Daniel Marcos, an Entrepreneurs' Organization (EO) member in Toronto, is co-founder and CEO of Growth Institute, which provides online executive education based on the Scaling Up methodology and has been named to the Inc. 5000 list of America's fastest-growing private companies three years in a row. We asked Daniel how entrepreneurs can scale their companies in 2021 despite unstable economic conditions. Here's what he shared:
When entrepreneurs and business leaders ask how my company is reacting to the pandemic or economic recession, I tell them: We don't focus on what we can't control.
Instead, I recommend concentrating on what you can control to fortify your company to adapt and succeed as we enter 2021--which will likely be another turbulent year.
Here are six actions you can take now to recession-proof your company, so no matter what the new year brings, you'll be strategically positioned for success:
1. Survive First, then 2X Revenue
If you've survived the first wave of the pandemic and economic recession, you've likely made some tough choices. Now is the time to position your company for growth by adapting your mindset to leverage scaling up opportunities in this new normal.
Ask yourself two questions:
- What has changed?
- More importantly: What has not changed?
For our company, what hasn't changed is that business leaders need executive education to effectively leverage market opportunities for growth. What has changed is the way we deliver that training.
For example, if you are a retail business selling shoes, what has changed is how people shop for shoes. What hasn't changed is that people need shoes and will still buy them.
In times of significant change, it's critical to identify precisely what value you provide, and then adapt to new ways of delivering that value in response to how customers want to receive it. That's how you survive.
2. Communicate, Communicate, Communicate
When the crisis hit, we didn't stop having our daily huddle each morning. Knowing that teams need more communication and reassurance in crisis, we added a second daily huddle toward the end of the workday.
Our team shared that it raised their confidence to see that company leaders had a plan to survive and were focused on how best to serve our clients. This not only reassured team members, but it also helped us pivot much faster.
When crisis hits, people tend to abandon our rhythms. However, maintaining a steady meeting cadence will keep your team strong and provide stability when everything else is in flux.
3. Focus on Data
There are two broad categories of business data: lagging indicators and leading indicators. Many companies focus on past performance--a lagging indicator of what you've already accomplished. When times are uncertain, leading indicators are a better predictor of future performance.
Running your business based on lagging indicators is like trying to drive a car by staring into the rear-view mirror. It's impossible to see what lies ahead.
Link your company's broad purpose to key performance indicators (KPIs), and hold team members accountable for each one. Organize data dashboards to show both leading and lagging indicators, so you can see where your industry or market is going. Check-in often on your progress towards overall goals.
4. Minimize Expenses
Here's a universal truth in business: You can control expenses, but you can never control revenue. You can implement a robust strategy and achieve every KPI to drive income, but ultimately the decision is the customer's to make. Not yours.
To survive, focus on what you can control: Your expenses.
However, in turbulent times, cash flow ups and downs can make paying fixed expenses a challenge.
I recommend converting as many expenses as possible to variable expenses. That way, in lean months, you pay less to vendors. In prosperous months, you pay more.
People said it wouldn't work, but when the crisis hit, we gave each vendor a choice to work within a variable expense scenario or end their contract with us. Most agreed, because it's a step up from the scenario where the company goes out of business, and the vendor gets paid zero.
The time to negotiate variable contracts is now. Vendors realize the economy may get worse. If they value your business, they'll keep working with you.
5. Maximize Cash
Cash provides your company with oxygen and options. To improve cash flow, analyze your specific cash conversion cycles, and ask these questions:
- How can we eliminate mistakes?
- Where can we shorten conversion cycle times?
- What business model changes will improve our cycle times?
By implementing variable expense agreements and accelerating cash flow, you'll achieve an ideal position for growth.
6. Bet on Your A Team
Your A Team employees are top performers who drive growth. They're the ones who will help you execute to survive the crisis.
Unsure who they are in your organization? Ask this simple question: "Would I enthusiastically rehire this person?" If you would, that person is an A Player.
During the crisis, we analyzed our team and cleaned house. We're 25 percent leaner than one year ago, but our team is energized and optimistic about the future.
Double down on your A Team: Clarify what each is accountable for achieving, and provide them with the tools to perform effectively as you leverage new market opportunities and scale up in 2021!