Currently, we're going through some really challenging times from a business point of view and that's affecting all of us business owners, staff, everyone, customers, suppliers.
Right now there are two challenges cash or cash flow? And for some it’s both. Cash is simply the amount of money you have in the bank. Can you weather the storm? Using your cash reserves may not necessarily the best thing right now, if you can't hold on to some, that's great.
What about your cash-flow situation? What are you doing to generate income coming in? How are you managing your costs going out? In amongst all that, how are you maintaining good customer relationships, good supplier relationships? How are you looking after your staff? I know a lot of companies have furloughed staff. Have you just taken one group of staff and furloughed them? Or are you as I've seen with some companies rotating the staff that are furloughed to keep everyone actively engaged? What are you doing to actively engage your staff so Keeping businesses afloat right now is challenging?
Segment your supplies into tier one, tier two, tier three, tier one supplies, those you want to keep those that are critical to your operation. And those that cannot be easily replaced. If you know they are going to survive or a particularly good chance to survive, and if you've had a long relationship with them. Ask them if they want paying in advance. Would that help them? If you have the cash available of course. In trying to help them survive you are doing something positive for them and, when you come out of this, they are going to remember how helpful you were. When the contract negotiations come up for renewal, when there's a pricing squeeze on your suppliers, you will be the first in the queue.
Tier two suppliers, the same applies, are they important but not critical? Can they be replaced easily? If they can, offer partial payment in advance, with a discount. Make sure they can be replaced because, at the end of this, they are going to remember that you put the squeeze on them, so you need to be able to replace them simply.
Tier three is those that you could potentially cancel now to save money on. Tier three suppliers are those that can be easily replaced those that you do not particularly have a strong relationship with or those potentially that you know are going to go to the war.
Taking all three tiers combined you are helping those that mean the most to you, but making sure you still have the ability to survive also. There has to be some balance.
Focusing on customers; those that you value highly, contact them, offer them pay later options if you can afford it, but no discount. If you start discounting now, people will expect it in the future.
For your Tier one customers, maybe buy from them, help the. Do your customers have gift vouchers you can use? Do your suppliers have gift vouchers? Potentially that's a way of generating positive affiliation with them. Those discount vouchers you can give to staff who are struggling potentially at moment give to other customers supplies; be creative.
Tier two customers; contact them, keep them informed the same as you do with your tier one customers. Share update, ask if there is something you can do. To be helpful, but again, careful, no discounts, but do ask for some help. They may want just a week's deferment; could you do that?
Your top tier three customers keep in contact with them. This is this time is all about relationships, and it is all about keeping in contact. keep them informed, share them updates, let them know that you are still surviving, you are still doing well. Keep them engaged with you.
Once your customer and supplier relationships are being better managed there are three sets of plans you need to have in place. This is something you should do and review every month.
Let us assume this lock-down continues, what happens if it goes on for another month, and then another month and then another month? What does that look like? Have those scenarios prepared and revisit it every month.
When we come out of the Covid-19 scenario we are going to do a very deep recession, it will be a short recession, we will hit the bottom and we will start to come straight up because of the fiscal stimulus that's in place, but it will see the rest of the 2020 recession. Plan for that, how many customers are you going to lose? How many of your suppliers are going to be in trouble? How much is your spend going to go down by? And do you need to carry the same structures you have today? What does that mean?
Think if one of your major suppliers entered trouble financially. What is your plan for that? Where is your contingency? What is your strategy? What is your backup? Now do the same for one of your biggest customers. Imagine your biggest customer suddenly stopped ordering . What's the impact on that?
Right now we are in a situation of uncharted territory for many, many people. Understand what the potential outcomes should could be: plan for the worst and hope for the best. Segment your customers, segment your suppliers and build a month by month plan for today. Build a month by month plan for recession. Plan for supplier failure plan for customer failure. Most of all, plan ahead, work out what you can do. Get Smart with your finances and have contingency plans for the most likely scenarios.