02 Apr 3 steps to Protecting your Business During a Crisis
It is important as business owners and executives to inventory and quantify your exposure in times like this. COVID-19 is eating away at the health of our country. Not just our physical health but our economic health. By evaluating your risk ahead of time you can ensure you take steps early on to protect your business from rising and delinquent accounts receivable (AR) and subsequent cash flow issues.
What industries are you serving and how is your revenue distributed amongst them? As an example, if you are providing services to the hospitality, travel or auto industries; you may want to evaluate your customers to identify risks associated with delayed payments or worse bankruptcies. Having diversification can help but is not always the answer as many industries are feeling the downstream impacts of those hardest hit. Take your time to properly evaluate all your customers and the impact they are facing from this pandemic.
Protect your cash flow by working with your customer in advance on prioritizing your payments as essential. We have seen good success in offering “discounts for early payment”. This is usually a good indicator of if your clients are or are not dealing with a cash shortage. In addition to securing your receivables, now is a good time to evaluate your operating expenses. Businesses are shrinking in almost every category and while government stimulus can provide short term relief it’s not necessarily going to bring business volume back to what it was before the crisis began. Right size your organization.
Look for opportunities to merge your business with other businesses. While taking the initiative with the first two steps will help mitigate your risk, this step can help you profit and benefit from a transaction that under normal economic conditions may not be possible. A simple example is two competing companies providing products and services in the same category can find major savings in a business combination through well thought out integration efforts. 1+1 =10.
Using our SVP model we can help you find your perfect match. Keep in mind the world is going to accept change and disruption now more than normal and consolidation will happen in an economic downturn. You are either part of it or not.