally and delivered a product or service that was needed or even required.
Despite the challenges of 2020, we all learned some lessons that we can apply in 2021. These lessons aren’t new; instead, they were thrown into sharp relief to remind us all that the cyclical nature of business trends require that we are always balancing the pursuit of upside and mitigating the risk of downside.
Below is a list of some tactics and behaviors that will enable us to fall forward as we adjust to the ‘new normal’ (whatever that means).
Transition into 2021
If there is one word, just one, that encapsulates the most powerful reminder from 2020, it would be Adaptability. The ability to shift quickly and nimbly to alternative business models, channels, and delivery systems is the key to surviving in a dramatic downturn like the one we’ve experienced. That goes beyond a mindset. It’s an operating philosophy that promotes creativity, quick decision making, and rapid course corrections implementation. Across-the-board salary reductions can extend your ability to weather the storm and preserve your human capital. If you do have discretionary cash, there will be real talent available. Perhaps you can acquire a piece of machinery that your business needs at a fraction of the good-times cost. Step back and evaluate your post-downturn strategy and position your business to pop out of the downturn rather than crawl out.
There is a financial dimension to adaptability. Fixed costs are the enemy of adaptability. Every well-run company is continually assessing its expense structure. Fixed costs are hard to manage since human capital is an integral part of maintaining and growing a business. A simple rule of thumb – if a cost is not directly associated in some way with your company’s crown jewels…what makes you special…how you differentiate in a crowded market…your competitive advantage… then consider variable-izing that cost through contracted labor, outsourced production and employing a constellation of domain-specific service providers that you can turn on and turn off as the peaks and valleys of your business performance.
Adaptability requires the Courage to face a significant challenge head-on. To borrow a quote from Frank Herbert (the author of Dune), “Fear is the mind-killer.” It’s human nature to hunker down and hope that you can win a war of attrition. This approach will leave your organization gasping for air as the trend begins to reverse. Having the courage to assess your options and make the really tough decisions clinically, and in turn, implement them effectively and humanely is what separates a leader from a great leader.
Cash, cash, cash. Plan and manage your Cash every day. Many wait until the tough times hit to dig into and understand their cash flow drivers. Managing money in good times prepares you to work your cash in tough times. If you can do just one thing at an operational level that will best prepare you for anything, focus on understanding the dynamics of your cash flow and the knobs that you can turn to respond to changes in your operating environment – and turn them as soon as you perceive that challenging times are coming. Communicating with your external stakeholders can buy you time. For example, contact your customers and offer them the option to make partial payments (yeah, on the phone). Frequently speak (yeah, on the phone) with your vendors. Keep them apprised of your ability pay, and be humble enough to ask for any help that they can provide.
Have you built an Organization that can persevere through tough times? A great team will respond if it sees you fighting day-in and day-out, sees that you were willing to sacrifice your financial wellbeing to retain them, and know that you are treating your external stakeholders with the same respect you expect. There’s been plenty of ‘stuff’ written about this, so there’s no need to regurgitate any of the -isms. But, if you haven’t cultivated a culture that can respond to challenges with resiliency, creativity, and a renewed commitment, well, good luck. You’re going to need it.
So here’s to a great 2021. The script isn’t going to flip magically, but the glimmer of light at the end of the tunnel isn’t an oncoming train. As we adapt and move forward into the next 6 to 12 to 18 months, let’s all apply what we have learned while grinding through this year to grow and prosper.