In sports there is a stance known as the “Universal Athletic Position,” or “ready position.” Feet apart, knees bent, hips back, chest forward, arms extended-with minor variations, this stance is favored by athletes as a starting position for many different sports. Being in “athletic position” allows a player to move quickly in any direction. The athlete is ready for anything.
Similarly, businesses can put themselves in an athletic position where they can move and adapt quickly. This empowers them to more easily mitigate damages when they face challenges, and to take advantage of opportunities when they arise.
Why Is it Important for a Business to Take an Athletic Position?
Even under normal circumstances the list of things that can happen to a business is endless. A natural disaster, a fire, or an extended power outage could seriously disrupt your ability to function. Bad publicity, whether deserved or not, could damage your reputation and your customers’ loyalty. New technology or stiff competition could make your current products obsolete. And so on, and so on.
Under extraordinary circumstances such as the Covid-19 pandemic, the threats to a business become even more severe. According to Fortune Magazine, nearly 100,000 businesses in the United States have closed permanently due to the pandemic and this number continues to increase. Thousands of other companies have filed for bankruptcy or are seriously struggling.
While some calamities can be anticipated, others are impossible to predict. A business that has the foresight to prepare for the unexpected has a better chance of surviving when others might fail.
On the positive side, times of change often bring about unexpected business opportunities. A company that takes an athletic position may be able to reap a handsome profit from those opportunities and to prosper while other enterprises decline.
How Can a Company Become Ready for Anything?
Planning and preparation are essential for the success of any business. If there is anything that Covid-19 has taught us, it is that nothing can be taken for granted. The companies that continued to profit despite the lockdowns and restrictions were those that had strong contingency plans and resources in place.
What lies ahead is uncertain. It seems unlikely that things will ever go back to the way they were before the pandemic. With a fragile economy, continuing threats of disease, societal instability, and mounting international tensions, preparedness is more important than ever. Your organization’s ability to be flexible and resilient are crucial to its survival and prosperity.
Imagine you are playing baseball, and it’s your turn at bat. You are standing on the balls of your feet, prepared to swing the bat. At the moment the ball leaves the pitcher’s hand, you must make a split-second decision where to aim, and whether or not to complete the swing. That decision may make the difference between scoring and striking out, and ultimately between winning and losing the game.
Likewise, you must be prepared to make the quick, correct decisions that ultimately determine the success of your business.
Here are some ideas that could help your company be prepared for the inevitable changes that the future will bring:
Increase Your Financial Confidence
Running a business is somewhat like driving down an unfamiliar highway at night. One of the most important things you can do to have an athletic position is to “turn on the headlights” when it comes to your financials. Most companies have systems in place to provide historical accounting information, but many are lacking foresight to see the road ahead. You need to have the proper tools and mirrors in place to safely make lane changes.
To increase this visibility your company should have a 13-week cash projection, a 12-month rolling forecast updated monthly, and a 5-year monthly forecast. You should incorporate solid budgeting practices and actual-to-budget reporting. Accrual-basis accounting and an efficient monthly close process are vital as well.
You need to have the expertise (or outside experts) in place to be able to use these financial documents to analyze your current position, ensure you are in athletic position, and make confident, data-backed decisions when challenges or opportunities arise.
Make sure that your company maintains clear and accurate financial data, and that you have made allowances for emergencies. Financial confidence is trusting your data and being able to make well-informed business decisions. Your risk factors are likely to increase in times of crisis and opportunity, so it is important to know exactly what your available resources are.
Having financial confidence will also help you keep your goals in mind as you make necessary adjustments. It will help prevent serious mistakes that can result from acting in panic.
Stay in Sync with Your Customers
Remember that when change comes, it not only affects your business, it also affects your customers. If their incomes decrease, they may start looking for less expensive products and services. If they are forced to work at home, they may need home office supplies, online purchasing options, homeschool resources, or home delivery services. If they receive stimulus checks, it may be a good time to invite them to purchase some of your more expensive products. Times of upheaval can become tremendous financial opportunities if you are aware and prepared to act.
Watch for ways you can better serve your customers as their circumstances change. Think about inexpensive ways you could temporarily adapt your current products and services. For example, at the onset of the pandemic some clothing manufacturers started making face masks and some distilleries started making hand sanitizer. If you help out your customers in their times of need, they are more likely to remain loyal to your company in the future.
Keep an Eye on Your Suppliers
Your suppliers will also be affected as unexpected situations arise. If they find themselves in need of cash, they might offer special sales or incentives that you can take advantage of. They might be willing to negotiate more favorable terms or enhance their service.
When you are in athletic position, you have the financial tools in place to be able to make a confident, data-backed decision about whether these sales or incentives are in your best interest.
This could also be a good time to look around and see what bargains you might be able to get from other suppliers, especially if there is any indication that your current suppliers are in danger.
Have a Robust Continuity Plan
While major events that cause business disruption may be unpredictable, the effects of those events can-and should-be planned for. A continuity plan is a set of strategies for keeping the business running regardless of circumstances.
A business continuity plan should consider the possible effects of adverse conditions on people, facilities, equipment, utilities, supplies, and information technology. If one or more of those resources is harmed, how will the business continue to operate? Where will the money come from to pay for damages? What alternatives can be brought into play to keep revenue coming in? Do you have sufficient reserves of money and resources to get you through a crisis?
A good continuity plan can save your business in an emergency. It can also help your business reap windfall profits in in times of opportunity. It is well worth your time to develop and maintain a plan.
As Jason Smith, CEO of the Risk Management Institute of Australasia pointed out in his 2020 interview with Smart Company, “Every time you undertake a business continuity planning exercise, you learn something new about your organization. It’s all about good management – setting yourself up to manage the downside risk and maximize your chances of success as you move forward.”
Be Prepared for an Exit
It may be that your long-term goal is to sell the business. Or perhaps you might receive an unexpected buyout offer from another firm. If your company is in athletic position, you will have current, accurate financials in place so that a potential buyer can easily determine the market value of your company. You should also be well-versed in the due diligence process and have a plan in place to evaluate the benefits and drawbacks of any acquisition offer that might come your way.
Learn from Experience
After dealing with a setback or a stroke of luck, you should review the events to see what went well and what could have been improved. Even a small event can provide valuable lessons. The recent blast of Arctic weather in Texas lasted only a few days, yet it brought many businesses to their knees due to power outages, frozen water pipes, crop failures, and lack of heat. Such occurrences can alert you to areas where you are not as prepared as you thought. They can also give you ideas for how to profit from similar events in the future.
Build a Strong, Flexible Contingency Team
Your CFO should be your first line of defense when the unexpected happens. A good CFO will have the expertise and industry knowledge to be able to quickly analyze your (hopefully athletic) position and to make data-backed decisions using financials and projections.
It is also important to have a team of people who are able and willing to adapt quickly–people who have a “can do” attitude and are not afraid of a challenge. Contingency plans and strong communication channels should be of high priority. Your contingency group should be well aware of your plans and be ready to take decisive action.
Don’t forget that your team includes not just your employees, but outside resources as well. Good relationships with your banker and insurance agent are essential. If you have a landlord or use outside consultants, it is wise to discuss contingency plans with them, to prevent unpleasant surprises when disaster occurs. You may also wish to solicit input from trusted suppliers, customer representatives, or others as you prepare your contingency plans.
In tempestuous times such as these, it is imperative for businesses to evaluate their readiness for unexpected events. Taking an athletic position through planning and preparedness can help your business not only survive but prosper. Should you desire advice or help in preparing your contingency plans, we invite you to contact Preferred CFO. We are in athletic position and ready to assist!
About the Author
Jerry Vance is the founder and managing partner of Preferred CFO. With over 16 years of experience providing CFO consulting services to over 300 organizations, and 30 years in the financial industry, Jerry is one of the most experienced outsourced CFOs in the United States.
You may also be interested in...
Choosing the right supplier for your business can be complicated, especially if a large portion of your product comes from a single company. For many companies, supplies are secondary only to labor in their expenses. But choosing the right supplier has even more...
In every company, there are important decisions to be made on a daily basis. Some decisions are mundane and have only short-term consequences. Others are strategic and can affect the company’s performance and profits for years. Too often, these critical decisions are...
Whether your business is a startup or an established enterprise, you need a strong, agile financial team with a highly competent leader. Some companies think they can get by without a Chief Financial Officer (CFO) until they start preparing to go public. Other...
It’s not uncommon to have difficulty differentiating between the main financial professionals. Not only are the names similar, but they are also often unintentionally used interchangeably. However, despite how the titles may be used colloquially, there are distinct...
Nearly every business requires supplies and services. To keep your company moving forward smoothly and to ensure optimum profitability, you need to find vendors who are trustworthy, consistent, and correctly priced. An ideal vendor is more than just a supplier; they...
A virtual CFO, also called a VCFO or fractional CFO, is a consultant or company that provides CFO services to one or more businesses on a part-time or ad-hoc basis. In the past, a true CFO was usually a highly paid, full-time employee that only large corporations...
Gross profit is one of several key profitability metrics that help companies evaluate their financial health. It is necessary to determine gross profit before you can calculate other important figures such as net profit, EBITDA, and the company’s bottom line. Gross...
Selling a business, especially in the current economic climate, can be a complicated process. You want to get the best price from the right buyer and smoothly transition the business to the new owner. The process takes a significant amount of planning, negotiation,...
An essential factor in business management is the ability to discern where the company is headed and what course to chart for maximum profitability. Intuition and guesswork are not sufficient to create a rational roadmap for the future. For that, the process of...
Cash management is the lifeblood of any business. It can make or break any company regardless of how great the product or service is. In fact, cash-flow related challenges are the reason 82% of small businesses fail. Cash flow is a metric that every company should...
It’s becoming increasingly common to see companies turning to an outsourced CFO instead of a traditional in-house CFO. This is especially true for the dynamic, high-growth SaaS industry. SaaS companies are finding that outsourced CFOs specializing in SaaS are often...
There are many reasons why two companies may choose to combine into a single entity. Expanding into new territories, adding technologies, reducing costs, eliminating competition, boosting revenue, and increasing market share are just a few examples. The legal joining...