If you have six hours to cut your budget, spend the first four sharpening the axe

 

By now, most businesses in many industries are beyond stage of making sure their employees are physically safe. Allowing (better: being enforced) your employees to work from home, almost ensures that from a company perspective.

Employee safety and remote communication remain of paramount importance. But if these 2 topics still determine your management meeting today, you have a very risky future ahead.

 

The focus of most management agendas has shifted in the last 1 to 2 weeks to another topic: managing cash. The current circumstances of most business are so difficult, that their normal operations cannot be sustained. The only way to survive is to free up resources. The only way to survive and to thrive again later is to free up resources in line with your redirection towards growth.

axe

 

I am pretty sure that a lot of managers are wondering how long this temporary crisis will last. Will it be finished during/after summer? Or will we only see significant growth again 2021? Some recent US reports, especially the one from Harvard, already talk about 2022… How many budget cuts will we then have? Nobody knows for sure.

Also in this crisis, cash is king. That is the only short-term solution to cope with any serious decline in top-line. Now is the time to cut, and to cut hard if needed … whether you do it in indirect costs. Whether you trim your geographical, product, business unit portfolio. Or whether you will change your debt structure, delay dividends, or optimize working capital, there are several options. But do not just slash with your axe.

 

Now is the time to differentiate your company from the rest. Despite a pressure to take decisions quickly, you need to couple your budget reductions to long-term growth options. It’s for example better to cut deeply in non-growth area’s than to use the famous Dutch cheese slicer method. If you decouple both, you are already preparing the next crisis of your company.

 

Renew your growth strategy if the current crisis requires it. But make sure what your future growth path will be. An easy solution to deal with the unknown length of the current crisis, is to create a growth strategy for 2 scenarios: one for a couple of months and one whereby the crisis will take a year for example.

 

This is one of the most difficult business transformations you are facing, dear business leaders. Cause you need to combine a short-term keep-your-head-above-the-water survival mode with longer-term growth strategy. See it as a challenge and a way to differentiate yourself and your company. You can plant the seeds for your future growth. It is your choice if you place those seeds in the ground or cut them away now.