The fundamentals of business don't change when the calendar turns from December 31 to January 1 of a new year. The temporary “relief” of being out of 2020 will eventually fade and the reality of the challenges we face as business owners will still be there. Learning from the past (and present) will help us be better prepared for the future. Here are some things 2020 reminded us of:
Respond Not React: Nobody expected stay-at-home orders and gym closures due to a pandemic. But far too many gyms reacted by reducing member fees or putting accounts on hold, even without being asked. The consequence is having to dig out of a bigger hole or even closure. The businesses who communicated value and provided superior service, even when the delivery platform changed from in person to online, were in a better position to maintain pricing, keep their clients and even grow.
Running Lean Is Better: You can’t count on constant growth to cover up cash flow problems. Evaluating operating expenses regularly keeps you from having to make drastic cuts when income slows. If an expense isn’t contributing to the core competencies of your business, get rid of it. And never forget that debt is a business killer. Always know what you are getting into when you incur debt, including government-backed loans.
Savings Matter: Should there be a question why we should have 3-6 months of emergency funds, both personal and business, ever again? Paycheck Protection Program (PPP) saved a lot of businesses, and we can be grateful for the help, but we should never count on it. If you don’t have one, open a separate savings account today.
Cash Management Doesn’t Just “Happen”: Your business needs to have a system that puts every dollar to work. It should be structured to control operating expenses, track and pay down debt and maintain healthy profit margins. It needs to be simple to operate while giving you the feedback you need to make good strategic business decisions.
George Santayana said, “Those who cannot remember the past are condemned to repeat it.” None of us want to repeat 2020, so let’s propose to learn from 2020 and do what it takes to be prepared for whatever is next.