In times of economic crisis, companies struggle with their sales and marketing, and we often see savings in that area. In a crisis, revenues fall while costs stay the same or even rise, and cash flow becomes an important advisor. Surviving a crisis is about maintaining more revenue than expenses. A simple ABC, not really a special insight that we share here.
Keep healthy margins, save costs and sell more
We are in a global health crisis, with a recession on the horizon. The coming months, maybe even years, will be a period of sales declines. Companies will want to minimize costs. And some companies will go bankrupt. De eerste en grootste reactie van de meeste bedrijven is het verlagen van de kosten. This is easier, and usually within your own control. And with that, the income flows of other companies as well as people’s incomes decrease, which means that consumer spending falls accordingly, a vicious circle.
There is also another, but more difficult way to improve the ratio between income and costs, and that is to increase your income. Again, an ABC. The difficult part, however, is getting your customers to spend more in a crisis and therefore cost-saving period. How are you going to do that?
It would help if you start rethinking your value proposition. Companies do spend money, even in times of crisis, but only if the value offered is higher than they spend. Sounds easy enough, but it isn’t.
The basis of your added value
We are happy to share with you how we think you can provide value for your customers in times of crisis. It would help if you started thinking like a customer, like one of them. Think and act like them, put yourself in their shoes. Where are they affected by this crisis and where can your services help and add value? Let’s look from a time perspective, how your customers think and act over time. I’ve emphasized words that you may be able to apply yourself:
- Short term (1 – 2 month(s))
times of crisis, companies focus on the short term and, given the nature of the crisis, on caring for their employees. How can employees continue to work. The most important issues are maintaining business operations and creating stability and clarity. IT service providers see this in an enormous order flow for laptops and Office365 environments. When that period is over, it is about securing the cash(flows). Have money in the bank. In times of crisis, even the best paying customers can change their behaviour, for the same cash reasons. The third activity is that companies want to cut costs. Reduce or cancel contracts that have a direct effect on their expenses and costs. Priorities are to terminate the high amounts and flexible contracts with minimal or no impact on day-to-day operations. Think of temporary workers, rental of equipment, but also services that you can slim down such as electricity, cleaning, internet; you name it.
- Mid-term (this fiscal year)
After the initial period of stability, companies focus on keeping current fiscal year results healthy and rationalize. It’s about maintaining a positive cash flow. Operating margins, net profit and cash flow indicators should have a positive balance. Cost reduction schemes or solutions must have an effect within the financial year, preferably with a positive business case in the same financial year. Although it is never a popular theme, employment is under pressure. We look at temporary employment contracts and also at employment contracts that show a positive balance if terminated within this financial year. Working efficiently and at the same time keeping the business up to standard is of paramount importance. Businesses are also focusing on securing their revenue streams. Customers will be contacted more often, up- and cross-selling will be looked at and special offers will be made to win the current deals in the sales funnel. All depending on portfolio lead times, companies will be looking for low-hanging fruit, creating revenue at a minimum of expense.
- Long term (1 – 3 years)
The long term is a period that many companies do not see in the crisis. Why invest or work on long term scenarios when you are in survival mode? Based on rationalization, companies operate in a slimmed-down mode, very efficient, effective, but…. do not carry out activities that are important to the long-term stability of the company. Downscaling has led to cost-effectiveness and a healthy financial situation for the short and medium term. However, for the long term, as business will grow and demand will grow, organizations will face scale-up challenges. Having an organization that can easily adapt and scale will lead to a situation where a company can more easily deal with a future crisis. This takes time, so it is now necessary to orientate on their future value. In addition to organizing and preparing for the future, companies that downsized their commercial activities during the crisis will see a gap in their sales funnel. Not investing in marketing and sales will lead to cost savings in the short term, but also to a decrease in new leads and opportunities. Future new sales growth must come from a healthy funnel and therefore a continuation or even expansion of commercial activities during the crisis.
These insights are only a sketch of what will (probably) happen to companies during a crisis. A modern company needs to be agile, adaptable, responsive and customer-focused, but… how many are there really? The scenarios I have shared are just possibilities that can play out within companies.
Share your thoughts and ideas
But, even if they don’t exist, you may want to use them. During these times of crisis, the management of companies or the internal consultant and crisis teams need advice. They look for solutions and ideas to help them with their challenges. Just sharing the above scenarios can help and bring new ideas to the table.
A suggestion is to think along with your customer’s cash position. Minimize or even refrain from setup or initial payments within the project. Calculate the initial costs that you normally charge in the beginning in the monthly amount. A small and very logical idea, but not always top of mind.
So it’s best to take a breather, examine what your target audience is doing or should be doing, and then introduce your proposal. How? In Part II, we share tips for building your short, medium, and long-term value proposition.