From the Lionesses of Africa Operations Dept
Two ‘Lioness Weekenders’ ago, we dived straight into the most important aspect of our business lives, that of Cash Flow. This week, the London Business School showed us why it is Cash Flow that is the only thing that keeps our Head of Finance awake at night.
So, no surprise, the smaller your business the more you rely on day-to-day Cash. If demand stops, you have nothing to lean on. Please re-read our first article on Cash Flow and put your best employee onto bringing in the cash!
Governments should also take note of the information on the left of the graphic above. If you want to protect employment, insist that banks lend to SMEs, and given that women-led businesses employ more and push more through to communities, Lionesses should be at the front of any emergency lending.
Last week we looked at HBC - Health, Business, Communication. We apologize for last week’s letter being so long, but it was all information that needed to get to you fast, and with Covid-19 information, a month is like a week and a week is like a day. For that reason I have put a ‘Tea Break’ in this week’s letter - you may be a business leader, but you still need time for yourself. Seriously.
The 6 take-aways from last week were:
Business leaders must not hide.
Communication should be clear, and unambiguous (please, please, please!).
Any plan is better than no plan.
It’s ok to say “I don’t know right now” (so long as you come back soon with an answer).
Lionesses need to be vocal and most importantly, visual.
But above all - “BE KIND”.
This week in our series on Prepare, Resist and Recover, we move to RESIST.
Resist is both the most exciting (we shall be thinking of opportunities), but also the most terrifying part (risks) of this new normal.
Two points to be made before we start:
Although many processes in the Resist category require control, you must resist the need to control, instead show Leadership (which is absolutely not control), Communicate your needs and Trust in your Team. This is so important.
If an employee (however junior) comes up with an idea, please do not dismiss it, listen. If you think of a minor change (‘I want it blue not pink’), ignore it - who cares? Minor changes are for sunnier times. If more serious changes are required, then sit, discuss and work with the innovator. They will feel 10 foot tall when you have finished.
You must encourage ideas, innovation and dreams.
As usual, these letters are only to encourage your thought process. They are NOT saying that you must do this or do that. Every business is different, you know your business, employees, customers and suppliers the best. If you can adapt these suggestions, brilliant. If these suggestions create a spark of an idea that saves your business or even if it just encourages you to put in a plan to encourage some hope for your employees, then how cool is that. Go with it!
So, Resist. Where to start?
All companies must take a careful look at their suppliers and customers.
Stay loyal to customers and suppliers. They are under the same stresses you are (sometimes more). If you can help your most loyal customers and suppliers with solutions that make a difference during this time, you will tighten the bonds and that closer relationship will persist and increase once the emergency is over.
Cash is your oxygen, but it does have to be tightly controlled in these dark times. Will your supplier survive? If there is a chance that they will struggle, be very careful with paying early but start looking together for solutions. Get control of the goods you ordered as soon as possible, even if you have to send your own truck round to pick them up. Of course these are difficult times and we all want to support other businesses, especially other Lionesses and small family businesses, but you must prioritise and your business, your employees, your communities must all come first. It will not help your suppliers or customers if you go bust and all that are left are the big multi-national companies. Remember in the opening chart - private businesses employ 60% of the workforce, that is your community.
Immediately, put this essential rule in place:
ALL invoices must go to you for sign off prior to payment. All means ALL. No exceptions even if you have in the past agreed that invoices below a certain level can be paid automatically, these are not normal times. Why? Well, for example, you do not need 6 months worth of paper for the photocopier, yet often when a company is in trouble we find everyday orders are still going out as usual without any thought at all! Aggressively cut all such costs.
In addition, your kindhearted bookkeeper will have built up good working relationships with a number of suppliers over the years. A call from them often results in an instant payment, all through good intentions, but that is one area you must rule and not delegate. You must know what is going on in your bank account at all times. You will know who the essential suppliers are for your business and who the small businesses are that should be supported. Get your bookkeeper to give you a list of all suppliers and their terms so that you can put them on order of importance.
Next, get a list from your team as to what payments are due, what is in the factory, what is ‘on the water/road’ from your suppliers, when invoices are expected (do you have 30 day or 60 day terms, are these terms from when the goods leave the factory, leave the port or arrive in your warehouse?). You need an entire flow chart. This list has to be updated immediately there is a change. This list should be given to you and also on a whiteboard so that everyone can see when supplies are expected, allowing your sales team to keep customers informed. Clothing brands - remember the size bell-shaped curve? Don’t get stuck with loads of sizes you don’t want when small and medium are missing in your warehouse (yes, don’t we know it!). Speak to the factory owner and point out that he can’t fill the boxes with wrong sizes and still expect to be paid - that will concentrate his mind. He has loads of XXXS and XXXL he manufactured by mistake in his basement that he will try to pass on at this time… Any ‘pre-sales’ must be logged officially - if no log, no sale, in times of uncertainty, chaos must be avoided at all costs. Do you send out an order of medical gowns if one size (small) is missing? Move that stock and get paid! Tell the customer the small will be in the next batch. When ‘small’ next arrive make sure new ‘smalls’ are not slipped into a favoured client’s delivery before fulfilling the previous order. Sales teams are under pressure from their clients and warehouse staff need to be protected from ‘turf wars’. Communicate your expectations.
Receiving Cash will be a huge issue. How strong are your customers? Will you get paid? Once your goods leave your warehouse all control has gone. For any customers that owe you money already you have to find a solution. You cannot run on fresh air and they should not expect you to. If a solution cannot be found, you will have to start insisting on payment of past invoices before starting that truck. In times like these, interest on unpaid invoices will make no difference, if the customer was not paying you in normal times, then why would he start now? Do not put your company at risk just because the conversation with the customer is difficult - please believe us, conversations with your employees are going to be a lot harder if your company goes bust.
TEA BREAK! Find that quiet place, make a cup of Tea and take a moment for yourself. These are important times of peace from the battleground.
Welcome Back!
We now have to group Lionesses into businesses where it is ‘Business as usual’, those with ‘supply shocks’ and those in the last category, a ‘demand shock’ where horrifically the pain just keeps coming on in waves.
Business as usual.
The business that is currently doing well, you must speak to suppliers and customers, to keep them informed of the situation, to learn of potential bottle necks, so that you are warned ahead of time. There will not be many of you in this bracket. Either the world needs your goods or services NOW, which creates an immediate supply shock… or it simply does not need what you have which creates an instant demand shock.
Supply Shock.
To give you an example: Temie one of our many inspirational Lionesses is in the blood business (her company is Lifebank - well worth following on Twitter - so much fabulous energy!). Blood is desperately needed, yet what we are seeing in the UK and Europe is a collapse of those willing to give blood (either not allowed to leave home or not willing to go to Blood Bank Clinics). If this happens in Nigeria, this will be for her a huge supply shock, just at the time when she has normal if not increased demand. This is why last week we suggested as a company wide, ‘bringing together of the community’ event (assuming social distancing of course), a visit to the Blood Bank or even setting up a pop-up blood drive in your factory/warehouse. If you are based in Nigeria, her email is: hello@lifebank.ng we are sure she will be happy to assist in setting up a pop-up. Businesses who have a supply shock but not a demand shock have a good chance to come through this, but it will be tough simply keeping up with demand.
Demand Shock.
Businesses with a demand shock but no supply shock, such as Richard Branson’s Virgin Group that is mainly in the fun and leisure business are in for a tough time (he has just announced a massive cash injection into his company and has appealed to various governments for financial assistance) will be suffering right now and…“In one shocking sign of the times, Kenya is destroying about 80% of the 60 tons of fresh flowers it would normally fly every day to markets including the U.K., the Netherlands and Germany…”.
Immediate and Practical steps:
Please take a moment to go through your loan agreements, are there any ‘Condition Precedents’ (‘CP’) that could come and bite you immediately if you miss a payment, paying special attention to Debt to Equity clauses. Speak to your funder about this if you find any CP’s that would be painful, but even if there are no terrifying clauses, speak to them anyway to discuss the situation and discuss what you are putting in place and the support you hope they can give. It is also in their interests that you are supported.
Please check what your government is putting in place to support businesses. Many governments are starting to issue guarantees for as much as 80% of loans. If you were close to closing a loan deal for growth, continue discussions with the bank. All governments are encouraging banks to continue lending. Also look out for Government mortgage holidays (if the owner of your factory/warehouse is being helped out, make sure any support from the Government cuts your rent).
Heavy demand shock:
Without doubt this is now where the pain lies as we move into the businesses that will and are clearly suffering. Many of you who have been in touch with Melanie and our team are hitting those pain barriers hard. Sales did not just dry up (that suggests a movement, a curve downwards). No. Sales just stopped - dead. From sales to instant nothing, zero.
So companies like Richard Branson’s that have zero demand…
Life for you tragically has gone into shut-down, Lionesses in this position should look at their business in this light. The economy is not going to turn around in one week or even seven. This is going to take months. If your business is in tourism or other such areas, you sadly may have some tough decisions to make. Many of you may be in this position already.
When Michael Schumacher had the terrible ski accident in December 2013, the only solution available to his world class medical team (and he could afford the best) was to place him in a medically induced coma, until such time as his body healed and he could hopefully be brought back.
Unless you can manufacture something that is needed by the medical community, unless you can produce something that people need to buy now, then you may have to pivot or reinvent your business until the sun comes out again.
The Light.
So let us look at the light first. How can we adapt our businesses to survive this Tsunami that has hit from out of nowhere.
Right now, the world needs:
Ventilators.
Ventilator parts.
Manufacturers, this is your time. If UK Car and Vacuum manufacturers are changing their systems to manufacture ventilators, why not you?
Medical glasses. (the plastic safety glasses we used in our school days), these will all require moulds to be made - can you or your supplier make these type of moulds?
Masks.
Medical gowns.
Medical hats.
Medical gloves.
…..all need miles of fabric — if you are in fashion, what are you going to do with the miles of fabric you just had delivered? (H&M, the mass-market clothier, is adapting its production lines to supply more surgical garments, if they can do it - why not you?)
Hand Sanitiser.
Alcoholic drink manufacturers - welcome to your new world… Although the market for Gin will not dry up (try spending 3 weeks locked up in a room with my kids!), Hand Sanitiser will save the world and if you make a cool design it will become a great marketing tool, believe me. Likewise perfume manufacturers - LVMH is making hand sanitiser as well (just think of those bottles!), so perfumers, here is your chance.
Soap.
Hotels.
Have a hotel near a hospital ? Chelsea Football Club just opened up their hotel for the nearby hospital’s Medical staff to sleep in…
Large halls.
Have an empty warehouse or conference centre? Your time will come soon. These are being changed into instant Intensive Care Units such as the UK’s new 4,000 bed ICU in the Excel Conference Center.
Obviously this is not an exhaustive list, simply one to get you thinking during a time when possibly you cannot even remember where you left the tea bags, let alone how to save your business as it is all so overwhelming. We are not saying that your lifestyle will not change, it will and possibly dramatically, but ‘where there is hope there is life’ and that applies to businesses too.
Next week we shall deal with the dark. Retrenchments. As hard as this will be, perhaps this is the only solution to saving your company long enough for the buds of Spring to push through once more. They will come, but time is a luxury that many of you with businesses in certain sectors simply cannot afford. However be warned, the employment laws of your country have not changed and there are often rules in funding contracts that will bite you if you ignore them.
Until next week:
Stay safe, stay strong and stay determined, remembering at all times that you are not Super-Woman, it is ok to feel pain, it is ok to cry, just that you have to do it at home and away from your staff who are looking to you for strength and leadership.
More articles from the Coronavirus: Business Unusual Series by Team Lioness.
