Anything-Proof your Business: Acceptance (Part II)

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Prerequisite: Please read Part I.

In This Guide

Introduction (Part I)
Acceptance (Part II) < you are here
Adjustment (Part III)
Acceleration (Part IV)

Acceptance

Realization

You’re probably sitting here reading this and wondering what you’re going to do to move forward. You may be wondering how a virus can cause so much damage to the economy, to your business, to your livelihood. You’re not alone. What’s more important right now as you’re reading this, is the realization of what’s happening. While I’m certain most leaders refuse to accept all of it, they have accepted that something is different and they want to change it. This is the first step.

Equally important: Don’t beat yourself up. There’s nothing you could have done different or planned in advance that would have prevented the situation from taking its toll on your business. But now you understand this threat, and you understand that threats from political, social and worldwide events can impact your business in a way that you haven’t seen before.

You may be looking at other businesses, the ones that seem to be thriving right now, and you’re thinking:

“I can just copy what they are doing.”

Don’t. You need to find a path for your business, and copying and cloning without understanding the key internal decisions and organization-wide tools they have put in place will take time, energy and cost too much to come back from gracefully. In other words, you may waste your time and precious company time going down a rabbit hole.

So how do you find your own path? Over the coming sections, I’ll show you what others have done, what I’ve personally done, and new frameworks and tools that are helping companies like yours.

Pain

Bob Dylan said it best:

“Behind every beautiful thing, there’s some kind of pain.”

You have to feel the pain. We learn from it. We grow from it. We do what it takes to get rid of it and make sure it never happens again.

I’ve tried to teach my seven-year old this lesson. When COVID started, his school, like many others across the United States, were shut-down. Distance learning became quite a challenge for us, for him, and for his emotional well-being. I remember how many times he would come running, asking for approval, asking us to review something, asking if he was doing it right. He had to personally feel the pain of figuring out things on his own. The beauty that came from that is he’s now self-sufficient, barely asks us to review his work and has grown from the entire experience.

Jumping back into the business realm again, if you’re thriving at your business right now, then this book won’t have the same impact as it would for someone who has had to terminate a majority of their employees, who’s federal aid funds have dried up, and whose business bank accounts are shrinking each month. Likewise, if you have a month of runway left, you have very few tools available to you right now, and you’ll have a challenge implementing all the tools presented in this guide.

Safety

During this adjustment phase, you’ll quickly want to make a list of all the areas of your business that are continuing to provide revenue. This is your safety net, for the time being. You’ll want to do whatever it takes to preserve that revenue, including maintaining customer satisfaction, writing personal thank you letters, retaining key talent that’s responsible for this revenue and diving into the business processes required to make sure you won’t have a challenge fulfilling your goods and/or services as it relates to this revenue.

As an example: You’re a restaurant owner who’s had repeat success with a few dozen customers ordering takeout regularly over the past few months. You don’t have very many new customers ordering takeout, so you’re thinking of trying a new food delivery service, running promos, or even creating an entirely new website where customers can order online.

In the above example, safety means relentlessly focusing on those repeat customers. We’ll cover tests, automations and accelerations you can put in place once you’ve honed in on this ‘safe’ revenue stream that’s repeatable with little effort. You don’t know how many times I’ve spoken to restaurant owners since the pandemic began, who are losing money trying to attract new customers that have little brand affinity to their business, or trying losing money with food delivery apps that promise more takeout orders.

Cost-saving

Maybe you’re wondering why cost-saving comes before restructuring (next section). The reason is simple. You’ll need everyone’s input on areas to save costs along with the actual implementation of cost-saving measures prior to headcount reductions. By engaging all levels of the organization, you’ll be able to hear new ideas and find hidden costs that managers and executives may have been unaware of.

Some key areas to look include consultants, recurring and annual services up for renewal, auto-ordered supplies, equipment and inventory. For most businesses, the fastest way to save cost comes from people, including consultants. Create a spreadsheet, if you don’t have one already, of all these costs that the leadership team, perhaps your head of finance, can evaluate further.

Once you have your sheet, review it with leadership. Ask for comments and concerns in removing the cost entirely. There will likely be cases for reduction versus complete elimination of a cost. For example, if you used to auto-order office supplies each month for your entire staff, but nobody is going back to the office, that’s an expense you can put on hold for the time being.

Based on experience, this exercise can be a rabbit hole. Set a goal in mind and timebox it. You’re looking for a certain percentage reduction, or two weeks. Time is against you, and you can spend months looking for cost reductions using your single most expensive resource, people. I don’t just mean salaries and benefits, I mean you’ve now asked the entire organization to contribute to something that takes away time from their normal duties.

Restructuring

Inevitably, you’ll have to restructure. Almost always, this means your personnel. There may be a case made for restructuring your capital, but you’ll be in a much stronger position to do that if you proactively make the hard decisions now, and continue to make those hard decisions until you’ve seen your business rebound.

I’ve seen employers make the mistake of reducing everyone’s salary, and having a “we’re in this together” mentality. Let me be brutally honest, nobody is loyal to you, or to your business. That employee you thought would be with you through thick and thin will immediately start looking for work as soon as they catch wind of a reduction of pay. The exception to this is if you have a family business, and your brothers, sisters, uncles and aunts all know what’s coming and you mutually make this decision together.

Similarly, once your pseudo-loyalists find out you’re about to lay off a percentage of the workforce, they’ll start looking for the next gig.

So how do you do this the right way? Is there even a right way to do it?

Unless you’ve built an organizational culture of radical candor, daring leadership, or have family loyalty because you’re all related, there is no perfect way. You’re damned if you do, you’re damned if you don’t.

Even the great examples that news outlets felt were pretty close to utopic versions of layoffs are under scrutiny now. The first great example is a large business, Airbnb. They had to lay off 1,900 people at the start of the pandemic. The founder and CEO was humble and apologetic. They created resume pages and career placement services for those impacted, and even went on to share how large the severance checks were to news outlets. None of that seemed to hold, because just a few months later, whistleblowers are talking about how disastrous that move was to the company culture, built on loyalty and trust.

If you’ve ever read Rich Dad, Poor Dad, you’ll know there’s generally two kinds of people: entrepreneurs and employees. If you get lucky enough to hire an entrepreneur, they’ll get it. But an employee is counting on safety. They want the government to provide them safety. They want their employer to provide them safety. Safety comes in the form of a paycheck. You’re removing the safety for them to create more safety for your business.

This section isn’t all bad news, so here’s my advice. Craft your message first. Take the elements from your company culture, and make sure your messaging incorporates those key elements. If you are a transparent organization, talk about how you have less than a million in the bank, and you’d run out of capital in months at this burn rate. You’re offering everyone transparency into the business. If your culture is built on ethics, then explain how you cannot ethically kill the entire company who everyone has worked so hard to build up, when you know you’d be able to solve this with a tough decision today.

Next, and this is the hardest part, you need to select who stays. I’ve seen too many business operators, owners and executives focus on creating the list of soon-to-be departed. Instead, you should focus on who you want to retain, at all costs. Ask yourself:

Who are the ones who make the business?

Focus on the employees who might have taken years to find, months to train and that you’ve seen grow into stellar team members. Ask other leaders in your organization to assemble their own list as a cross-reference. If you’re using a framework like Entrepreneurial Operating System (EOS), you can use Right People, Right Seats™ and People Analyzer™ to get this done easily. If you don’t know what those are, don’t worry, we’ll cover those.

I’ve also seen a mistake made here, where the retention list is entirely composed of highly-compensated individuals, and the potential termination list is filled with the lowest-cost employees. This won’t work for two reasons. One, math is against you. Higher cost means more burn rate, faster depletion of cash. Two, I’ve never seen an organization where the highest compensated employees are the ones doing all the work. One or two layers below, you have lower-paid employees who are doing jobs that their bosses don’t know how to do, or never want to do. You need to make sure your list is a meaningful reduction of operating expenses, and not just pure headcounts.

Now that you have your list, or at least an initial take, and you have your message, take time to review it all. Once you’ve slept on it a day, maybe two, you’ll want to double-check with other key leaders in the organization. I prefer to sit down together with those leaders and talk openly about what’s happening. Ask if anyone has objections or changes. Don’t entertain “is there another way?” line of questioning, because this is happening, and it needs to happen quick.

Do this in one day. If there’s a large percentage to let go and your human resources doesn’t have bandwidth, two days is ok. If two days isn’t sufficient, you’ll want to bring in consultants who specialize in this because your organization is too large and needs help; probably needed help a while ago. Whether or not you provide severance is dependent on legal obligations, employment contracts, geographic restrictions, cash in the bank and your internal processes.

If you have a large amount of terminations due to performance, you’ll likely want to carve those out separately and do them at a different time. You’ll want to address, with the hiring manager, why they waited for this time to come before they took action and the reasons behind that. It’s not fair to the company, and it’s not fair to the employee when they have a performance issue they’re unaware of and get blindsided with a termination for performance exit. Performance issues should be handled during the course of normal business operations and with an avenue to provide the employee a chance to remediate.

Contracts

Agreements with third-parties can become a quick source of cost reduction. In fact, just calling all your major vendors and asking for a loyalty discount can reduce your operating expenses by five to twenty percent. Yes, many of them will ask for a longer commitment, but I like to say you’re doing them a favor by sticking with them and not cancelling, not the other way around. Be mindful that your vendors are going through these same new world challenges as well.

If you’re a larger company with a finance department or legal team dedicated to contracts, you can ask them to create a spreadsheet of the monthly expenses, and the annual contracts that require near-term renewal. Once you have that, you’ll need to chime your leadership team in and ask what can be eliminated or reduced entirely. You’ll be surprised how many third-party services and tools are unused. Equally, you’ll be surprised how many tools have a larger number of licenses than you would consume. These are hidden costs in your business, and you’ve just sniffed them out.

Make sure you give a timeline to your leadership team, or this will become another rabbit-hole exercise. I typically like to propose a two-week evaluation with another two-week period to contact the vendors. Once you have this in place, make it a regular thing. I prefer every other quarter, some prefer to do it annually. Once you have your templates and procedures for how to contact vendors and make the request, write it down and put it in the same folder as your third party cost spreadsheets.

Tip: You don’t need to be amazing at negotiations to get this done. All it takes is a call and perhaps an email to a vendor’s customer support. If you find yourself speaking to someone stubborn or hard-headed, you can chime your legal team in or skip this vendor and come back next time you review these costs. Don’t get hung up on one tough cookie, when you have an entire box of cookies waiting.

Zoom-town

Yes, 2020 has become the year of virtual. Zoom, Hangout, Skype, Facetime and other technologies are more commonly used than ever before. If you haven’t figured out how to use these technologies effectively, you are missing out on the standard way businesses will communicate for the next couple years. But even more than the technology, there are cost savings associated with being virtual.

The first major cost is office space. You should be taking a look at reducing your footprint, or your entire office space altogether. If you are in manufacturing, you can still look at reducing corporate office footprint. One exception is if you own the building outright. Commercial real estate is only starting to see the beginning of a decline, but it will bounce back.

Another area to look at cost-savings would be office-related supplies and incidentals. For example, if you have snacks, coffee and beverages on automatic order, you should reduce or eliminate those costs for the time being. If you have perishable items already in storage, consider donating them to food banks or allowing employees to pick some up so they go to good use.

I live in Austin, and I remember the month after the first stay-at-home orders when large tech companies decided to back out of three million square feet of leased office space immediately. To them, paying the penalties was more cost effective than leasing space that wouldn’t be used for a long time. You should be looking at the cost-benefit of reducing your footprint, moving to a different location or eliminating office space altogether if possible.

Delays

There are a few different types of considerations in this arena. Your business might have manufacturing delays, shipping delays, or personnel-related delays due to medical or family situations. While those are the most common, there are other delays your business might experience. Our son’s daycare, for example, was impacted from resuming operations entirely because of local regulations and restrictions. A single sentence in the Texas checklist for child care centers has created an indefinite delay for reopening:

“80 square feet space per child.”

Each daycare room is only 360–400 sq. ft. and has 8–10 children, any less and the entire operation wouldn’t breakeven. They were forced to close their doors.

If your business requires manufacturing and has been impacted, it will take some creative problem solving to get operations back on track, especially if your business and the vendors that you rely on aren’t considered essential businesses. I was speaking to an entrepreneur that manufactures chewing gum, and the new restrictions pushed his production cycle from one month to three months. The good news is that grocery stores and retailers were still placing orders, and seemed to be understanding of the delay. Other businesses may not be so lucky and will have to do some customer relationship building during these times to make sure they retain all of those customers long-term.

Once you find all the areas of your business that are impacted by delays, you’ll need to write them all down in a spreadsheet or list. Make sure you write the reason for the delay as well as how long the delay can last. This is crucial to help your leadership team and organization prevent future impact and delays using previously logged data.

Delivery

If you produce a good or service that requires people, you’ve likely been impacted and continue to be impacted by guidelines, regulations, safety protocols and illness. Restaurants, consulting firms, salons, hotels, and even software companies are all feeling the pain in different ways. Regardless of your industry and niche, you’ve had to overcome some significant obstacles and there may be a few you haven’t figured out how to move permanently past.

The good news is, the demand for your business is likely still there, but it may have morphed into a new format for delivery. For example, if you own a restaurant and were used to filling every seat each night, your business has likely shifted to a majority of takeout and curbside orders. If you operate a salon, your business may have shifted to outdoor seating, or reduced capacity. Gyms that are doing well, not great, have decided to bring their operations outdoors or engage in heavy sanitization and isolation protocols. If you haven’t already, you’ll need to find a path forward. Waiting is not an option.

Divergence and convergence lists are a great way to ideate delivery solutions with your leadership team. The steps are simple:

  1. Invite your team to a virtual meeting (Zoom, Hangout, Skype or whatever flavor you prefer)
  2. Share a virtual whiteboard or virtual doc (Google, Microsoft, or whatever you choose).
  3. Spend 20 minutes, and no more, letting every team member write a possible delivery alternative to your challenge. Nobody stops until the 30 minutes is up.
  4. Spend 20 minutes going through the list. You would read this aloud back to the team, ask for clarifications if something needs more detail.
  5. Have everyone choose their top 5 favorite ideas, and jot them on a private list. They send these to you, privately. Timebox this portion to 10 minutes maximum.
  6. Spend 10 minutes removing items without any votes, and shuffle the items in order of highest votes. The best 5–10 ideas naturally come out.
  7. Assign 1–3 items to a leadership team member for feasibility check. They would come back the next day with blocking issues, cost and required effort. I like to use Small (days), Medium (weeks) or Large (quarter or longer), but your team may already have a scoping protocol. If so, use that instead.
  8. The next day, have each leadership team member present their feasibility findings. Timebox each presentation to 5 minutes.
  9. Share or screenshare the full list of top ideas back to the team, and have the leadership team pick their single favorite idea. They would send this to you privately. Timebox this to 5 minutes. If there’s still debates happening, someone didn’t present their feasibility findings thoroughly. If there’s an idea that seems to get too many questions, eliminate it for now, since you don’t have buy-in and there needs to be a deeper feasibility assessment done.
  10. At this point, you should have less than 5 workable ideas that need to be tested. Present those back to the team. Ask for volunteers to take one of the ideas, test it with customers and vendors. For example, if you operate a gym and the idea is to “have your trainers create at-home exercise routines” this test can be as simple as asking a customer if they would pay their full-price subscription if they were provided with new, trainer-led exercise routines each week.

This process really works. In just 24 hours, you’ll generate, test and understand how to make modifications to your delivery to stay in business. Some of the best ideas I’ve seen come from this accelerated format, and it only takes one well-executed idea to save the business. Add the benefit of team buy-in, and you’ll see morale increase for your leadership team since everyone is working together to save the business.

Aid & Assistance

PPP Loan, CARES Act, SMB loans and many other resources are available to you and your small business. I remember talking to a founder who told me that he thought:

“PPP was for the small pizza shop that really needs a government handout”

and I was surprised with a) that misunderstanding and b) the fact that this founder didn’t look into PPP because it felt like charity. The fact is, we as small business owners, operators and executives have never seen a situation quite like this, so when there are programs available, there’s no harm in digging deeper to understand it before jumping to a conclusion.

Of course, there are those who will misuse and abuse the programs, or skirt around the way they were intended to provide assistance. But I would like to think when something makes the difference between keeping your staff employed for a few more months, even at reduced capacity, or when faced with staying in business or shutting your doors down for good, the decision becomes simple. No rock goes unturned.

Continue reading Part III. If there are topics you’d like a deeper dive into, have feedback on, or want just a little more clarity, please don’t hesitate to comment.

CEO | Founder | Entrepreneur | Father. Formerly @volusion, @intuit, @eharmony, @iac. Perpetually seeking enlightenment. https://www.linkedin.com/in/bardiadejban

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