Paul Griffiths is currently Chief Financial Officer (CFO) at Consilience Ventures and has previously worked at household names such as EasyJet. Here for BLM, he gives his thoughts on how business leaders can react during this difficult time, to save costs and keep the business running.
I have spent many years working with ultra-budget businesses and it becomes a bit habit-forming. I have also found it translates really well into the start-up business model, it’s not shareholder £ your spending, its YOUR EQUITY, every £1 you spend today is £10, £100 even £1000 of your future value your working so damn hard for.
Right now this is even more important than ever and here are some thoughts about this approach works.
Review all costs! Simple right?
Not really, when people review costs they mentally ignore things they know, understand and believe to be necessary. Mobile phones are needed right now?
Well… that depends if someone is now working from home and using zoom/hangouts etc. from their broadband is a mobile needed? Is that international roaming package providing value for money right now? Cancel everything and see what’s missed? Try it, its liberating.
Review departmental costs, just because you told marketing 3 months ago they had a budget of £xxx do not be afraid to cancel or change it now.
As a business leader take back control of the spending, even if its temporarily. Ask the person responsible for spending your companies money some simple questions:
Why have we ordered this?
Do we need it?
What’s its Value to us?
Review all income
These are uncertain times and even the most loyal of customers can change their mind. As a business leader take it on yourself to take the worse case view, and don’t spend promises until they are money in the bank, even if its payments you’re certain you will receive (corporate customers, government etc.) Nothing is certain.
This is a tough one, but the reality is if you want your business to succeed, if you want to keep some people employed you may need to let others go. Don’t be fooled into taking the easy route either, letting go a couple of low level people may be tempting but it wont really move the needle, in reality one senior manager could be the equivalent of 5, 6 or more junior staff.
The best way is to trim the overall team from top to bottom. At the moment being able to furlough people is a great short term option.
Pay your suppliers
This is so important. At times like these its really tempting to hoard cash and sit on it, but if we all do this things start to stagnate, I don’t pay my suppliers, so they don’t pay their suppliers who don’t pay me.
Its called cash flow for a reason, pay your bills, its a leap of faith but hopefully it will mean in the not to distant future you start to received your payments, the wheels of commerce start to turn and we all have a brighter future.