Crisis strategies that work

Crisis strategies that work

Presently, optimism has bounced off it lows. The end of the lockdown is so close, it’s palpable. Can’t you smell and feel it? So much so, that for many of us, the gloomy gut feeling of a looming depression are overwhelmed by hope. The return of the king, of GDP, to the land of plentiful bank credit, low interest rates and shopping mall pilgrimages. For many a crisis strategy for a depression is non existent. Tough times are ahead.

Meanwhile science and maths of business and government balance sheets are having to take a back seat. The news and information pipeline is still there. We know the bad news is yet to hit, the kind of news markets dread. Faltering earnings, liquidations, shop for lease signs, brewing bad debts in banks and the many industries that will be closed for months to come, despite the reopening. The list is too long for here.

We know the safety nets of today will invert and catch us all in the tax net in the future. What happens when Jobkeeper and Jobseeker can’t be funded? What happens when the government realises it will lose a huge portion of its tax base? What happens when we realise immunity doesn’t last? What happens in a recurring shut-down world? What happens when all the worlds governments need to borrow at once in the debt markets over the next year? What happens, is the right question to keep asking in every area of business. It’s the question of uncertainty. It is the realism of consequences. It calls out hope for what it is, lack of action.

What you need is a crisis strategy. Initiatives that deal with the crisis within your context. Being prepared for tough times is the antidote to the anxiety it produces.

A sound science and economic based assessment of our situation quickly roll calls a huge list of industries and business that will be restructuring in a way not seen since WW2. When populations undergo such systemic change in how they live the economy has to adjust to that. That is both positive in terms of new, better ways of doing commerce but negative in that the transformation can flatten business growth curves for many years ahead. Some won’t get to transform or will stubbornly hang on to the old ways instead of coming up with a crisis strategy or exiting early at a lower loss. Industries will falter despite the reopening, some will undergo disruption not seen in our lifetime. Some business models will sadly close and others will rise from new consumer archetypes that have evolved out of this Crisis.

We could be in this recovery phase for years or even a decades.

It’s smart to be realistic about the bounce being a soft one. I think even smarter to see this as a wave of optimism or what traders call a suckers rally. Personally I feel the worst is yet to come, much worse, and not with respect to the virus but economically. I’ve prepared our online accounting business for this. I need to disclose I’m quite a market bear on this economy so taper my comments accordingly. Seek your own advise from your financial planners on these matters.

I’ve prepared for the worst in our crisis strategy. I’m expecting a depression.  I expect government to play a much bigger part in our lives than normal. This is what happened after financial crisis events through history.

The opening up of the physical economy will catalyse a realisation that we wont be just kicking off where we left off. Much of the change is irreversible. Companies will have higher costs to deliver. Some business models will no-longer be workable. We will have a huge government debt, that at the end of the day, will need to be paid for by us, the small business tax cash cows. We are getting money now but we will be giving that back in the future. That’s how this works.

There are many burning questions of uncertainty. Will we need office space like we did before? Has the shut-in economy re-educated management to the cost, risk and productivity savings (arguable) of people working from home. Does grandma still need to shop at the mall? She was forced to buy online, a rapid acceleration of the online shopping adoption curve. The bricks and mortar retail sector didn’t see that coming. There’s dozens off these two faced opportunity/crisis situations. The cost being slow GDP due to transformation being slow and expensive.

The sensible playbook is about adopting crisis strategies that enhance survivability, improve balance sheets and anticipate a long cycle of depressed economic activity and transformation. So I wanted to share a few low cost crisis strategies that might spawn some ideas for your own businesses. 

However, what I want to highlight more than anything else is that you make your luck. Hope wont fix your balance sheet or your profit and loss. Focused action is your access to good luck. This might mean disrupting or reinventing your business model, or picking a niche instead of being a broad flat multi-product or service business. It might mean dropping what doesn’t make you money in the tough times that you laxly carried in the good times. 

Look at this as a challenge to take on. Seeing yourself as a victim of your conditions is fatalistic and hopeless. Decisions shape your future and action executes them. Tough times call on you to have a crisis strategy.

As George Classon said in his most excellent book, The Richest Man in Babylon, “MEN OF ACTION ARE FAVORED BY THE GODDESS OF GOOD LUCK” 

  1. Let customers buy and self serve online – Reduce your reliance on bricks and mortar, on the phone and on sales reps. Design and develop e-commerce capabilities that may take months to get working but are a long term play. Gates, Buffet, Bezos and Musk all play the long game. Accept that face-to-face is becoming warehouse-to-house. Use systems to do your work. Your people in your business are doing all the things you have yet to automate. Constantly remind yourself of that. For example you can remind your customers they can see all their invoices online in the Saasu Online Invoice Portal. Why take calls or emails when they can check themselves. The crisis strategy is to use those resources to sell. Turn a cost resource into a revenue one.
  2. Let Saasu Online accounting be the bad guy and use Automated Statements and Reminders to collect money for you. Finding ways to improve your balance sheet while interest rates are low is sensible. Another way is to collect money owed to you. Cash is king, it’s not a cliche it’s a matter of fact (just ask S&P, Moodys or any bank lender). When it’s not collected you are a lender to your customer, a creditor. That’s hyper-risky in these times. Just look at Virgin who owes suppliers AU6.8 Billion. They are all asking themselves the question, why weren’t we more proactive in collections. Virgin clearly lacked an economic crisis strategy given how short their survivability was.
  3. Make your luck by taking action in one of these areas in your pipeline. Leads, conversion or product/service delivery. One of these 3 will be a bottleneck. If you think of the pipeline as being as thick as your most successful area then one of the other two areas is a bottleneck in your pipeline. Investigate and work on the one that is stopping you. At Saasu our weakest area is leads because they cost a lot of money in our industry with multiple billions dollar competitors we are up against. So I spend my time on that.
  4. Use Pareto’s law. Analyse where you are making 80% of your money from 20% of your customers. Can you double down, can you create a feedback loop (re-invest profits in profitable activities back into that same activity). It might be one successful niche product. It may be a service that is high margin and low effort. It may be a part of your business that is immune to shut-downs. Or, my favourite, an addressable market you do well in that you can supercharge using this feedback loop method. My previous post covers this also.
  5. Downsize. For some this is forced, for others it is managed. Smaller feels negative for many people but if you have a minimalist mindset small means “essential” and less can mean more, that is, more happiness and less worry. Don’t get caught up in vanity metrics like how many people you have working for you. The metrics I like for our crisis strategy context are positive cashflow (power and safety), asymmetric returns on activities (you should do things in your business that return much more than you invest) and lastly, and most importantly, customer happiness. You won’t win if this isn’t your mindset. It is not to be mistaken to mean every single customer must be happy. You will not be able to offer what some customers seek, that’s an incompatibility, and you should declare that to those customers. Speak to your advisors about what metrics matter for your context. Most importantly keep your financials up to date in an online accounting system. Knowing your situation helps removes some fear (use an automated cashflow forecaster like Saasu’s)

Sometimes on the other side of adversity is the creation of a new journey, a change you needed but were never game to take, a reinvention. So it’s good to see the positive in what might be a terrible situation.

I can’t remember where I read this (possibly The Untethered Soul by Michael Singer) but someone wrote that it is a good idea to look at what is the worst case scenario and accept it now. Maybe you lose everything. Look at it hard and say to yourself can I live with that. Maybe you can, maybe the removal of all that stress, the purging and the opportunity to start fresh on something different is a blessing or cleansing in disguise. Sometimes accepting the worst case is the fastest way to remove fear and anxiety. It is a mental reset, the best way to empower you to start being grateful for what you do have and to start taking action from the position in the game you have been put in. 

Focused action creates luck. Have a go.

Story photo by The CEO Kid