How to keep your business secure in a crisis?
It is strange when an individual and the management are surprised when a crisis arises. Why?
On planet Earth, for 6000 years already, winter has come regularly after summer, without exception. It is there, sometimes milder and sometimes more severe, but there was never a period when there was no winter. This metaphor is similar to a crisis because ever since there are humans on planet Earth, crises have come and gone. The only difference between winter and crisis is that we know when winter is coming according to the calendar, crises do not have their exact determinant.
The crucial thing preceding every crisis, including this one caused by the COVID-19 pandemic, is the period leading up to it. This applies both to the health of people as well as businesses. That is also the first step. So, how to do it? You cannot know what kind of crisis will come, whether your biggest client will cancel their contract, whether your supplier will have a financial meltdown, or a state of emergency will be declared due to extreme weather, war or a pandemic.
Nonetheless, crisis preparation and action to be taken apply to all of these conditions. You are preparing for a crisis, and within the actual crisis, you will pivot your direction depending on your needs. One of the biggest mistakes companies and people in them make is that they do not do anything concerning crisis preparation. They think and know that a crisis is possible, but in the haste of daily business, they do not work on it at all, reasoning that it rarely happens and, if a crisis occurs, most of them take the position “We will somehow manage it.” They deal with solvency by investing. They spend most of their money on all things because, at the time, things are going ok and it’s hard to focus of something negative. It is easier to think in the short term than in the long run and that is true because I have experienced all these conditions myself. It is recommended that part of your earnings is planned for times of crisis.
As you do not know what kind of crisis will occur or you do not want to worry about it at any given moment, then everyone should prepare in their unique way. It is impossible to have just one pattern by which every company would approach a crisis situation in order to stay safe, although there are certain similarities in these patterns. For example, you must have a stable cash flow and the trust of your clients and suppliers. These are the two most essential elements in times of crisis, whether it is a business crisis or a worldwide pandemic caused by COVID-19. The fact that you may have a high-quality contract will mean nothing if the other party goes bankrupt; that can happen to anyone.
What does stable cash flow mean and how can it help you in times of crisis? You should have a stock of money for at least two months, and ideally for three months, for you to pay all the expenses of your company and to service all your necessities without having income for that period. What exactly does that mean? It is unlikely to happen that you will instantly be left without income whatsoever because if that happens – then it as a disaster. Since crises come at once but gradually put us under pressure and we, therefore, slowly adjust to them, you will have a grace period for a response in a crisis that you have provided for yourself. In my experience so far, you have 6 months to monitor the crisis, view its consequences, adjust your business to the new situation and move on with your work and responsibilities. It is unlikely that any one crisis will last with such an intensity that you will not be able to adjust your business to the new situation in six months; after that, you are able to keep the business safe and solvent for an extended period.
Trust means that suppliers, financial partners and other stakeholders will trust you because you already have a reputation. Accordingly, you will be privileged for the funds you can receive in this period of crisis. For example, in times of crisis, banks become quite unwilling to place money. When you have a reputation, you have a better chance of being funded. Also, the same is true with suppliers. Having a good relationship will bring about the belief in you, which will help you get the raw materials or support you need during a crisis. Think about it this way: everyone knows the crisis will pass. Everyone wants to continue doing business. However, they will choose to cooperate with those who they believe and will continue their business with them when the crisis is over. You have to make sure that it is you. If you have gained trust of your employees, they will also trust you. They will not be scared, or even if they are, your word will mean a lot to them. What goes around comes around. Right? Good deeds are repaid with good deeds!
When any type of crisis arises, many people ask me, “How should I respond?” My first suggestion is, “Don’t react immediately, wait for the first wave to pass.” It is usually the most stressful because you are encountering something that you either have not had the opportunity to deal with or you are totally unfamiliar with it, so everyone is in a panic. From my point of view and from my experience so far, to make your business safe in times of crisis, the following should be done:
1st Stay informed – ensure that you are informed from multiple sources and make sure those sources are as relevant as possible.
2nd Check your financial stability, whether your money is in jeopardy, whether it is in an unsafe place and so on. With this point, it is essential to react intelligently, depending on the situation.
3rd Make a quick estimate of your income and expenses. Predict where you might incur potential losses and make at least 2 to 3 case scenarios.
4th When you have created case scenarios, identify two crisis groups. One should consist of top management while the other would consist of a wide range of employees and it would be necessary depending on the type of crisis. Their task is to meet regularly, i.e., once a week, or more often, if necessary.
5th The top management circle should discuss the situation and cases that are considered, including discussing taking the necessary action at the moment when the scenario happens. For example: if there is a 30% reduction in our revenue, we have to go with a 10% pay cut, so when that point is reached, you need to react. Reactions are individual and different from company to company. What everyone has in common is reducing, but not stopping expenses. The gradual reduction also implies a slowdown or complete shutdown of investments.
6th The second crisis group has the purpose of comprehensive informing, more people – more information sources, more opinions and so on. At the same time, involve people, do not keep them in the dark, inform them in a timely manner and introduce them to all steps, ask them for opinions, etc. The most important thing here is to deepen communication, which cannot be excessive in times of crisis.
7th Hope for help from the sidelines and stay aware who could help you, but you need to rely on yourself. Only you will get yourself out of a crisis. Don’t expect the state or anyone else to solve your problems. Of course, they could help you, but in my experience, they may offer some help or no help whatsoever. If you want things done, do it yourself.
8th Follow all experts in your field, visit webinars, seminars, get educated about a given crisis by people who have more experience than you. It could be that you know 95% of the things you will hear, but the other 5% can save your business. You may find an ally or piece of information that is of enormous importance to you. It is an excellent time to start exploring and educating yourself in your as well as other areas, which may or may not be related to the crisis.
9th Be socially responsible, because every crisis has passed, so will the one in which you find yourself. Accordingly, sooner or later, things will return to normal and it will be up to you to continue where you left off – with your employees, clients, partners and everybody you have had a relationship with before the crisis.
10th Contact all stakeholders that are relevant to your business. Regularly, ask them what their predictions are, whether they expect to be stressed, how and how you could help them. Do this as often as you can, once a week, or two weeks, depending on the situation. Your reactions will depend on their decisions and situation.
11th Feel free to pivot and adapt your business to the needs of the crisis; change your business model in such a way that is close to your standard one but different from what you are used to.
12th At the same time, keeping up with the crisis, set aside some of your money to respond quickly to an investment during the crisis period. Remember – the best approach with the most growth potential is to invest during a crisis. When everyone is scared, that is when you should enter the market, and when everyone is careless, then you should exit. I am only suggesting this if you have some serious reserves and, in your estimate, you can survive the crisis with the rest of your money.
13th Make a log of everything that was going on. The crisis will pass, you will forget the details, but if you find yourself in another crisis, you will have a welcome ally for future “warfare.”
To summarize: during a crisis period, you should respond quickly but in good measure, frequently and appropriately, rather than suddenly and excessively. Intensify communication with all stakeholders. Stay informed from multiple sources as fake news will circulate. At the moment, we are all witnessing the extent to which COVID-19 fake news circulates on a global scale and how difficult it is to filter the truth from the lies. Keep your stakeholders informed of your situation, give them regular updates, especially to employees. As I said at the beginning, no crisis is the same: there is no pattern by which you can respond, but there are similarities which you can follow. Individual and personalized decisions will be made depending on the situation and the structure of the company. This is written and talked about only from the perspective of a fully immersed member of a particular organization. I have singled out some thoughts that, in my opinion, are important. This is not based on any teachings or books, but my personal experience. I have been through 10 personal and global crises so far. Furthermore, these principles can be applied on a personal level, only by adapting them to smaller groups and individuals.
I stand at the disposal of anyone who wants to exchange their experience with me because, in the end, no one person is the smartest. In unity, there is power. Get in touch and keep your business and lives safe.