By Eric Morse, Western Communications
Editor’s note: Visit the official Western COVID-19 website for the latest campus updates.
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The COVID-19 pandemic engulfing the world poses problems for entrepreneurs on multiple fronts.
They worry for their families, employees, communities, and businesses – almost exclusively in that order. I hope that we will all reach out to support our small- to mid-size businesses in this country as they are truly what drives our economy and exceptional quality of life.
Almost every entrepreneur I have heard from is facing the current environment differentially. Some are seeing revenue drop by 60-90 per cent this quarter and next, and others are weathering the storm more intact. All are dealing with the safety of their families and employees: mentally, physically, and economically.
Allow me to offer some thoughts to all entrepreneurs. Most of this is just a reminder and it is certainly related to their business survival as that is where I hope I can offer some ideas or affirmation.
TIPS FOR ENTREPRENEURS
- My first suggestion is to take a deep breath. This has been a whirlwind for everyone and, while some of you had contingency plans in place, many of you have been reacting to a quickly changing environment.
Once you’ve had the chance to breathe, reaffirm your purpose: Why did you get into this business in the first place? Is that still what drives you today? If not, think through your drivers, your “why,” it’s amazing how times of crisis can clarify this for us.
Next, be sure your actions today and tomorrow are aligned with that purpose.
- Engage your top team in some simple scenario planning. What will you do under a variety of potential futures? What if your revenue drops 30 per cent, 60 per cent, or 90 per cent over the next quarter or two? What if your workforce is unable to work remotely using current processes?
The key is to work out a few scenarios; typically, worst case, most likely, and best-case scenarios based upon a few key determinants of your business. Have the plan ready in case you see the indicators pointing in the direction of one of the scenarios. Just the process of planning can give you some sense of control and hopefully give you a leg up as we move through and out of this crisis.
- Keep it simple – think cash flow. Cash flow is your lifeblood and, if you can manage your cash flow effectively today, you will position yourself well for the inevitable upturn. You can increase your cash position if possible by adding to the cash coming into the business or more likely right now by reducing the cash being used.
Cash is king in most entrepreneurial endeavours and it is even more important when dealing with the current uncertainty. To some extent, entrepreneurs have an advantage over their older corporate counterparts that have never had to bootstrap a business.
One thing to keep in mind is that your employees will know where the fat is and what is non-essential, and they will likely know where the next revenue source is. Engage and communicate like never before.
REDUCING COSTS AND GENERATING CASH
- Obtaining cash. Given most entrepreneurs’ bias against debt, many of you likely have the capacity to take on some form of debt. Scour the daily feed from both your provincial and federal government, and check with your banker. There are new programs being announced daily that may be able to fill some holes, keep employees on the books, or top up EI under certain conditions.
- Don’t forget your customers and suppliers. Having invested appropriately in these relationships, it may be the time to tap well-positioned customers or suppliers for more favourable terms or even a line of credit. Think about what you can do to create additional value for these partners: faster delivery, preferred service appointments, etc. Peers (other entrepreneurs within your network) may also be a source of temporary funding, although they are more likely to be of help in reducing your cash outflow through shared buying, marketing, or service partnerships.
- Reducing costs is the other way entrepreneurs can improve their cash positions. Think carefully about implementing growth plans and be sure they generate sufficient cash in a number of scenarios. Outsource or take on partners in areas of your business where you have cost disadvantages.
Rethink your views on competitors; perhaps there are ways you can work together to decrease costs (buying groups) or serve different segments of the market more effectively. In need of human resources, look to your local university or college. Many universities now offer entrepreneurship programming, and students in these programs are eager to gain experience working with entrepreneurs. The students can be hired on a reduced, or sometimes, no-salary basis, as they often have to complete research or consulting projects as part of their programs. You get smart, young talent to help with pressing issues, and, through your mentorship, the students get invaluable experience working in a downturn. This is definitely a win-win experience.
Lastly, keep operating expenses as low as possible. A quick operational audit can often find quick wins for cash savings.
The best advice I can give you is to stay focused on the long-term success of your company. This crisis will end and the actions you take now should position you to prosper as we come out the other side.
Lean on peer networks or join one today. Engage your employees to help in solving the most pressing issues. Build relationships; don’t erode them. Build brand equity; don’t spend it. Invest in those things that increase cash flow. Work on ways to become even more intimate with your customers. Don’t panic and stay focused on long-term value creation.
If you can do these things, you will be well-positioned to prosper.
Ivey Business School professor Eric Morse is the Special Advisor to the President and Director of Entrepreneurship at Western.