One of the most stressful situations to be in is when you are the owner of a business (or the employee of a business) is when there is more cash going out than coming in.
On the surface there may even be healthy net profit, and consistently good growth.
However, cash may be tied up in slow-turning inventory, and slow turnover of accounts receivable. It may a combination of factors including catch-up from some bad months, or fixed costs that are too high.
So, what to do? Here are 5 things you can do:
- Create a Plan
- Get Focused on money coming in, not money going out
- Talk to your customers
- Engage your Team
Create a Plan
This is time to get super-laser-focused. Everything must be done fast. You have no time for long meetings and strategy sessions.
The world can seem to be working against you – low cash, few resources, a disgruntled work force (possibly looking for other employment), upset customers. The stress can be immense and can lead to poor decisions.
What you need to do is look for low hanging fruit – the biggest return for every dollar spent.
The low hanging fruit will be those things that bring in the most money for the least output of money and time.
Create a plan of action with a few simple high leverage action items and stick to it, monitoring your progress daily.
Every item on your action list must revolve around…
Money In vs Money Out
It is easy to think about the money going out and get overly fussy about stopping the bleeding.
Yes, you must ensure value for your money at this critically important time. So do that.
However, if you get too focussed on saving money from expenses, you may make things worse.
Here is an example – in the 1990s Continental Airlines was ranked the worst airline in the USA on every single customer service measurement and headed for bankruptcy (again!).
One incentive they had given their pilots was to save in fuel costs. Makes sense, given that fuel costs had soared due to the Gulf War.
So, what did the pilots do? They flew the planes slower and turned off in-flight air conditioning.
The company saved money on fuel, but planes were delayed, and customers were furious at not only being late but flying in an oven.
There is nothing for an airline that will increase overall costs more than delayed flights, yet here they were not monitoring the effect of incentives for the pilots on their behaviour.
Here are some costs that can be eliminated – any marketing that cannot be measured. Determine what actions will result in the highest yield for each dollar, and that you can MEASURE.
When I say measure, you must be able to track new customers for any marketing expenses incurred. You cannot guess.
It works something like this – you run a full page ad (assuming you have the funds, and this is high leverage for you) and in the ad there is a code or coupon that must be entered or quoted so that a direct relationship between closed sales and marketing dollar can be measured.
In addition, you would look at tighter credit policies and strict terms of payment to avoid carrying accounts receivable.
Talk to Your Customers
If things in your business have been in decline, a large part of it may due to poor customer service.
Now is the time – and you cannot delegate this – the owners and top management need to be the ones to get on the phone and call your best customers.
Ask questions. Let them vent (and you just listen) if they are upset with things that went wrong in the past.
Find out what they really want, and what they are willing to pay for.
Ask for forgiveness if you really screwed up. Yes, you read that right. You need to be humble now if customer service is a big reason your business is in decline.
Tell them what you’re committed to and that your phone lines are wide open to receive feedback. Now is when you need to stay on the pulse of your lifeline – your customers.
Up next is your Team…
Engage Your Team
As in irate customers, you may have a Team with very low morale. So, have a meeting and, once again, ask forgiveness for past mistakes.
Be truthful about the situation and get their buy-in. They may not believe you are sincere, so that is why humility and honesty are needed here more than ever.
Hand pick a few people you trust and create a “commando-type” Team of fast and intense doers.
Engage this Team in your turnaround strategy and action plan. Delegate leveraged tasks to each of them.
Again, each of the Team members must become super customer-focussed.
The money-in will come from sales from good customers. You don’t need to waste time looking for more loans or equity. You likely won’t get it anyway if you are bleeding money (unless you are Uber).
And now is the time to…
Every little step in your Action Plan must be communicated every day with lots of different means. Emails, group action-focussed calls, bulletin boards, white boards tracking 2-3 key metrics.
You will want to celebrate wins!
And lastly, I would recommend you start having a crazy amount of fun. Yes, you read that right too.
What do you have to lose? The excitement of turning a losing business into a winning business is a thrill ride.
Surrender into the excitement of the turnaround.
Believe you can do it, and just get into massive action…
Thanks for reading…