By Rick Wirthlin
As we monitor the impacts of COVID-19 on the global markets and our daily business operations, it’s important to take a moment to think strategically about your path forward. The magnitude and velocity of change within the markets has many people searching for information and ideas to drive decisions. While managing risk is a key part of every business leader’s job, periods of heightened volatility require additional attention.
Here are 10 strategies to help your company prosper through this cycle. While some strategies are more challenging than others, careful consideration will help your business weather economic volatility and thrive despite it.
1. Revisit cash flow models.
Many businesses have cash flow models that help predict the impact of potential sales losses of 10, 20, or even 50 percent. Understanding the risks and implementing contingency and business continuity plans in place to mitigate them is critical.
2. Reduce expenses.
Closely examine your costs and identify opportunities to eliminate unnecessary expenses. Even if you are comfortable now, start thinking ahead by shopping around for better prices from vendors and suppliers, including insurance policies like health care coverage. Can you hedge any raw materials? If you’re buying diesel fuel, consider buying it in the futures market to fix costs and avoid price increases.
3. Right-size your operations.
Evaluate your headcount, your fleet, and other expenses. As tight as the labor market is today, it’s imperative to have the right people in the right roles. Decide which capital expenditures, such as new equipment purchases, can be delayed (or leased) until the economic slowdown passes.
4. Cross train employees.
Coach your team into growing their careers by learning new skills. Consider the implications of a single person being sick or unable to perform a standard business task. Make sure more than one person is comfortable performing the tasks that keep your business productive.
5. Free up cash.
Now is the time to refinance debt and negotiate lower interest rates to boost your financial flexibility. Reducing loan obligations will help improve your overall cash flow. If you have debt with short-term amortization, ask your lender to extend your financing terms to reduce your debt service requirements, which can improve your cash flow. Lock in or increase lines of credit so you’ll have access to cash when you need it.
6. Adopt a growth mindset.
Preparing for a downturn isn’t just about cutting costs; it’s also about increasing revenue. Focus on driving additional growth through diversification and leverage your competitive advantage to tap into different customer bases or industry niches. M&A opportunities can offer synergies to diversify your business and help to bolster against economic swings now and in the future.
7. Protect your data.
Cyber criminals are taking advantage of the current situation to gain access to email, social media, and financial accounts. Additionally, malware attacks are expected to increase with the increased volume of coronavirus-related email communications. Remind employees to stay vigilant with data security, confirmation routines, and password protocols. Remember, unless you contact us first, Huntington will never reach out to you asking for account information.
8. Take advantage of technology.
Digital disruption is reshaping every industry, and economic downturns can magnify these advantages. If you’re not innovating with new technologies to streamline your operation, grow revenue, and set your business apart, you’re already falling behind.
9. Think ahead.
Whether you’re downsizing or expanding, it’s important to have a long-term vision that will outlast this economic cycle. Don’t cut your best people or ignore your biggest revenue opportunities if they’ll give you a sustainable advantage down the road. At the same time, don’t grow too fast now if it will stretch you too thin later.
10. Check your blind spots.
Ask your board of directors, bankers, attorneys, accountants, and other consultants to take an objective look at your plans before implementation. These professionals can review your plans and share best practices to help you navigate this challenging time.
We encourage you to reach out to your Relationship Manager for insights, mitigation strategies and preparation that may help you manage through these challenging times.
