If there’s one thing we’ve learned from the pandemic, it’s that it’s not always a good idea to sit still and wait things out.
Businesses have been trying to deal with the economic fallout over this public health catastrophe for months. Those who were successful have at least one thing in common: they took action.
Here are four ways your company can modify its operations to survive and thrive during a crisis.
What Operational Adjustments Do I Need to Make?
There are four actions to take when it comes to operational changes:
- Restructure costs
- Reengineer processes
- Automate & innovate
- Negotiate everything
Restructure Your Costs in Line With the New Norms
Business norms are rapidly changing, which has opened up new ways of restructuring costs that many people haven’t thought about before. Matt Garrett, CEO and Founder of TGG Accounting, suggests reexamining spending in the following categories.
- Office space: If your employees are doing well with working remotely, consider whether a return to the office is necessary and how you could use that expense to make your company more competitive. For example, TGG Accounting spends about 12% of its revenue on occupancy costs every month. That money could be used elsewhere if work-from-home became permanent.
- Employee benefits—Student loans: The CARES Act contains a little-known provision that allows companies to contribute about $5,000 toward their employees’ student loans. This allocation offers huge financial benefits to both parties because the money is non-taxable for the employee and deductible for the employer. This perk would be great to add to compensation packages.
- Employee benefits—Medical: You should be considering new medical benefit models. For example, you could contribute a fixed dollar amount toward your employees’ healthcare premiums and let them choose their health insurance rather than pay a fixed percentage. This change defines the contribution instead of the benefit.
- Employee benefits—401(k): Take another look at your 401(k) plans. You could offer a performance-based matching plan instead of a standard 3% profit-sharing plan. That could mean contributions of $5,000 are matched with $1,000, while contributions of $10,000 are matched with $5,000. With this strategy, you incentivize a culture of accountability.
- Information technology (IT): There’s never been a better time to figure out how to best use technology to make your business more efficient and effective. To save more on the back end, you might need to spend a little more on the front end. However, you can also explore the potential cost savings of outsourcing your IT.
- Talent management: This is not a time to hang on to under-performers. To take control of your team, you must act decisively as a business owner to upgrade your talent.
- Travel & entertainment: If your salespeople can sell on Zoom, maybe they don’t need to travel or entertain clients as they did before the COVID-19 outbreak. Let’s face it: meal and entertainment costs used to be a bit of a black hole for business owners. Instead, shift that spending toward other business objectives such as more competitive pricing.
- Sales budgets: Start measuring everything in sales, but don’t micromanage your sales reps. Simply change your commission structures and set clear goals. Significantly increase the cap for high performers; lower the overall cap for poor performers.
Reengineer Processes to Increase Efficiency
Take a good look at your processes in terms of efficiency. For example, you can build “cookbook-style” processes into your accounting processes to increase efficiency and accuracy while decreasing your costs. Use that same technique in your processes for inventory management, project management, purchasing, etc.
Clamping down on your processes increases accountability. High performers will appreciate it because they love to be efficient and effective. Low performers won’t be able to hide their ineptitudes anymore.
Automate and Innovate
Let technology work for you and invest in tools that automate your processes and/or continually improve them. The idea is to increase your margins and become less dependent on people. If you have different products, adjust each one separately to get better margins for the environment that you’re in now compared to pre-pandemic times.
Improve Margins by Negotiating Everything
Speaking of improving margins, negotiate everything! Work with your banker on your loan terms. Talk to your property owner about the lease. Discuss pricing with your vendors. Don’t hesitate to ask for purchasing discounts on bulk purchases or long-term contracts.
Don’t freak out during negotiations. Be the one who is aggressive, positive, and confident. Debate the terms so you can get better overall profitability because that leads to longer-term cash.
How to Modify Your Operations to Survive & Thrive in a Crisis
Now you know four ways your business can make operational changes to survive and thrive during a crisis.
By restructuring, reengineering, automating, innovating, and negotiating, you will be able to improve how you operate and propel your company forward.
These strategies are essential to coming out on the other side of the pandemic with clarity and confidence.