Where do you go from here?
We know you are smack dab in the middle of a global crisis.
Trying to figure out what to spend your time on today is a challenge and figuring out how to survive is an even bigger challenge.
What will change for the short term?
What will change permanently?
What can I do to make sure our company is still around and thriving when this is all over?
The founders of EROC Advisors have some thoughts on today’s reality and planning for tomorrow.
TODAY
CASH
• Make sure you have completed the process of obtaining any appropriate funds that are available. PPP, EIDL or other local funds that are available.
• Once you have completed acquiring funds (or not), begin a cash flow forecast to make sure you can make it to the anticipated end.
o How long before you can open?
o What cash will I need to re-open – working capital analysis
o Contact vendors and discuss how both sides might be able to manage during this time. Now is the time to see which of your vendors are good partners and which are not.
• Prepare a breakeven analysis on your current business
o Identify fixed versus variable costs
o Analyze fixed costs to establish a strategy to reduce and cut where able (permanently & temporarily)
– Can you renegotiate contracts ?
– Look at all benefits and where changes may be made
o Analyze variable costs and identify opportunities to potentially reduce
– Can you substitute a product?
– Can you change a supplier?
– Can you reduce inventory levels and still meet customer demands?
o Update the BE analysis with these changes.
o After you have completed analysis above, prepare a weekly cash flow forecast to help track success.
PPP LOAN – if you were able to obtain a PPP loan:
o Make sure you track all expenses that are required to obtain forgiveness
o Incorporate the “forgivable” portion in your forecast, but don’t solely focus on getting as much forgiven as possible. If your forecasted business revenue will not support re-hiring your staff, you might be better off taking the loan at 1% cost and save payroll expense.
o A lot of the forgiveness calculation is dependent on further guidance from the SBA and Treasury. Make sure you are aligned with someone (CPA, Payroll, Banker, Advisor) that can keep you up to date on any changes.
PEOPLE & PARTNERS
• Communicate and evaluate:
o Stay in close communication with your current staff and the staff you had to lay off.
– Be open and honest. Be sensitive to personal issues.
o Evaluate how your team reacts to this crisis
– Evaluate all your employees
• There may be opportunities to upgrade or reduce labor cost
• Who are the stars?
• Who embraced this as a challenge and who waited for someone to tell them what to do?
– What new employee requirements will be needed to operate?
• Will masks be required?
• Will testing be required? Is this legal?
– Challenge your stars to help evaluate what will happen next.
• This is a great time to develop future leaders in your company
• Reach out to all levels. You will be surprised where great ideas come from.
• Communicate with your clients/customers
• Be open and honest with this group as well
• This is a time to create a lifelong bond with some of your customers.
o Evaluate your customers
• This may not be an intuitive time to think about cutting loose some customers. If 20% of your base are usually difficult and they are even more difficult now, it might be a good time to adjust your business plan to focus on your top customers.
o Communicate and evaluate vendors
• As mentioned above, your vendors should want you to survive and want to help you do that.
• If they are solely focused on their survival, they will not be a good partner in the future.
• This is a good time to really look at your business plan and determine if your sources of product/material are dependable and varied or if you have to find alternatives to avoid concentration.
TOMORROW
REVENUE AND MARKET (NOW)
o What changes will occur in your business that will not be fixed overnight when “stay at home” is lifted?
– # of customers you can serve.
– Layout of office/retail?
– Cleanliness?
– Staff training?
– Staff benefits and retention?
– A/R collection?
o Prepare now for the changes that you are confident will be needed.
– Some changes will be temporary, some permanent – evaluate and form an opinion.
• You will be wrong on some opinions, but better to make an active determination – your best competitors will.
o What are short term new revenue opportunities?
o What are potential new long term revenue opportunities?
o What changes will happen in your industry?
– How can you separate yourself from the competition?
– Take action sooner.
– Market these advantages
o What changes can you make to adjust for the market?
– On-line services?
– Is there new technology or service that you should look into implementing?
o What changes will your customers make and how has COVID impacted them?
– Buying habits?
– Product change?
– Reduction in # of customers? Will some of them not make it?
o Prepare contingencies as you see the actual results come in
– What milestones will you look at to determine when to adjust?
REVENUE AND MARKET (SOON)
o Will there be any permanent changes to your industry?
o How long will this take to happen?
o How does this impact your business model, profitability long term, Return on Equity?
o How will you pivot to take advantage of the positive revenue opportunities the new market presents?
– Is it a new product or service within your existing customer base?
– Is it a different geography?
– Is it a new business line and target customer?
o Will you need a new office space strategy?
– Did you beta-test remote working and client communication?
– Does this change the amount of space?
– Does this change the configuration of space?
o Prepare contingencies as you see the actual results come in
– What milestones will you look at to determine when to adjust?
– How quickly are you willing to move?
RISK PROFILE
• What will be your new risk management process?
– How will you measure risk and return for future growth opportunities?
– What strategies and processes will you employ to diversify your revenue mix?
– What new processes will you use when making decisions to extend terms to clients?
– Will you need to maintain more liquidity or capital in your business?
– Do you have the correct controls to maintain the risk profile of your company?
TECHNOLOGY
o Did you make an investment in technology to manage through this time? Should you have?
– Did it work well?
– Can you incorporate this into your new business model on a go forward basis?
– Can you expand it?
• Will there be on-going investment?
• Are there risks?
o Privacy / Cyber
– Was it effective for employees / clients?
• Solicit feedback
FUTURE PLAN
• Evaluate options
o Sale or exit should always be part of your planning consideration.
o How does this new reality effect my long term goals?
o What other options are available?
– Sell to competitor?
– Acquire competitor?
– Bring on partner?
– Raise debt?
– Raise equity?
If you have any questions on any of the above information, or want further details, feel free to reach out to us!
EROC Advisors
www.EROCAdv.com
813-444-4360
