Survive this economy, pt. 2

In my last article, I wrote about how important your “state of mind” is when it comes to running a successful (or unsuccessful) business. Successful leaders think and act differently than unsuccessful ones. Preparing for and responding to a crisis, whether it’s a recession or the COVID-19 pandemic, is all about how you think. It’s imperative that you think “outside of the box” and be proactive with your team and your circumstances.

Let’s look at what you can do once you find yourself in a crisis where cash flow is seriously reduced. We’ll look at what you can do both short-term and long-term as you lead yourself, your team and your company through such a situation.

Short-term response.

First, similar to a pilot who finds himself flying into the fog, you have to get on your instruments. Otherwise, you could be flying upside down and not realize it. You need objective data to tell you where you are. Here are the tools (or “instruments”) that my clients use:

1. Annual budget: Your budget is a document that looks to the future for your divisions and/or company. It provides objective revenue goals and production benchmarks for each division. This document tells you and your team the sales goal that you need to shoot for. It also establishes tangible benchmarks for costs such as field labor, materials and equipment. Most importantly, it allows you and your team to see your progress (or lack of progress).

2. Bidding and estimating worksheet: This worksheet also looks to the future for individual projects or accounts. It helps you manage risk by establishing goals for field labor, equipment and materials. Field labor comprises 90% of your risk, and this worksheet establishes man-hour goals to help you measure and control risk.

3. Job-costing worksheet: This worksheet looks at past performance and provides a reality check of sorts. Since field labor jeopardizes your profitability more than anything else, this worksheet should primarily focus upon your budgeted-to-actual man-hours for each project or account.

4. Profit and loss (P&L) statement: The P&L also measures past performance, but on a division or company-wide scale. If formatted properly, it can tell how you are doing compared to your annual budget.

5. The Bid Board lead tracker worksheet: This is perhaps your most important tool. It tells you what’s in the pipeline and whether you’re on track to hit your sales goals. Cash is king in a recession. First, each and every lead needs to be tracked to ensure that it doesn’t fall through the crack. This worksheet allows you to do that.

Second, you have to network like crazy and be proactive at finding solutions to help you work more efficiently and market more effectively.

Long-term response.

Since recessions and crises are inevitable, entrepreneurs should always have contingency plans – both short- and long-term – to counter their effects on their businesses. Here are some long-term suggestions:

1. Build a service base: Too many entrepreneurs provide services that are severely affected by recessions or crises. They enjoy creating construction projects, for example, so that is all they do. Construction projects are the first casualty in a recession. Just like football, if you live by the blitz, you’ll die by the blitz. It’s not a question if there will be another crisis; it’s a question of when.

Smart entrepreneurs don’t just do what they like to do. They do what is best for their business. It may not excite you, but providing services such as lawn maintenance, irrigation, lawn care, pest control, tree care, plant health care, etc., just may provide the cash flow that gets you through a crisis and allows you to sleep at night.

2. Build a cash reserve: It may be difficult, but it’s important that you prepare for a rainy day. Open a money-market account, a savings account, whatever; but force yourself to regularly deposit cash into this account.

3. Build good management systems in your business: Remember, “What gets measured, gets done!” Build the systems and provide the tools that allow you and your team to measure whether you’re being successful or not. This takes time, training and treasure (money). The things that you should be doing to prepare for and respond to a down economy are the things that you should be doing anyway. There’s nothing new here.

Conclusion.

In order to build a successful business, you have to be prepared for any and all contingencies. To be prepared, you have to think like a leader. Successful leaders think and act differently. There are things that you can do short term and those that you can do long term in order to build a business that can weather just about any storm it faces. Being an entrepreneur is not for the faint of heart. It’s a constant mental battle – a state of mind. It’s one that you can win, if you’re willing to train yourself and your team to do so.

Contact Jim Huston at jhuston@giemedia.com