The pandemic and subsequent economic decline caught many businesses by surprise. Some were completely unprepared to financially support themselves through mandatory shutdowns and decreased sales, while others burned through their savings to keep things afloat.
Even with help from initiatives like the Payroll Protection Program, many business leaders are still grappling with the loss of revenue they experienced at the height of the pandemic. For those who are beginning to recover, the current circumstances have provided an important incentive to plan ahead for financial difficulties, especially when it’s due to factors outside their control.
Nic Faitos, Senior Partner at Starbright Floral Design, serves as Chair of Forbes Business Council. He reached out to his fellow executives to share how they navigated more than one financial crisis and recession, and learned practical and effective tips to shore up their cash reserves and retain access to the capital needed during difficult times. Here’s how they recommend “future-proofing” a business against financial hardship.
1. Practice Flexibility
Flexibility is a key to survival. Be prepared to adjust and launch new products quickly. Also, a team with a diverse skill set helps to survive during tougher times. – Elizabeth Solomeina, Flying Solo
2. Study Historical Industry Performance
Look at historical performance for your industry during a crisis to create contingency plans for high-risk areas. Lock down the “known unknowns” first, and then build fungible resources that can pivot to new sources of revenue to address the “unknown unknowns” based on trends. Times of financial hardship pressure-test businesses, and the ones that have strong, sustainable fundamentals will come out stronger. – Helene Rutledge, UPGRAID
3. Listen To Your Customers
As much as you can, do your best to predict the future demands of tomorrow, today by listening to your customers. One key way to future-proof your business is to always keep an eye on where there is room to innovate and keep funds on hand to drive this process. Keeping your business future-proof requires room to diversify your portfolio when the demand arises. – Anita Gupta, Heron Therapeutics, Inc
4. Assess Your Organizational Structure
From an operational perspective, companies will need to take a deep look at their organizational structure and adopt a business model that more effectively utilizes cross-functional teams. The harsh reality is that businesses may not have the luxury of continuing to separate certain work functions. A sustainable, strategic plan that eliminates excessive spending and maximizes productivity is key. – Najah Rahmaan, Dedica Group, LLC.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
5. Find New Ways To Provide Value
Innovate new ways to deliver value. Status quo choices deliver commoditization and vulnerability. Make adaptability your competitive advantage. Get closer to your consumers on what they value and what they are willing to pay for. This sustains regardless of the environment. The value will adapt over time. Either you stay in front of it or you will be left behind. – Fred Schonenberg, VentureFuel
6. Diversify Your Business Portfolio
Realize and accept the cold hard truth that you can’t really future-proof your business without changes. Try to diversify. Move from a single business that serves a single niche to a portfolio of businesses. Be ready to protect your people and make sure they know about it. Do not throw good money after bad; be ready to cut the losses to start over again with something different. – Sergii Gulko, XTRD.io
7. Don’t Spend Based On Your Projections
Budget for what was in the bank yesterday, not what you think you will have tomorrow. In good times, business owners risk thinking there will never be a slowdown and will spend based on projections instead of what they have on hand. A new piece of technology does nothing if you can’t end up using it. Build your war chest for when lean days come, and that will allow you to survive and even thrive. – Edward Alvarez, Edward A Alvarez, DDS, PC/NYCLaserDentist
8. Build Up Cash In The Business
Build up as much cash in the business as you can. At a minimum, we try to have two months of operating expenses in the bank in addition to what’s set aside for taxes. We did this by patiently keeping profits in the business for a while instead of taking bonuses. We also have a line of credit equivalent to another two months of operating expenses. This kind of liquidity is key to surviving hard times. – Tom Conlon, North Street
9. Introduce Multiple Revenue Streams
The key is to be diversified and have multiple revenue streams. Adding buckets of revenue will hedge against a particular stream going dry. This method has to be weighed against diluting your brand and straying away from your core business. We are a service business and even during a pandemic, you have to be out there and make new connections constantly in order to make the rain. – David Schwartz, Gerstman Schwartz & Malito LLP
10. Proactively Stress-Test Your Business
The best way to future-proof your business against financial hardship is to proactively stress-test it. Think of the worst-case scenarios possible and what you can proactively do to minimize the negative effects. Do you have proper cash reserves to survive an extended period of time? Do you have proper insurance coverages? Do you have a documented continuity plan? Try to plan for what you can. – Robert Depalo, National Financial Network
11. Forge Strong Partnerships In Your Industry
Having the ability to pivot into a complimentary service or revenue streams can future-proof any business. Start forging strong working relationships with your peers and partners. What can you do to help these companies work better and stay stronger? The clients that have proven successful through this crisis have looked to their peers not as competitors, but as allies and found opportunities. – Jeanne Hardy, Creative Business Inc.
12. Watch Your Accounts Receivable
Keeping a close eye on your accounts receivable is the key to ensuring your business will always be around. As long as your customers are paying and you aren’t overextending for them, you will be financially secure today and tomorrow. Being aware of when a client is over their time and speaking to them quickly will protect you and your business. – Benjamin Elzweig, Active Staffing Services
13. Look Ahead To Future Trends
You should look at where the industry may be trending and determine how to be proactive in setting up your business to act and be ready at all times, e.g. through technology, infrastructure and staff. Another way is to regularly survey your existing base to identify areas that may be weak and opportunities to engage and grow the business further. – Dr. Jaquel Patterson, Fairfield Family Health
14. Reconsider Your Commercial Real Estate Needs
Due to the current economic situation, reevaluate if you actually need all the space you are renting now, since some employees roles can be permanently remote going forward. Negotiate your current lease — commercial space rates are cratering across NYC. Have a larger liquid percentage allocation of your assets, which can be for emergencies and for investment opportunities depending on the direction of the economy. – Art Malkov, BlockchainDriven
15. Explore Government Contracting Opportunities
Try to land government contracts. This is what we did with our agency when Covid hit and our retainers decreased. The government stimulates the economy during a recession by awarding more contracts to the private sector. There are platforms like BidSync and Public Purchase that can help. Some smaller contracts are easier to land and will help you build credibility to shoot for bigger ones later. – Sardor Akhmedov, Jafton.com
16. Analyze Your Current Contracts
Analyze your contracts and work toward a formula that can unleash the cash flow power of your business. For me, back-ending profits was the trick. While every business is different, a smart, purposeful and curated formula can future-proof a business by providing security without having to generate more revenue. – Michael Saulpaugh, Elegant Music Group
17. Be Diligent About Collecting And Making Timely Payments
Be diligent about getting timely payments from all your clients. Do not let account receivables age beyond their due date. Also, maintain a high credit rating by paying your vendors on time. Make sure you have a 90- to 180-day reserve set aside no matter what. The recent blackout was a costly lesson, as I had to close for four days. I now have a backup and disaster recovery plan in place. Be prepared! – Judi Hays, Judi Hays, Inc.
18. Simplify Your Processes Through Technology
The first step to future-proofing your business is to leverage technology to simplify your processes, which offers multiple benefits. This will help businesses operate effectively and efficiently. In addition, create alternate revenue streams of income to ensure if there is a loss of one stream, you are still able to bring in profits through the others. – Arthur Robertson, Third Eye Advisor