This article is based on a report produced by NetSuite’s Brainyard research team.
As the country looks ahead to the reopening of the economy, there are some measures that a business can take right now in preparation.
Reassessing the entire operation, from the overall go-to market strategy right through to the products and services sold, is something that business leaders can undertake now, while things are still – for most, at least – relatively quiet.
Getting ready now will place a company ahead of its competition, so that it can be equipped to hit the ground running as soon as the economy opens up again. Here are seven actions that executives can take right now.
1. Assess the Current Situation
First off, a full situational analysis will help you to understand where you are right now. To do this, you should examine your KPIs, such as the lifetime value of a customer, customer acquisition costs, retention rates and costs per channel.
From your findings, you should be able to see what has been affected and what has withstood the impact of recent events. Use your measurements to determine the state of the business and to ascertain if there have been fundamental changes in customer behaviour, buying trends, growth or channel ratios.
Analysing where you are is the first step in deciding where to go next. Do any of your findings point to a possible change in business strategy? Perhaps you are selling more through one channel than another. Or maybe the acquisition costs for customers for certain products are becoming prohibitive. Can you shift your focus away from critically impacted industries, like hospitality and travel, towards others that have been less affected and therefore have more money to spend? Where can you reorganise or reorient your staff so that they can best support the internal departments and processes that need them most?
2. Check Your Cash Flow
The economic outlook is still uncertain, but it’s possible that the downturn will continue for some time. Against that backdrop, cash flow is a key consideration, so you should run several planning scenarios that allow you to prepare for the worst.
One essential check is to determine your operating expense run rate, and – if you’re not profitable – to check your cash burn rate. You should also project your cash flow and working capital needs in order to ascertain how long you can carry on with your current cash and credit.
So that working capital remains healthy, you will need to keep payables in check and closely manage your receivables. Can you change net payment terms, create incentives for early payment, provide alternative payment options, or ask for deposits on custom orders?
Finally, make sure you have taken advantage of all the you are eligible for. You may still need to explore credit options or extend commercial loans, so reach out to your bank, investors or lenders now.
3. Understand Your Health and Safety Responsibilities
When the economy begins to open up again, workplaces will need to review their health and safety practices to make sure that they can protect their staff and ensure the safety of their customers.
Retail outlets will be reopening first – from the middle of June – and the government has already specified some guidelines that retailers will need to adhere to. These businesses will need to check the advice and introduce practical safety measures, such as Perspex screens, handwashing or hygiene stations, temporary signage or distancing guides. They will also need to amend processes and procedural documentation and communicate the changes to employees.
In advance of reopening, those businesses with other types of workplace – like offices, factories and warehouses – will be wise to review their practices. If you fall into this category, do you need to put in place any precautions for staff or customers so that you can assure everyone’s safety?
While the precise regulatory requirements for reopening are not yet known, you can be prepared by auditing your current situation. This will arm you with a checklist of potential changes to processes, actions you may need to take, or practices to consider implementing.
4. Run Forecasting Scenarios
So that you can be fully prepared for all eventualities, it’s important that you plan for a variety of scenarios. These need to examine sales, costs and cash flow against a number of likely economic pictures.
You should model the outcomes of situations where, for example, sales decline by 20% or 30% or 50% over the rest of the year. And you should project that further, to model the impact of continued reduced revenues throughout 2021. If supply chains have been affected, you may need to factor in increased costs, and examine options for finding alternative suppliers.
By accounting for multiple downward scenarios, you can pre-set some metrics for staff numbers, remuneration levels, and other expense changes that can mitigate the financial risks.
5. Examine Customer Retention and Acquisition Strategies
It’s a well-know fact that it costs less to retain a customer than it does to acquire a new one. While estimates vary, many suggest that customer acquisition can cost five to seven times more than retention. The best use of marketing funds at a time like this is to concentrate on existing customers, as these will provide the best source of revenue.
And if new business is required, then it’s best to opt for low-cost marketing tactics and focus on industries that have been least affected. Email marketing that is carefully targeted and offers greater value or alleviates uncertainty in customers’ minds can be more cost-effective and attract more prospects than a scattergun advertising approach, for example.
6. Re-evaluate Your Packages, Pricing and Payment Terms
Take a close look at your pricing, to see if there are any opportunities to re-package your offers to make them more attractive to customers. You might consider unbundling products – to make them less expensive individually, for example.
Alternatively, you might want to bundle additional, value-added services together, like an extended warranty or extra training, to give more peace of mind. This can protect your margins while simultaneously increasing customer loyalty and extending customer lifetime value.
Consider whether you can you offer more flexible payment terms or if you should bring in promotional pricing or bulk discounts that will stimulate demand. But, if you offer a discount, ensure you get something in return – like a longer contract, or a larger quantity purchase.
7. Align Your Organisation to the Changes
The final step, once you’ve prepared or instituted some of these actions, is to align the business to the changes. You need to clearly communicate the realignment to avoid ambiguity and uncertainty. Frequent, clear and open communication will help convey the company’s vision and strategies, allaying fears among customers and suppliers, and averting rumour or gossip from employees.
Make sure each department understands the new plans and that these are cascaded to all staff. Visibility of senior executives in this process is valuable, so make yourself and your leadership team available for hosting events or handling question sessions. Transparency is important in engendering confidence amongst staff too, so don’t shy away from answering the tough questions frankly and sincerely.
Extend this level of communication to your customers as well. Your communications can help them to understand the difficulties you have encountered as well as the solutions and changes you will be implementing for them. Consistent, clear messaging will help improve customer satisfaction.
Are You Ready for Business to Open Again?
Organisations across the country have all been affected in one way or another. And it’s highly likely that business in general will see many changes in the coming months, and maybe years. Being prepared for these future impacts is critical to the survival and future success of your company. Taking decisive action now will ready your company and have it in an optimum position ahead of the reopening of the economy. Download full report here.
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