Business Action Plan for the Coronavirus

Released 4-4-2020

Revised 4-5-2020

July 1981

​July 1990

​March 2001

December 2007

March 2020

What do these dates have in common?  They mark the moments in history when recessions began, ushering in economic turmoil.    Having worked with many outstanding business leaders through those exciting times, I want to share with you, some lessons learned.

Charting a Way Forward

I like to think of myself as a rational person, but I’m not one. The good news is it’s

Economic downturns, whether caused by an embargo, the unintended consequences of financial policy, or a rogue virus, can trigger a great deal of pain and uncertainty.  What about our employees, customers and suppliers?  What will the world look like tomorrow?  What’s the path forward?

As a businessperson, you know the Coronavirus isn’t your fault, but as a leader, it’s your responsibility to look ahead and chart the next part of your company’s voyage.

Here in Michigan we are experiencing an unprecedented 3-week shelter in place order.  Many businesses have completely closed and face a future full of unknowns.  Many businesses are battened down like ships in port, waiting for a storm to pass.

Another option is for business leaders to use this time to chart their way forward.  But how?

Strengthen Your Leadership Mindset

It’s tempting to charge off into headlong action.  Fight, flight or freeze responses, are in part responsible for our success as humans.  Leaders often feel pressured to “have the answers” and to act immediately.  But this financial crisis isn’t a Lion, Tiger, or Bear.  So, I encourage you to take a little time and mentally prepare for what’s to come.

Be Agile

When faced with difficult choices, it’s easy to get bogged down in research, deliberation, planning and delegation.  This is how software was created in the past, and a big part of why it was so costly and time-consuming to produce.  But today, most software companies use an Agile approach.

Agile is a team approach where people play specific roles.  The Product Owner for example, insures there is a clear vision and strategy.  They also break the vision down into useful outcomes and prioritize what they want.  The team then works on the list, producing a series of useful outcomes in a short amount of time.

There are other things that are important in Agile.  Things like transparency, communications and building a culture where people realize that setbacks and dead ends are opportunities to learn and discover.  The advantages are you have momentum, you have something that works, and you are little smarter.

Developing an Agile mindset can drastically speed progress.  It’s an organized approach to many of the activities you do today.  But by adding clarity, feedback and teamwork, you go farther, faster. 

Dealing with the Unknown

Will closures end in a few more weeks, or will this go on till June as some suggest?

Will funds be available to help us resume operations?

Will our employees come back?

What about our customers?

Could there really be over one million illnesses, and two hundred thousand deaths?  Such a scale would touch every family.

With so much grim news, it’s hard to imagine better times.  Fortunately, there are steps you can take to gain a more realistic perspective.

Confirmation Bias

Confirmation bias is the tendency to search for, interpret, favor, and recall information in a way that confirms or strengthens one's prior personal beliefs or hypotheses.  [2]

It’s easy to dismiss the opinions of those we don’t agree with and view them unfavorably.  Their points of view might make others uncomfortable or they might seem to be troublemakers.  In my consulting work I pay special attention to these folks.  They may not be exactly right, but they often are onto something that can have a significant impact.  What I’m saying here is don’t surround yourself with “Yes people”.  Encourage people to speak openly and profit from their unique perspectives.

Confirmation bias also causes blind spots to information and facts that run counter to our personal models of the world.  Better options are to seek clarification.  Ask probing questions, seek to understand, dig for the roots of a problem, look for facts and truth.

Be Goal Focused, Not Task Focused

The best CEO’s I’ve worked with had the gift of being clear about their vision and goals.  In addition, they held their team accountable for bring those goals into reality.  They weren’t completely hands-off, they wanted to see the plans; sometimes adding insights, sometimes guidance.  They also regularly checked in to gauge progress and they gauged that progress against their goals.

So, I encourage you to clearly communicate your vision, goals and timelines.  Let your team work out the details and coach them along.  The vast majority of people want to do great work, they just need frameworks that allow them to thrive.  And with a clear vision, goals and a timeline, they will have a way of knowing how they are doing, even without your asking.

Leaders who get bogged down in too many tasks, often become frustrated.  One of my mentors once told me he managed by MBWA (managing by wandering around).  What he meant was, that he communicated his goals, and let the people who worked for him take on many of them.  This freed up his time so he could check in with them.

He would drop in for a morning visit, see how they were doing, answer questions, and provide guidance.  This seemingly casual style, meant he was always up to date and involved, without being overbearing.  And the performance of his people and the company’s performance, proved it’s worth.         

Probabilities in a Changing World

It’s important to keep in mind in times of rapid change, that you are working with probabilities.  It’s nearly impossible to be 100% on.  Then again, we’re striving for much higher accuracy than a 50/50 coin toss.  Some decisions will be off the mark.  Suppliers will be late.  Interruptions will happen.  Or to paraphrase Moltke, “no plan survives contact with the enemy”.

The techniques that follow will create a clearer picture but are not perfect.  The results will still require your judgment.  Be open to learning rapidly, adjusting, and improving over time.  

In the articles above, both Morgan Stanley and J.P. Morgan forecast a recovery starting in the July – September time frame, lasting 6-9 months.

It will be interesting to see how accurate these projections are, because so many unknowns are at work.  Items like the duration of the outbreak, global monetary policy, stimulus packages, bank lending, and spending are examples.     

Projecting the future

When business is good, we typically review the financials once a month.  The P&L looks good, check.  Cash flow is positive, check.  Sales are a little off forecast, but not bad.  Set a reminder to talk to the Sales Manager, and file everything away.

But with a little fine tuning, these tools can be indispensable for decision-making during a crisis.  It will help you run different financial scenarios, track your progress, and evaluate your decisions.

Cash flow Spreadsheet

Using your 2020 budget, or last year’s final P&L, you can create a cash flow forecast that reflects your original plan.  It’s formatted like your P&L, but each month is shown separately, allowing you to see the entire year on one page.  This forecast will serve as our baseline, let’s call it the Pre-Coronavirus Forecast.

There are no problems with cash flow throughout the year, and profits are reasonable.

By creating a copy of the Pre-Coronavirus spreadsheet, a second version can be used to test different scenarios that reflect your estimate of the depth and length of the recession.

In this version, revenues for April are reduced by 25%, and by 19% for May – September.  Because experts are predicting a short recession, revenues were forecasted down 12% in October, 8% in November, and 5% for December.

The impact of reduced sales on cash flow and profits are shown in red.  Without quickly reducing expenses, and/or increasing revenue, cash will run out in May 2020.  A cash flow spreadsheet also helps you identify large cost saving opportunities like purchases, wages, marketing & promotion, interest, loans, and capital equipment.

In just an hour or two, you can create your own cash flow forecast.  It will be a valuable tool in guiding upcoming decisions. 

Of course, this is just one of many potential models.  Your sales could actually go up, depending on your creativity and market opportunities.

There are many other shifting variables including things like:

• Your market.
• Your actual line of credit.
• Government sponsored loans.
• How the economy responds in the next few months.
• Customer orders.
• Supply lines.

That’s why it’s helpful to create copies of the spreadsheet, test different scenarios, and find a model that you’re comfortable with. 

Action Checklist

Below is a list of activities that helped create successful outcomes during past recessions. 

Many, you may have already taken, while others are the result of “lessons learned”.  For example, learning what customers are thinking and talking about.  Your Accounts Receivable department has a relationship with your customer’s Accounts Payable department.  This relationship can provide useful information about your market’s ecosystem and assist you in making decisions.

Here is the list:

Do you see a cash flow spreadsheet helping your company during this crisis?

Was the action checklist helpful?

Please let me know by leaving a comment below.