2020 was an unusual year as businesses adapted to the pandemic. 2021 is an unusual year as businesses adapt to lifted restrictions and prepare for the future. What lessons have business leaders learned? How can they not only protect their businesses against future threats, but also take advantage of opportunities in a reconfigured economy?
Here are five key pieces of advice from the session:
1. Protect Yourself
From supply chain interruptions to paid-leave policies, COVID-19 revealed vulnerabilities many businesses didn't know they had. And it has added a previously obscure legal phrase to business lexicon: force majeure. "Force majeure excuses what would otherwise be a breach of contract due to something beyond your control," Veronica Rossitto explained. "That's one of the popular things for attorneys to look for now in contracts as a result of the pandemic."
For example, many businesses are adding provisions that would exempt them from meeting the terms of their commercial leases in the event of a mandatory closure, such as the widespread government shutdowns ordered during the coronavirus outbreak.
In addition, Veronica encouraged business owners to separate their business assets from their personal assets. If you're a sole proprietor or "DBA," your personal savings and even your home could be at risk if your business fails. "I always recommend forming some kind of LLC [limited liability company] or corporation so that you can run your business through that legal entity rather than through you personally," she said. Further, she urged businesses that have more than one revenue stream to legally insulate them so a financial difficulty in one line won't drain another.
Finally, the panelists wholeheartedly agreed that every business owner needs a clear, legally enforceable succession plan in the event of death, divorce or disability. This is particularly important if more than one financial partner is involved. Bob Keplinger told of a business associate who balked at paying $5,000 in attorneys' fees upfront to create an ironclad succession plan and ended up paying $40,000 in legal fees to resolve a subsequent dispute.
2. Leverage Your Digital Toolbox
When the pandemic hit, any business that hadn't kept pace with modern technology realized it needed an immediate upgrade to survive. In some cases, this meant transitioning from in-house servers and desktop computers to cloud-based communications and laptops that enabled remote work. In other cases, it meant leveraging ecommerce to enhance or even replace in-person retail sales as well as fulfillment.
Bob said the pandemic eliminated the fears some businesses had not only about a work-from-home workforce but also remote sales calls. "Now a Zoom call is an acceptable way to communicate," he said. That new capability can expand the range of your business, possibly even into other states.
According to Mike Faherty, businesses should embrace this moment and explore other functions that can be done digitally and/or remotely: "What things can be automated, what things can be outsourced, what things can be done more efficiently so you can keep your costs as low as possible and maintain your margins?" (Regarding automation, Veronica added a cautionary note: Make sure that in evaluating which jobs to eliminate, you do so objectively to avoid potential discrimination claims.)
Mike added that the pandemic showed businesses the power of social media platforms and blog content to reach their target markets in new ways. "A blog gives you a chance to demonstrate some authority, and that's really powerful from a sales perspective," he said. "It's also an opportunity to share thought leadership."
Another insight from Mike: Popular platforms such as LinkedIn can also build your authority and help you reach prospective customers remotely through keywords related to your area of expertise, such as "payroll." But when participating in such platforms, he added, "Be careful not to 'sell.' Just add value."
It's also time for any business that hasn't already done so to embrace customer relationship management (CRM) software. "Whenever I'm coaching small businesses, it's one of the first things I ask them to do," Mike said. "Make sure you have a place to organize your customer data. Collecting a list of people who might do business with you, organizing that information and building out that data — that's the first order of business from a sales and marketing standpoint."
3. But Don't Forget Time-Tested Techniques
Some of the changes that the pandemic wrought are permanent. Others will be temporary. As more and more of the economy reopens, successful businesses will quickly need to reintroduce certain procedures, such as face-to-face meetings. And although he is a proponent of Zoom meetings, Bob recognizes they're not for everybody — and "some of us are really rusty about being in person."
Also, as businesses embrace digital technology, they should be careful not to do so at the expense of proven procedures such as cold calling — particularly in a business-to-business environment. "Cold calling is one of the most underutilized sales marketing channels available to small businesses," Mike said. "There's very little upfront cost, although there's obviously a lot of time invested in it."
He said the key is a hybrid approach that combines old-fashioned phone time with CRM software to maximize results. "A passionate business owner can be very compelling in a phone call just based on their deep level of understanding of the solution," Mike said. "I tell people, 'Make hundreds of calls a day once a week for a month and tell me what you've learned.' A lot of people are looking for that 'easy button.' It doesn't exist. Pick up the phone."
4. Anticipate Further Changes
Our panelists agreed that as the economy reopens, it's important for business owners not to get complacent and assume that everything will get back to "normal." Further disruptions are likely, including new regulations and restrictions.
Although a $15-an-hour federal minimum wage ultimately wasn't included in the $1.9 trillion stimulus bill, for example, eventual increases at the state and federal level are likely. Small-business owners need to plan accordingly. "It's a matter of anticipating trickle-down effects," Bob said. "Even if you're already paying that wage, employees might leave to pursue other opportunities that become available."
He encourages a proactive approach that includes asking your vendors what cost increases they might need to pass along to you. "Research it, because you're going to have to very, very quickly adjust your pricing, and you'll need a plan that explains that and justifies it for your customers."
5. Know Your Numbers
The importance of planning ahead is one of the most important lessons to come out of the pandemic. Many business owners soon realized how ill-prepared they were for a financial emergency. "If you don't know your numbers, you're operating blind," Bob said. "You could be risking your life savings without understanding [your finances] if it's just all your gut."
Among other things, Bob recommended using an outsourced bookkeeping service. "Too many business owners want to maintain control of every flippin' thing," he said. "You get to the point where you can't control everything. You've got to train and delegate [and outsource]."
The more financial insights you have, the better you can respond in times of crisis. With up-to-date, accurate information, you can make informed decisions about how to cut costs and double down on your most profitable products or services. "How do you improve your margins?" Bob asked. "It comes from knowing your numbers."
Mike added that one of the most important numbers to know is the cost of acquiring a customer. But you can't just look at the cost — you also have to factor in the return on that investment. "If I know each new customer is worth $3,000 to me," Mike said, "then I'm not afraid to spend $1,000 to acquire a customer."
Look Forward — Not Back
Being forced to change how you do business isn't easy. But in the end, it's necessary if you want to succeed. As Bill Giffen said, summing up the overall takeaway from this lively and informative session, "A lot of us have heard this before, but you have to get comfortable with being uncomfortable."
At Supporting Strategies, our experienced, U.S.-based professionals use secure, best-of-breed technology and a proven process to provide a full suite of bookkeeping and controller services. Are you ready to learn how you can move your business forward? Contact Supporting Strategies today.
Eduardo Ramirez, Managing Director, Supporting Strategies | Northwest Houston, provides bookkeeping and controller services to growing businesses.
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