During the era of COVID-19, it is important to focus on what is controllable. And as we see business slow and an economic downturn creeping in, now is the time to recession-proof your business. By focusing on efforts to brace for impact while building a strategy for a profit plan in the future, you’ll be able to strengthen your organization, reduce negative outcomes, and be better prepared to work efficiently in the long run.
Here are a few steps you can take now to maintain stability within your organization and plan for the upswing in business to come.
With a country on lockdown and no known end-date, now is the time to strategize on how you can be more proactive in protecting your business instead of being reactive when it’s too late. A study by U.S. Bank shows that 82% of businesses fail because of cash flow mismanagement. Thus, evaluating your cash flow and taking control is the natural first step to keep your business healthy.
Cash flow is what keeps your business moving. It’s the money coming in and going out of your bank account as a result of day-to-day operations. It’s what helps you maintain your business and how you pay your bills.
Study what money you have coming and going at any given time and learn how to ensure that you have the right amount of money in the bank at the right time to maintain your essential business needs.
After you’ve identified what your current and potentially worst case scenario cash flow looks like, it’s time to cut the fat. What expenses can your business live without? If you’re able to stay on the road, how can you manage your cost-per-mile?
An easy way to kick off your financial evaluation is to divide your fixed expenses (expenses or bills that are always the same amount like insurance) and your variable costs (items with varying prices like meals or vehicle maintenance). As Forbes magazine suggests, your cost-per-mile is more than just your cost of fuel expenses. List out every expense you need while on the road and cut back on your overhead costs as much as you can.
The sooner you can eliminate waste and adapt to working as efficiently as possible, the likelihood of your business surviving and being better positioned for a comeback when business resumes.
What we know about an economic downturn or a significant decrease in volume is that business as usual strategy won’t cut it. Whether it’s a plan for smart expansion or pivoting time to forward thinking investments, you need to shift your thinking.
When it came to the auto transport industry in the 2008 recession, different regions across the country were negatively impacted more than others. By doing research on what areas are still moving loads or studying lockdown restrictions across the country, you can expand or plan to move according to forecasted route upticks. Follow demand where it makes sense for your business and the efforts can help you maintain stability in a hostile economy.
A healthy American economy is nothing without the trucking industry. While that seems overwhelming in times of an economic downturn, it means that our industry will be amongst the first to bounce back. Now is the time to start planning for the inevitable rebound. A way you can do this without spending money is to invest in your network. What shippers or brokers do you work with most frequently? How can you secure their loyalty and stay top of mind? These relationships will be crucial to taking advantage of business when it comes back around. One segment of the industry that always manages to climb quickly after a recession is used car sales. Pay attention to who in your network will most likely have used car load connections. Maintain the connection to be among the first to bounce back.
Too many carriers who need technology have been resistant to new systems as the migration can seem intimidating. Now is the time to invest in your business, risk-free. Find a TMS partner who is willing to work with you on cost and has the ability to support you in your TMS journey to building back up a better business.
Business is already slowing down. We know that we are entering a recession. It might seem intimidating or unrealistic, but the organizations who act fast and invest in their business now are the ones who come out on top. By focusing on your cash flow, staying lean, adapting to our new normal, and finding ways to strategically position your business, you’ll be able to get ahead of the curve and proactively reduce the negative impact to your business.
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