There may not be a playbook for managing your business during today’s turbulence, however, this 8-point checklist will be a solid framework for you and your management team to roll up your sleeves with a financial game plan and strategy to weather the long-term impacts of our pandemic-driven economy.
1. MONTHLY FINANCIAL STATEMENT REVIEW: Do you review monthly financial statements, including a cash flow statement and forward-looking profit/cash projection on a weekly basis? Although a healthy P&L is extremely important, the balance sheet and the supporting processes to cash flow are critical. Experts consider the top line (cash) the most important item on a company’s balance sheet. Other critical items include accounts receivable, short-term investments, property, plant, and equipment, and major liability items. A good business can be out of business quickly if the balance sheet is not managed effectively. Evaluate how to put this discipline in place and have your CFO help you review key performance indicators.
2. COMPETITOR ANALYSIS: Do you and your team know how your company is performing based on your competitors or even the best-in-class companies within your industry? Once you’ve identified your main competitors, you’ll want to gather as much information as possible about them.
• Products and Services—Evaluate their products or services and compare them to your
own, ideally by purchasing them and trying them out. How is the quality and what features do you like or dislike? Who are their suppliers? Do they respond to consumer preferences?
• Pricing—How are their products and services priced? Do their prices vary for channel partners and customers? What is their discount policy? Can you estimate their cost structure?
• Positioning and Branding—Analyze your competitors’ websites, product documents,
brochures and catalogues. Follow them on social media and visit them at trade shows.
• Target Markets -- Identify their target markets and their unique selling proposition.
• Market Reputation—Talk to customers, suppliers, and distributors to get their views about your competition. What are their opinions about their products, sales, marketing strategies and customer service?
3. S.M.A.R.T. GOALS: Have you set up SMART goals to “close the gap” in revenue and profitability? SMART is an acronym for the five elements of specific, measurable, achievable, relevant, and time-based goals. It’s a simple tool used by businesses to go beyond the realm of goal setting into an actionable plan for results. Ensure you and your staff and employees are currently versed and aware of the key performance metrics driving your company’s on-going financial health and operational fitness.
• Specific: You have clearly defined what you want to accomplish.
• Measurable: You have identified targets and milestones to track your progress.
• Attainable: Your goal is realistic and manageable.
• Relevant: You have identified a goal that fits with your business model.
• Time-Based: You have identified a specific time period for the goal.
4. INVENTORY: Typically during a slowdown there is an imbalance between slumping sales and bloated inventories—don’t be weighed down with leftover merchandise that ties up your cash flow. One possibility is converting inventories into cash. If your business traditionally stocks 500 units of each of its slowest-moving products, consider cutting that number to 200 each. Monitor the results, keeping an eye out for those products that can tolerate even leaner inventories or that should be eliminated from your stock. This way if sales nosedive, less of your cash is locked into unproductive assets.
5. TEAM MEETINGS: Do you schedule monthly or quarterly “lunch and learn” sessions or virtual meetings with your management team? This is a time to openly discuss the components of your KPIs, competitive benchmarking, goal setting and more. This is also a time to set planning sessions with your team to clarify vision, performance, and strategy so you can quickly pivot if something is not working.
6. STRONG BANKING RELATIONSHIPS: Do you have strong banking relationships with multiple lenders and financial institutions? Banks are looking for smart lending opportunities, but are also trying to minimize risk, so they are careful about their lending practices—especially in a down economy or if a specific industry that you may be in is impacted greatly.
7. CUSTOMER RELATIONSHIPS: Are you nurturing customer relationships and generating demand? You can’t afford to ignore the potential profits of shifting your sales focus to include established customers if you want to recession-proof your business. The key here is excellent customer service. Ensure that your customers or clients love what you do or sell and keep them happy. Also, we are in a time where customers are buying online, making purchasing decisions quickly. Make sure you are generating demand for your products.
8. ADVISORY TEAM: Do you have a trusted advisor, a team of professionals, and financial experts to help you make difficult decisions? In some cases, a downturn is a short-term challenge for companies. It happens, you recover, and business continues. But what if your business is struggling to pivot and regain momentum? Making tough choices like layoffs, closing branches or factories, offering furloughs, or pruning multiple lines of business are very difficult choices that need experts with deep knowledge in finance, business, and who have “been there.” Going it alone is never the best option. Make sure you have that trusted sounding board you can rely on when a critical decision could make a costly impact.
By being prudent, strategic, and intentional, companies can be strong in boom cycles and can remain healthy and focused in tough times. B2B CFO® is a Digital Ignition member and is a trusted business and CFO advisor who can help navigate all economic conditions. For more info about their company, visit https://www.b2bcfo.com/