5 Business Lessons To Learn From The Coronavirus Crisis
You can’t prevent a Coronavirus outbreak, that is the job of the government. But you could have minimized its impact on your business, had you taken the following steps. Here they are!
1) Never Put All Your Eggs In One Basket
It is important to not put all your eggs in one basket. If your business has required exclusive physical presence, think about ways in which you can shift operations online. In fact don’t just limit yourself to operations or work from home systems. Think about ways in which you can generate actual sales online.
Let me give you an example in the services business. Suppose you are a Lawyer, or provide Financial services in person. Is it not possible to offer at least offer some consulting services online?
Furthermore, even if all your operations are online, do consider that sometimes it is possible that internet services in your region may shut down for a prolonged duration or a prolonged power outage(As we all know, nothing is impossible these days)
Therefore, set up remote teams that can continue operations even if such a situation happens.
This is obviously easier for some industries compared to others but it is important to understand that luck favors the prepared and misfortune hurts the unprepared much more.
2) Have Recurrent Billing
It is extremely important to ensure that you maximize all possibilities of recurrent revenue, which is going to be crucial for your business during a recession of this sort.
Set up a system where the client’s credit card or account is charged automatically every month or as per schedule without the client have to manually approve such a transaction. Manual approval every month is probably the last thing on the client’s mind during times of crisis, which is why you need to ensure that no matter what the situation, some automated revenue should keep coming in.
Of course, it is possible that clients may cancel, but you also need to have certain policies in place to discourage it. For example, you may offer a discount as long as the recurring billing keeps coming in but charge new higher rates if the subscription is cancelled.
3) Have Healthy margins
I have stated in many of my mails about the importance of healthy margins and this is more evident than ever in times of this crisis. A business may have a high turnover but if it has razor thin margins, a small shift in customer habits is enough to quickly turn it into a loss making business.
The Coronavirus is a massive situation and no small shift. This sort of a situation is enough to badly hurt even big businesses with low margins. Small and Medium sized businesses with low margins will be completely decimated.
If your business survives through this, you ought to shift your business model and focus a healthy profit margin rather than aiming for a high turnover at low margins (Or even losses as many VC funded businesses are doing). Doing this will protect against economic risk during uncertain times.
4) Maintain Cash Reserves
Often businesses are encouraged to re-invest every bit of revenue back into the company to maximize its growth. But quite often, the growth comes at a cost. First of all if you try to keep growing at razor thin margins or in losses, you are not growing a profitable business even if you are growing a bloated organization.
Secondly, even if you are profitable and investing all that money back into the business, you are again taking on a massive risk which is similar to putting all your eggs in one basket. Yes, you may grow massively and become very rich, but that will be depend a hell of a lot on you being lucky and avoiding any negative situation that derails your business. A macroeconomic crisis such as the Coronavirus or even a typical recession maybe enough to destroy your company if you don’t have cash reserves.
In this type of situation, sales dry up and right now you can’t even continue operations! But you still need to pay salaries and rent and a lot of fees associated with running a large company, WITHOUT generating much sales? What happens to many such companies with no money to continue running operations because they have no sales and NO Cash Reserves? They go bankrupt! Sure, you could get credit from outside, but how will you repay a loan if there are no sales? You could raise money from investors, but most investors are looking to sell at this time rather than buy because of panic! Basically, the business is screwed.
Furthermore, with cash reserves, you can actually take advantage of the fear in the market and buy valuable assets a dirt cheap price. This can give you huge economic dividends in the future! Cash is like food for business. It helps you survive and grow! Always keep some of it in the business at all times!
5) Invest In Training!
All of these steps are things you should have done PRIOR to the crisis as doing them now will be hard to do. These are things I have been talking about in my training programs for years. If the business had invested in training and gained this knowledge prior to the crisis, it would be in a much better situation today.
Luckily, all is not lost. Things will get better, a good percentage of businesses will recover, but do not make the same mistake as before and make sure you invest in a training program that will give you the tools to help you thrive during a boom period and survive during in a recession!