Be Smart When Rebuilding Your Business by Howard, Date: Oct 26, 2020

Has your business been severely affected by the 2020 recession? Did you lose your largest customer, one that produced over 30% of your revenue alone? Chances are, your business is in the phase I refer to as Rebuilding.

I recently shared the five phases I believe companies find themselves in—what I refer to as the 5 Rs: Regressing, Rebuilding, Restarting, Resuming, and Rocketing. Last week, we discussed the Regressing phase. Today, I’d like to talk about Rebuilding.

A company usually finds itself in a Rebuilding position because of an external factor, like a change in the economy, their supply chain gets shut down, or their customer base or market has shifted. It’s different from the Regressing phase because, in Regressing, your growth is relatively flat—maybe 3-5% or declining, when your best competitors are more accustomed to 20% or more. You typically have enough cash and enough business to have the cash runway to do okay, but not great. So, you’re not feeling as much pain.

When you’re in the Rebuilding phase, you’re in a lot of pain because you’re trying to build back volume. Your market may have shifted, and the landscape looks very different. Growth is nil, and your cash runway is short. All is not lost, but the road ahead sure looks tough.

Things to Consider as You Rebuild

Understanding your cash situation, the nature of your circumstances, and recognizing that conditions will persist is essential to understanding your next moves when rebuilding. It may or may not about finding new customers. It’s about understanding the best course to take until the market resumes an average pace. It’s about looking for opportunities and moving quickly. It would be best if you had a firm handle on your cash runway. You may need to change how you do business to acquire, keep, and serve customers well.

So what do you need to consider as you move forward? Here are a few key things to keep in mind.

Your Market

Do you want to serve the same market as before? Were you, perhaps, too concentrated in certain customer bases or industries? What moves can you make to start going after other segments that are doing well and could become a stronger long-term position for your company? Then, as the old customer segments come back, you’ll be well-positioned in the new customer segments, and you’ll then have a choice to either exit the other category or stay in both, and have a much bigger, more robust company, as you come out the other side.

Be Careful Who You Cut

Who do you need on your business’s “plane” so that, as you’re going up that cash runway, you have the strength to be able to take off and to service customers?

The first area that most companies unconsciously cut, which costs them market share and their reputation for the future, is too many customer-facing positions. Then, as the old customer segments come back, you’ll be well-positioned in the new customer segments, and you’ll then have a choice to either exit the other category or stay in both, and have a much bigger, stronger company, as you come out the other side. They have higher levels of mastery. So, I would keep those customer-facing roles and look at other areas.

Restructuring and Redefining the Organization

How can you restructure and redefine the organization, so it’s far more profitable in the future than it is today? Over time, many companies inadvertently create a bureaucracy with many people at the corporate and leadership level that really aren’t justified. They didn’t add enough value, and all this bureaucracy did was screw up their cash model.

So as you rebuild, I would challenge you to shrink the number of levels between the CEO and the frontline employees. Rethink how you treat and manage employees going forward, so those frontline employees play a more significant role in creative thinking and decision-making. Learn how to empower and incentivize workers so that more of your ideas come from them. In the end, this will allow you to remain flat (structurally), reduce overhead, and get more scale as you move forward.

Emerging Opportunities

What new, emerging opportunities are available if you pivot quickly enough? I know the CEO of a large business that made ties and bow ties. When the market shifted in early 2020 and retail stores closed, he was faced with letting most of his seamstresses go. But then he saw the massive need for masks and redeployed. He has one of the largest selections and biggest tractions in the mask business because he pivoted quickly and saw an opportunity. And, he is actually paying his employees better than he was before with new bonuses. He’s slowly rebuilding the tie business, but he’s generating more revenue and more business in the mask business today than he did in the tie business.

A Rebuilding Case Study: Southwest Airlines

I think Southwest Airlines, and how they’re handling all of the shifts in 2020, provides an excellent example of Rebuilding. Consider the following.

To me, the number one thing people need to think about in 2020 is, “How do we make customers feel safe enough to do business with us?” As of this writing, Southwest is the only airline that still has middle seats open. And so there’s more safety flying on one of their planes than any of their other competitors.

They’re also taking a position of not laying off anybody (at least through the end of 2020). This puts them in several very good strategic positions.

-If they have all their employees, they can still provide the higher levels of service that Southwest has become known for compared to their competition.

-They can turn planes faster because they still have an experienced workforce.

-Their planes are going to be better maintained, so we have more safety.

-Their employees are going to be more loyal compared to the employees in other airlines. And so I think it’s like a trifecta of vendors, customers, employees who will be more loyal to this company.

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And, I believe they will be able to build back faster. They’ve assessed their cash situation and implemented (or are implementing) strategies to increase the cash runway so that cash lasts longer. They’re also implementing things that will allow them to bring in new money from business faster because they’re doing that.

Something else they’re doing as they rebuild is entering new airports and adding new routes, unlike everybody else, who are cutting costs and cutting routes. And they’re positioning themselves to come out the other side like a slingshot and be ready to run faster because the competition will just be stabilizing.

Of course, to do that in the Rebuilding phase, you need to make sure you’ve built up your balance sheet, and you understand that cash runway well enough to understand the moves you make, so you can execute the strategy that you need. If you’d like to discuss ways your business can achieve this, I invite you to set up a FREE 30-MINUTE, NO-OBLIGATION CONSULTATION where I can ask you a few more in-depth questions and quickly pinpoint actions you can take to get your business back on track.

Come back next week when I will be discussing another one of the 5 Rs.