In addition to all the challenges life had already thrown at you in 2020, Covid-19 happened, and, suddenly, a rapid gear shift was required. Among other things, this came with the added responsibility to ensure that our businesses develop immunity against Covid-19. Indeed, the line between human safety and economic business survival is a tight one. In addition, most experts agree, life post COVID-19 will look very different from the one we were accustomed to.
Here are some thoughts to help build a layer of protection for the future success of your business.
How is your product or service aligned?
- Consider the spending impact on your customers and how your business is aligned to the changes in the markets.
For most individuals and business owners, health and safety have moved up in terms of budget priority and will strongly influence spending patterns and buying decisions. If you offer industrial office cleaning products and services, suddenly you may find customers more willing to accelerate the issue of a purchase order. If not, you will have to re-consider your product and service offering. Diversification, divesting or innovation may be new terminologies you will have to get to grips with.
How do you anticipate your customers will react towards your business?
Another aspect to consider is the market’s willingness to indulge in luxury or nice-to-have items. Given uncertain market conditions, loss in disposable income etc, the premium products and services will be substituted for cheaper alternatives. Customer loyalty is shifting, and consumers will scrutinise deals to ensure they receive increased value for money. A well-designed loyalty programme may ensure customers make you part of their monthly expenses.
Are you ready to go digital?
With lockdown, both retailers and consumers suddenly had to consider online e-commerce as an alternative commercial channel. Businesses with strongly established channels, such as Takealot, could easily continue to offer essential products via their existing sales and distribution channels. If you do not have a strong digital sales and distribution channel, explore if this may offer you the opportunity to increase sales volumes and potentially reduce fixed costs? Most consumers have now overcome their initial concerns and obstacles towards online procurement, given social distancing and long queues?
“How much did you say!?”
- Buy your accountant a cup of coffee and spend some time to understand the financial fundamentals of your business.
Invest time to go through your financials in detail with your accountant. Go through and unpack each line item to consider its impact and contribution towards the success and sustainability of your business. Have a clear view of how you would categorise each expense; i.e. which expenses you cannot do without, which you could consider reducing and which you could completely cut.
Which expense offers the highest value?
Fancy office space and expensive cars may not contribute towards additional revenue or gross profit margins and by cutting those out, you could improve the financial health and future of your business.
How much is your payroll investment contributing towards business success?
Ensure you implement a fair employee performance management programme. Your employees should be clear of what you expect of them, but also that if over-achievement leads to additional productivity and revenue, you will share the upside with them. Conversely, employees who are not pulling their weight and not contributing should be reviewed.
Cash is King?
Have a very good understanding of your debt/equity situation. Too much debt or even the wrong type of debt could impact the financial health of your business. Discuss the various financial tools with your accountant and ensure you use debt wisely in your business. Similarly, if you have a strong cash position in your business, consider the best options on how you could apply this in your business to deliver the optimum yield.
Carefully consider the management of capital reserves in the business. Equity in the business should rather be re-invested than withdrawn.
Review the margins in your business and rank products/services with the highest to lowest margins. The aim should be to build the future of your business on products with the highest margins. Consider the impact of low-margin-contributing-products. Either cut them out or consider the market reaction to increasing sales price. During challenging trading conditions, businesses with higher margins, lower debt will have a higher probability of survival.
Are you ready?
Lastly, ensure your effort to provide a safe trading environment is visible to customers and employees. Sanitisers, allowance for social distancing, trained employees, and compulsory face masks, may be the catalyst to secure future, repeatable business.