For 22 years, I flew a company airplane with my previous company. Our seven locations were spread out and flying between locations was much quicker than driving. As part of my pilot training, I had to learn how to deal with a stall, a spin, and a nosedive, in case one of these events should ever happen. Learning and remembering these tactics was critical to my survival.
Every business owner knows that business doesn’t always go as planned. They’ve all experienced business stalls, spins, and nosedives. Sometimes businesses get themselves into trouble and can’t see the way out. Recently, I have seen this as businesses try to navigate the current economic slowdown.
One of my roles as a consultant is to help business owners find their way out of a nosedive, righting the business, and returning it to a level flight path. If your business is currently in a nosedive, these seven keys will help you recover:
1. Sometimes business owners are so busy being busy that they don’t stop and look at the big picture.
Stopping may sound counterintuitive, but it’s necessary for seeing and understanding what is happening within your business. You can’t keep doing the same thing and expecting different results.
2. Stop the business from bleeding cash.
A line-item expense analysis is necessary to find the leaks. Approval for expenses over a certain amount should be installed.
3. Create a budget and use it as a tool to compare budget to actual on a weekly basis.
Highlight the variances and ask tough questions to get to the bottom of those variances.
4. Rely on your instruments and data.
As a pilot, I had to be able to read the instruments on the airplane dashboard. These instruments helped to ensure a successful takeoff, flight, and landing.
The instruments on your business dashboard are your P&L and your balance sheet, and they are critical to the survival of your business. They will serve you well if you use them as tools to compare the same period of time such as Q1 2020 to Q1 2019 and 2018. This will help you monitor the progress of your business.
5. Develop line-item metrics.
What is the cost of goods sold as a percentage of revenue? What is each line-item expense as a percentage of gross profit? How do these percentages compare to your very best year ever? Track these percentages on a weekly or monthly basis to develop a trend line to help you ask better questions, in order to make better decisions.
6. Generate a cash flow projection.
Realize that your P&L and balance sheet are lagging indicators. A cash flow projection is the one instrument you can use to look ahead at the movement of cash in and out of the business.
7. Develop a flash report of the critical information you need to better manage your business out of your nosedive.
- What are the weekly sales and how do they compare to budget?
- What are the YTD sales and how does that compare to budget?
- What has been shipped and invoiced this week?
- What are the current account payables and account receivables?
- What is the current cash on hand?
These are examples of critical information that can help you steer your business out of trouble.
These seven keys don’t encompass everything you need to get your business back on a level flight path, but they will begin the process of pulling you out of a nosedive.
If you would like to learn more, give me a call 503-312-3145 or email me at garyfurr@garyfurrconsulting.com
You can also visit my website at http://www.garyfurr@garyfurrconsulting.com
Listen to my podcast Turning Complexity into Simplicity®
For more on this topic, you can find the book, Strengthen Your Business, a collection of advice from a group of six business advisors and consultants across three continents and four countries who specialize in working with small and medium enterprises, available on Amazon.
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