As the situation improves, it is essential that organizations are well positioned for a smooth recovery. Businesses need to be ready for a “new reality” and must be able to identify and evaluate emerging opportunities to rebuild and grow.
While the short-term outlook for organizations in the private, mid-market and family business sector varies greatly by industry, it’s important to consider what rebuilding and reshaping will look like once the economy begins to return to a state of normalcy. Putting a strategy in place for the recovery phase and beyond will help prepare organizations to take advantage of new opportunities.
To do so, there are seven focus areas you should consider.
1. Assess the damage
Organizations need to identify the impact the crisis has had on their business beyond the financials. While comparing your financial results to last year’s numbers will allow you to see how much your business sales, profits and cash flow have been impacted, it is important to consider other factors to understand the complete picture. For example: did you lay off staff? If so, you will need to account for rehiring or adjusting workloads in the rebuild plan. Did you lose customers due to their businesses failing or because they have migrated toward competitors? You will need to account for the cost of regaining or acquiring new customers.2. Optimize your costs
Throughout the crisis, organizations have had a focus on cutting costs, but to give your business the best chance of surviving, you need a renewed focus on costs to better position your business for success. Cost optimization is more than just cost cutting and belt tightening. In my experience working with private, mid-market and family businesses, organizations that take a more strategic (might I even say holistic) view will have a greater chance of success.
By understanding your business’ cost drivers you can identify the right cost opportunities and avoiding unnecessary negative impacts on your business, customers and staff. A successful cost optimization initiative starts with gathering current cost base and performing a spend analysis, considering the effect that the wage subsidies have had on operations of late. This will help inform your needs and sets a baseline to measure and track success.
3. Access to capital
There are several options for businesses to access capital during the rebuild period. Federal support programs designed to help small and medium businesses impacted by COVID-19 are a good place to start. The challenge with federal programs is that the funding is limited – so it’s important to consider other sources of small business funding, such as traditional small business loads, small business term loans from banks, credit unions and online lenders, or contemporary financing options (accounts receivable financing; inventory financing; purchase order financing). Of course, those who know me will know that I want you to start with a strong negotiated collection of receivables to avoid additional capital requirements.
4. Getting confidence back in your workforce
Businesses need to keep a relentless focus on supporting employees during this crisis. It is important to understand that employee retention is an important part of any rebuilding strategy, as research shows a new employee takes at least three to four months before achieving the same productivity as an existing one, and costs of employee retrenchment and rehiring are substantial.
Have frequent and transparent conversations with your staff. Involve them in your planning processes as you map out future plans for rebuilding and reshaping the business to give them a shared sense of ownership in their roles and responsibilities. We’ve always said “communication is key,” but this means more than ever now!
5. A digital first workplace and technology enablers
Businesses need to start thinking more strategically about technology and digital capabilities, and investing in uplifting their technology capabilities as an imperative rather than a nice to have. Leveraging the new digital working order to your advantage will require strategic thinking around where the best opportunities lie to deliver lasting business value, customer experience and employee satisfaction. This is no easy task – the right mix will be critical to success.
6. Business model
Organizations will need to reshape their business models to respond to changing consumer needs. Consideration will need to be given to how each aspect of the organization, from customer experience, sales and the back office, will need to seamlessly collaborate to address customer expectations in the future. Key areas to relook at in your operating model include: the customer, procurement, supply chain and your workforce.
7. Build a plan and track progress
Business leaders may find that doing everything at once may not be realistic when considering how to rebuild. Creating a prioritized plan with your most important actions first can help provide structure to this huge task.
A logical order of events might be: securing funding, rethinking the operating model, launching a cost optimization program and new supplier relationships. Set a timeline for hiring employees, restocking inventory, and, finally, reopening your doors if you’ve been closed.
As you take necessary steps towards rebuilding your business, track your progress! This is particularly important if you’ve secured capital to fund your business, because you don’t want to waste time on activities that aren’t delivering a solid return on your investment.
To learn more about the impact of COVID-19 to your organization and how you can be resilient, check out kpmg.ca for the latest webinars, podcasts, and thought leadership.
Laurie Bissonette, FCPA, FCA, is a Partner with KPMG Enterprise™. She can be reached at 705-669-2521 or email@example.com.