4 out of 100 businesses survive their 5th year.
Less than 1 out of the 4 businesses that cross the 5th year survive their 10th year
These statistics could surprise you!
And say what! They refer to the normal times. With Covid 19 hitting the economy like a tsunami, the statistics has turned even more dismal. Many businesses have downed their shutters unable to sustain the slump in revenues, cash flows and increasing costs. However there are some businessesthat are not only weathering the Covid storm, but actually riding the wave and benefitting from it. Most of these businesses surely did something different to remain profitable.
Nassim Nicholas Taleb the celebrated author and thought leader talks extensively in his books about the concept called Anti fragililty. Anti fragility, as per him, is the feature that certain things, people and ideas possess, with which they not only overcome a rough or chaotic situation, but actually benefit from the situation.
Let us explore some of the measures to make your business belong to that ‘Anti- fragile’ category.
1. Refocus on Sales and Marketing:There are 3 broad segments to every business. The first is Sales and Marketing, the second is production and the third is operations. Successful businesses pump in 60% - 65% of their resources to sales and marketing, 20% - 25% to production and 15% to operations. It is important to review your business and consider a resource allocation suitable for your business. It should ideally have a significant focus on the sales and marketing segment. Even a small change in the ratio, can give massive revenue windfalls. A trying time is when we DO NOT put our sales marketing efforts on the back burner. That is the time when we should be most aggressive.
2. Review and course correction in indirect costs: Statistically, about 8 to 10% costs of most businesses do not directly impact the revenues and could end up being overlooked while looking at the larger picture. Expense like representation or entertainment costs for example could be one of them. It would be wiser for businesses to review each and every cost to figure out the impact it has on the business even if it is indirect.
3. Employee costs: The Initial reaction to any economic downturn by entrepreneurs is a downsizing of staff. Personnel costs are the glaring and obvious. They normally constitute the biggest portion of indirect costs. This is the rationale behind the axing of staff. However, there are a couple of things that must be considered in this context:
a) When employees are laid off, the costs of termination is quite high which will in turn create a further squeeze on the company’s cash flow; and
b) The employee layoff might result in the business being inadequately staffed.
From this perspective, it could be a good option for entrepreneurs to reallocate the existing workforce to sales or marketing to aid business growth.
4. Looking out for cheaper but equally efficient solutions: Information Technology has made everything around us to transform at warp speed. If your company relies heavily on IT, it is time to relook at some of the solutions to see if there are more efficient and cheaper solutions available. Cheaper solutions need not be inefficient, as is popular belief. In some situations a pencil serves the purpose just fine. You don’t need a digital pen for everything.
5. Keeping an eye out for supplier alternatives- bargain hunting: Supplier loyalty and nurturing business relationships are important values, but you are running a business for profits. Hence it is imperative to shop around in the market for alternatives to your suppliers. It is just sound business sense. Once you look around is when you get to know what the market is offering and at what price. This can be a tool to renegotiate existing contracts with your suppliers too. A win –win situation.
6. Remove the shame quotient from the idea of asking for discounts: Asking for discounts from all long standingsuppliers and service providers is a perfectly honorable move. If you don’t ask, the answer is a “no”. If you ask the answer could be a “yes” or a “no”. A 50% chance is better than no chance. This is a philosophy even your grandfather would approve of. It is in the interest of your suppliers and service providers that you survive and thrive during recession. If you have been a good client in the past, they will indeed be open to negotiations.
7. Freeze on Capital investments: Capital investments would typically need huge allocation of funds and might not generate any tangible results immediately. So freezing all capital investments during uncertain times, unless the capital investments directly result in increase in revenues, would be a good move.
8. Tracking numbers: This is a fool proof, age old mantra which should be done as often as possible. It is important that we keep track of the key numbers including sales, margins, accounts receivables, accounts payables etc during all times. However, during tough times, it gains more importance that we keep a very close track on all indicators of the health of the company.
9. Real time numbers, real time accounting: Several businesses run their businesses based on the bank balances. This is not sufficient as all businesses have debts to collect and debts to pay. A bank balance simply doesn’t give you the right picture. If you need numbers of the business on real time, you need to have real time accounting to support that. If that is challenging, attempt should be made to have weekly numbers at the very least.
10. Commitment to grow: Positive self talk goes a long way in deciding your growth trajectory. Decide and commit that you will grow the business! Once this decision and commitment is made, you will start to notice various possibilities for growing the business. The power of the mind gets to work.
11. Mentor mileage: A mentor is a person who you meet every once in a while to seek advice. Look for one. As the saying goes “If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.” Mentors are people who realize that the power of knowledge multiplies through sharing and good mentors love to share their knowledge
12. Value addition through a coach: All entrepreneurs need a coach at all times. So it is sound business sense to invest in a good coach. Non performing sports teams invest in great coaches to better their performance. Star athletes and entertainers hire coaches. Why shouldn’t we as businesses do it? The coach brings with him an expertise and knowledge he has gained over years from coaching leaders of various industries and from diverse back grounds. Your business knowledge is set to grow exponentially when you hire a coach. When your knowledge grows, the results would start to show in your business numbers as well. Sometimes the best of us can do with a good pep talk.
Harish Rao is a Curacao based Entrepreneur, Investor and coach. He is the CEO of Abaque group. Finsight global, Seguros Muskus (representative of New India Assurance in Curacao, Bonaire and the Windward islands), Partem education are some of the key ventures of the Abaque group.
Harish lives by his vision of “Empowering people to master themselves through education”. That perhaps, translates into his success as a business coach