At C-Level #19 & #20: Crisis…Starting with People & Cash

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The following is a blog written by Mike Sayre, a highly experienced and successful software, e-commerce, and manufacturing services CEO, COO, CFO, and Board Director. He is an Executive Leadership Development Coach at the Innovative Leadership Institute, a trusted partner inspiring and enabling perpetual innovation, evolution, and growth in leaders and their businesses.

PEOPLE always come first!

Businesses are built and run by people. As a C-level leader, losing the trust and confidence of your people during a crisis can create serious challenges and make your crisis worse!

How you treat your people, especially in times of crisis, will be remembered for a long time.

Having successfully led a number of companies through financial and/or operational crises, here are a couple of recommendations:

• Transparency and timely communication are essential, whether the news is good or bad.
• Deliver bad news with some kind of credible plan for how your organization will move forward with specifics on what you need from your people to make that happen.
• If the plan will take more time to develop, don’t wait to communicate. Let your people know that and what they should be doing while the plan is being developed.
• Hone and know your message so you can communicate it clearly, consistently and constantly.
• Be visible, available, approachable, and open to the input of others, even if it needs to be through video conferencing, the telephone, text or email. Showing that you are available and open to input, shows respect. And, you may just get some better ideas than you currently have in mind.
• You can’t lead others if you can’t lead yourself! Right now, during the Coronavirus (Covid-19) crisis, there are plenty of great posts, blogs, articles, and activities on the internet (and through other sources) that are focused on helping you get through this crisis by improving both your physical and mental health.

In addition to your people…the future of your business starts with CASH!

Do you know how much cash you have immediately available in the bank for the business? Do you have enough to cover your next payroll, the one after that, etc.? Do you have alternate sources of cash set up for temporary needs? If you use them, do you have any idea when you’ll have enough cash to pay them back?

Okay, so maybe this blog isn’t for you. However, there are lots of businesses owners out there who do not know the answers to those questions. I’ve seen them and I’ve helped them, so before it’s too late…please share this blog with others in your network who may not be able to answer these questions for their business!

If you can’t answer those questions, you are not the alone! Even if your business has been going really well over the past couple of years, the current pandemic may be creating new challenges that you really need to be preparing for now!

You would not believe the number and size of businesses that don’t have this relatively simple information to help keep their business running in the short term, especially during a crisis period.

Further below is a simple cash flow model in a spreadsheet. It is really no more than:

Cash in the bank today

plus      Cash coming in (customer receipts, loans, investor cash)

less        Cash going out (payroll, benefits, rent, and other expenses)

equals   Cash in the bank at the end of the period (week, month, etc.)

OMG…Duh…you say? Then go and ask your controller or accounting manager for the answers to those earlier questions. If they can easily give them to you, awesome! If not, read on.

Do not put this off and do not overthink it! Have your controller to put together a spreadsheet similar to this for your business, and tell them not to put this off and not to overthink it! Just make sure you are estimating to the best of your ability what the big and important numbers are and lump the rest into an average number for whatever period you use.

Here is the model:

Some things to note:

• The company in this example is a software-as-a service (SaaS) provider…don’t get caught up in that, the model needs customized for your business!
• Rounded numbers are close enough.
• This company only pays its bills once per month (less expensive to do, easier to manage the cash flow, and most great partners will accept this…if not, pay twice per month).
• Notice that if the company does not borrow on its line of credit, or provide the funding from somewhere else, it can’t make payroll in the week of 4/11/20. In this model, ABC borrowed $150,000 on its line of credit or from investors and is going to start paying it back by the end of the month, when the crisis is over.
• This model is only for one month. You may want to do a couple of models so you can better plan what you will do if things don’t work out like you think they will over a longer period of time.
• If you can’t make that next payroll, and you don’t have the ability to borrow from anyone or pull in additional investor cash, you have a major problem that would be better to figure out and address now, rather than when your payroll person tells you…which may not be until the day payroll is supposed to go out.

Some potential options?

• Step up collection efforts from your biggest customers (be careful of setting off their alarm bells!)
• Delay vendor payments (not a big impact in this model)
• Delay payroll (I’d suggest being honest and transparent with your employees on how they get caught up on their pay based on your cash forecasting model)
• Temporary layoff or shut down (if you are being transparent, your employees may be more willing to work with you than you think!)
• Permanent layoff or shut down (what we are trying to avoid here!)
• Others?

In any case, I hope you can see how this simple cash flow forecast is worth the effort, if you pay attention to it.

Once again, please do not overthink it and try to be any more precise than you really need to be! Getting a decent picture of where you are on a timely basis is of the essence right now.

The goal of this blog is to get business owners and C-level execs to be more proactive in managing their business through this and any other crisis. Don’t let your business crash because you did not pay attention to PEOPLE & CASH.

Next up…ADAPTING YOUR BUSINESS FOR POST-CRISIS SUCCESS!

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About the Author

Mike Sayre is a highly experienced and successful startup, turnaround & growth specialist in the software, e-commerce, and manufacturing service industries, leading organizations as CEO, COO, CFO, CIO, and/or Board Director over the past 20 years. He is an Executive Leadership Development Coach at the Innovative Leadership Institute, a trusted partner inspiring and enabling perpetual innovation, evolution, and growth in leaders and their organizations.

Thanks for following me! If you would like to learn more or get help, please email me at msayre@innovateleader.com .