In order to adapt in these uncertain times due to the coronavirus, it is essential for a business to have a clear vision of its activities.
Fast operational diagnostics are now more important than ever. This involves analyzing your financial position, future operations, profitability and break-even point.
Here are some strategies to help you meet the challenge.
Examine your financial situation
To assess your business’ financial health, you need to look at your working capital, credit options, securities and other assets.
Then prepare a list of your priority creditors, assess your risks and negotiate payment agreements as needed.
Adjust your financial projections
Since the current crisis is a total game-changer, you’ll probably need to adjust your plan. It’s important to be realistic and base your projections on an effective short-term plan.
Forecast operations and earnings
Again, be realistic. Assumptions that made sense yesterday may no longer apply. Business volumes may be down, but there may be opportunities ahead. For example, consider re-purposing your production line to meet the needs of an industry facing shortages.
Don’t forget to check your supply chain. Many businesses are currently grappling with supply disruptions leading to a shortage of parts and pieces. If this is the case for your company, you may not be able to reach your production targets.
Align your workforce with projected needs
Once you’ve established new production forecasts, it’s time to adjust your workforce planning accordingly.
Make sure the environment is safe for workers.
Create temporary staff reduction strategies.
Revisit all variable costs. You might find interesting opportunities.
Convert fixed costs into variable costs whenever possible.
Assess and test several different scenarios. Prepare a cash budget to properly evaluate your financial needs. It’s important to plan out the disruption period, as well as the revitalization period.
Calculate your break-even point
You need to know your break-even point in order to develop a short-term action plan.
Make sure your production forecasts and costs are equal to your projected earnings.
If the scale doesn’t balance, see if you can adjust operations or find ways to cut costs. Be conservative in your estimates.
Set indicators and keep your eye on the goal
You now have a plan. It may not be your dream scenario, but at least it’s realistic and carefully thought-out. Your next task is to make sure your plan can be implemented and tracked effectively.
This involves setting key indicators. You don’t need to define the whole set. Instead, focus on those that are crucial to your plan’s success, such as:
- Cash levels;
- Employee numbers;
- Hourly productivity;
- Profit per order.
Analyze profitability and fine-tune your plan
It never makes sense to sell products or services at a loss. This is doubly true today, especially if you’re short on material or human resources. To get the most from what you have, you should:
- Assess product and customer profitability based on historical data, and update your priorities based on these insights;
- Reassess your sales prospects by focusing on your most profitable products and clients.
A healthy dose of optimism is good for business, especially when times are tough. By carefully assessing your situation and developing a solid plan of action, you’ll be able to make informed decisions no matter what comes up. And if you need a hand, we’re here to help.