Strategizing Businesses post COVID-19

With the reopening of the Indian economy, every business needs to reassess its strategy and operations to properly position for the recovery. Fortune favors the bold, and in order to get through this crisis, organizations must take decisive actions.

Below is a small checklist to aid the management in taking decisive action and optimally positioning their organizations.

Business Model Assessment

The first step is a comprehensive situational analysis of your business. This is a rigorous assessment of what has and has not changed, with particular focus on the elements that have withstood the shock and which ones have been adversely affected. Institute a weekly tracking and measurement around your key performance and business indicators. Many of these KPIs may have changed in the aftermath of COVID-19. These KPIs will not only measure your current state, but will also help you make decisions on what to do next.

Business Model Checklist

• Review all key performance indicators (KPIs). What is the lifetime value (LTV) of a customer now, and how does that compare to your customer acquisition cost (CAC)? How do your customer acquisition costs vary relative to their respective channel?
• Establish and modify the baseline metrics that you will use to measure change. For example, if you are a seat-driven software business, how is user growth trending? Are you seeing a variance in daily active users (DAU) vs. monthly active users (MAU)? What is the most important metric that will signal a significant positive or a negative shift in business?
• Examine the year over year (yoy), month on month (mom), and week to week changes in these KPIs.
• Determine which of your customer segments are buying and are engaged. Given the damage done to certain sectors such as hospitality, travel and leisure, and oil and gas, it’s critical to focus on the ones that are in a position to spend versus those that are in survival mode.
• Assess your sales channels, and, if possible, shift resources to best performing sectors.
• Analyze customer segments, business models and product or service offerings. If success has narrowed in those areas, it’s time to re-orient your workforce around them — that could mean all-hands-on-deck for sales, marketing, engineering, supply chain and other business processes.
• Talk to your customers and prospects. Listen to their concerns, challenges and priorities. Are there areas in which your solution could help the customer?

Financial Assessment

Managing cash flow is always a priority, but the current backdrop has elevated it to the forefront. Cash runway is of the utmost concern and should be calculated under different scenarios. While prognosticators speculate on the shape of the upturn, follow the mantra of hoping for the best but planning for the worst. Run multiple scenarios assuming:

1. revenue shortfall that you experienced in the March and April months stays constant throughout the year;
2. revenue shortfall persists into the first half of 2021; and
3. revenue further declines through the end of the year.

Depending on the nature of your business, you may need to run additional scenarios that factor in seasonality, customer concentration, festivals, etc.

The economy may bounce back in the second half of the year, and if so, you can adjust accordingly. However, if you do not proactively adjust early to a more dire situation, your business will not be in a position to survive. Tightly managing payables and receivables can help any business augment working capital and serve as a bridge extending your runway additional month(s). Accounts receivable financing may also be an option available to few business, but it comes at an added cost. If you have a good banking relationship, reach out to your bank manager to explore credit options, including extending the loan amortization time period or establishing / increasing asset based revolvers.

If you are a venture backed company, talk to your investors about raising additional funds at an attractive price, perhaps at the same valuation as the last round or through a convertible note or simple agreement for future equity (SAFE) to expedite the process.

Financial Checklist

• Calculate your answers to these two fundamental questions: What is your operating expense run rate? If you aren’t profitable, what is your cash burn rate?
• Exhaust all avenues with banks and non-banks to optimize total capital.
• Review cash flow projections and working capital needs. How long can you survive with current cash and credit?
• Continue to explore ways to defer payments on leases and toward suppliers, prioritizing suppliers and vendors that are critical to driving top line growth. Can you extend payment terms with any suppliers?
• Re-examine customer acquisition costs (CAC) and total customer value (TCV). What is your revised LTV to CAC ratio? Has the CAC recovery time elongated? If so, you may want to reduce the CAC target.
• Continue to take action around expediting receivables, with an eye toward changing net payment terms, creating incentives for early payment, providing varied payment options and asking for deposits on custom orders.
• Get even leaner on inventory, scrutinizing metrics like turnover and fill rate. And consider all avenues to liquidating stock. If you are a product company, have you to adjusted for possible supply disruptions?
• Take a hard look at how workforce actions (furloughs and cutbacks) have impacted your ability to drive revenue, and tweak accordingly.

Health / Safety / Legal Assessment

The biological crisis means the way every business operates will undergo some change. This will have a major impact on every constituent of your business. And it will require a diligent look at all health, safety and legal issues that arise from coming back to work, opening up for customers and engaging with your suppliers and vendors.

Health / Safety / Legal Checklist

• Examine and work within city, district and state regulations on reopening facilities.
• Craft a facilities plan for your warehouse, plant and offices that includes an assessment of how closely teams work together, cleaning and hygiene supplies and cleaning services. Consider whether your environment dictates providing protective equipment (PPE) such as masks, gloves, etc.
• Create health safety policies and guidance for employees and customers, including posting signs and developing communications about physical interactions and hygiene. Assess your need to screen workers and/or customers as they come in contact with your facility and your confidentiality policies around doing so.
• Ensure you’ve communicated explicitly about how employees should report to human resources if they become sick or start experiencing any symptoms.
• Make sure to have scenarios mapped out in case an employee does develop the virus. Will you close the offices? How will you communicate what has happened, and what will happen next?
• Determine policies around paid sick leave and parental leaves.
• Consider which travel restrictions your company will apply.
• Examine whether implementing shift work, or simply more flexible working hours, will help comply with the employee guidelines.
• Stay up to date on Notices issued by Municipal and other local Authorities, and state guidelines.

Business Planning

Forecasting is hard in normal times, and in this environment, it is downright difficult. Even so, you must build out a handful of scenarios that are based on reality and assume a wide range of outcomes. Every organization must re-look at its forecast for sales, expenses and cash flow and retest its assumptions. These scenarios should include modeling cash flow, burn rate and liquidity under multiple scenarios:

1. if revenue declines 20% for the rest of the year;
2. or 30%;
3. or 50%.
4. Model the impact if revenue does not recover swiftly and stays at depressed levels well into 2021.

Forecasting Checklist

• Run sensitivity analysis on your sales and profit forecast, accounting for multiple downward scenarios. Pay particular attention to the levers that have an out-sized impact. Is there one customer base or product that has an out-sized impact?
• Determine your company’s stance on future hiring. If there is a hiring freeze, which metric(s) will dictate lifting the freeze?
• Analyze which positions can be eliminated without a significant hit to business continuity. If not now, under which circumstances would additional headcount cuts be necessary?
• Review bonuses, commission payments and other employee related planned expense growth. With cash preservation paramount, does it make sense to replace cash-based bonus payments with equity in whole or in part?
• Don’t ignore salary reductions, whether temporary (i.e. 1-3 months) or permanent, for senior management. If the reductions extend further, contemplate replacing salary with additional equity. If it’s a temporary reduction, specify what needs to occur before it reverts to normal.
• Examine working capital, payable, receivable and all cash flow related assumptions. Have customers revised their payment terms?
• For many product-based companies, supply chain disruptions have been problematic. Factor into your plans continued interruptions and potentially increased costs, which will require modeling alternative scenarios and associated costs and delays. Where possible, look for second source suppliers, especially in long lead time components.
• Make sure your scenario planning includes building in further risks, including employees getting sick, continued or new supply chain interruptions, loyal customers going out of business and even secondary health outbreaks. Your models are only as realistic as your risk assessment.

Customer Retention & Acquisition

While it may be difficult, it’s paramount that every organization focuses on retaining and servicing existing customers, whether you are selling a product or a service. This also may be your best source of revenue, since you already have an established relationship. New customer acquisition might be trickier, but this is where low-cost, guerrilla marketing strategies can come into play for both business-to-business (B2B) or consumer (B2C) sales.

Customer Retention & Acquisition Checklist

• Focus efforts on industries or segments that are essential or least impacted. Pare back your efforts in areas in which the prospect is unable to buy.
• Reassess how you go to market. Make sure to focus on your value as a partner and how you’re caring for your employees, customers and community. Demonstrate how you’re able to help.
• Reassess your pre-COVID marketing and sales messages, emails, cold-call scripts and any external branding.
• Take into account the uncertainty that current and potential customers feel. What could you do to alleviate worry? Can you offer money-back guarantees? If training is required, can you make that part of the deal? The more you compensate for unknowns, the better.
• Understand which marketing channel give the biggest bang for the buck.

Packaging / Pricing / Payments / Delivery

With so much disruption to business, taking a fresh look at your product or service packaging, pricing, payment and delivery terms is a useful exercise. Are you better off bundling more into your offering or simplifying un-bundling? Can you offer promotion pricing or discounting to certain segments to spur demand? Does offering payment term flexibility or use of credit make sense? Are you able to delivery your products to the location of your customer and at what cost? All options should be on the table as a catalyst to spur sales.

Packaging / Pricing / Payments / Delivery Checklist

• Be responsive but disciplined in your discounting. If you do offer a concession, ask for something in return, such as an extended contract term.
• Be thoughtful about passing on increases in raw material costs. At some point, it may become unavoidable, but cash-strapped customers will notice, so be prepared to explain increases and avoid even the appearance of price-gouging.
• Rather than simply cutting prices, consider bundling value-adds to increase loyalty while protecting margins and customer lifetime value.
• Assess whether you can create a subscription model for a lower monthly cost versus a large one-time payment.
• Consider alternative business models. Many software companies are offering extended free trials or upgrades in service tiers as a gesture of solidarity and support. Product-led software business models are increasingly popular anyway, so maybe now is the time to try this approach.
• Be creative. Selling Rs. 1000/- gift card for Rs. 800/- is a good deal for customers and ensures they’ll visit once it becomes feasible.
• Give salespeople crystal-clear parameters on what constitutes a discretionary discount and what triggers approval by a supervisor or higher.
• Highlight initiatives your company has undertaken to support the community. Even before COVID-19, consumers cared about the social values behind the brands they purchased. That’s elevated now.
• Can’t accept online payments? At minimum, share Paytm or G Pay so there’s a contact-less option.

Organizational Alignment

Once you have gone through your checklist of actions, the last and extremely important step is to get your organization aligned and focused. Ambiguity and uncertainty about the future is fine, but your business can have clarity in its strategy, tactics, goals and objectives. Make sure you communicate frequently with your employees and present a clear vision externally to both customers and partners.

Organizational Alignment Checklist

• Make sure that every department of your organization understands the plan and is bought into and trained on its execution.
• Consider running virtual town halls and all online meetings, which are effective vehicles for internal communication. Executives and other decision makers are humanized in this format. Include time for Q&A, even fielding anonymous questions so employees aren’t shy about asking tough ones.
• Answer those questions as plainly and as honestly as possible. Confidence, inspiration and transparency matter. You can have those and be uncertain about the future.
• Consider a weekly communication, like a newsletter that recognizes contributions from around the organization.
• If it makes sense, implement daily team huddles at a departmental, functional or even geographical level, which can be an effective way to develop a consistent approach, message and set of expectations.
• Develop a customer message, and make sure it comes through consistently, whether it’s being delivered by sales, on your website, in direct email communications or in virtual events held to serve customer needs.
• If your customers need guidance, determine whether you can create content — in written or video form — that is helpful and tactical. Now is the time to show this level of partnership wherever you can.

Every assessment matters to some degree. The challenge is finding the data that matters the most at the current time. Businesses are in a unique position because they use unique methods to move faster than their competition and some may face a different set of challenges compared to their competitors. This means that the most important assessment for your business is going to change from time-to-time based on the stage and trajectory of your business.

By keeping an eye on the above points, you’ll be better prepared to identify when these changes happen and where you need to place the majority of your attention.

How has the COVID-19 situation affected your organisation? How are you strategizing your business? Please share your thoughts in the comments section below as I learn just as much from you as you do from me.