What is a CRISIS?
A crisis is a situation where you are caught by surprise and stuck in a sticky situation where you have totally no clue on how to handle it.
Since it’s a surprise, we do not usually have a plan in place that we can activate during the crisis. And you will notice many small businesses being wiped out during the crisis, simply because they do not respond to the crisis in a rational manner.
What I wanna share with you today, is the single most important tip in crisis management. Yes, the most important one, Building New Relationship.
During the Crisis, who are the people around you (besides your family members) are affected? Your employees, your customers and your vendors (including financiers). These are the people who are watching you, wanting to know how you are responding to the crisis as their interest is in your hand.
Take the COVID-19 as an example, many countries have either a city-wide lock-down or nationwide lock-down, even back home in Malaysia, we have Movement Control Order (“MCO”). It’s affecting our businesses. Offices are not open for business, factories closed, no tourists, no entertainment. Hence we have no revenue, no cash flow.
The wrongdoing during this critical period by most business owners are simply:
– negotiation with employees for pay-cut
– lay-off of employees
– delaying of payment to financiers/suppliers
– pressuring of customers to collect outstanding
– other cost-cutting exercises.
If all the above works, maybe you can still keep your company for the time being, but I can assure you that when everything is back to normal, you will be out of business.
During the crisis, most business owners will think about themselves, thinking of how to keep themselves alive and not really bother about others; whereas good business owners will act very differently. They will face this crisis in a positive manner and I believe the following is perhaps more sensible:
– Do not sacrifice your employees before you. If there is a pay cut, you should take the biggest cut before taking others. You should let go of your allowances or other emoluments to show to employees that you lead by example. Do not even think about laying-off your employees if you have not slashed your own pay.
– Even if you have exhausted all possibilities and the last option left is to cut your staff overheads, try your best not to lay-off your employees, but rather take an average pay cut across the board. Explain to them the effort that you put in, and suggest to them to take the pain together, equally instead of sacrificing their comrades. We celebrate together and we suffer together.
– Take care of your employees’ family. During the crisis, your employees are afraid of losing their jobs, their family members are worried too. To keep your employees motivated, you should help them to calm their family. For example during this COVID-19, a small gesture such as giving each employees’ family sanitiser and face masks are good enough to show your sincerity and care.
– Your customers are suffering during a crisis like this, you may want to follow up with them on your collection, but do not take stern action to recover your debts. Instead, offer them alternatives, such as partial payments, instalments or even factoring of invoices. Your customers will remember what you did to help during this challenging moment, they will remember you forever.
– You are right, your suppliers and bankers may not be as friendly as you, but that doesn’t mean you can just ignore them. Face them and do not avoid their calls. Instead, share with them your current situation. Tell them your plans on costs cutting and collection plan – keep your suppliers and bankers informed. Their concern is very simple, they are afraid that you may just close down and run away.
These new relationships that you built during the crisis are gonna be very significant for the future of your business. The foundation of trust and mutual respect between you and them will bear fruits in future.
Just remember this, they appreciate your effort and sincerity during the tough time, then your best wishes during their glory days.
#entrepreneurship #startup #smallbusiness #crisismanagement #cashflowmanagement #sme #mco
March 28