Positioning for Success in 2022
February 02, 2022
By Robert Katz
With the start of a new year and an early softness in the public markets, it’s an important time to reexamine your company’s plan, vision, and execution. Everything starts with a good to great plan; sometimes execution changes by the hour, but with an excellent foundation the road map is in place. Here are five qualitative and quantitative opportunities to increase profits and cash flow and improve your company’s capital structure and overall morale.
1. Reward the Superstars: Strengthen Commitment to the Team!
Most companies are suffering from supply chain, logistical, and staffing issues. Times are tougher and it seems that stress levels will continue to worsen before they’ll get better, especially in light of the new COVID strains. During these times, it’s more important to thank and reward the top earners and superstars. Now more than ever, people are transient and moving for a few thousand dollars -- what better time to recognize excellence and let your employees know that you care? This resonates significantly; more than one thinks. Most people stand ready to complain about almost anything, compared to the few who take the time to praise staff who provide an excellent experience or do excellent work. Maya Angelou said, “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget you made them feel.” Making a positive impact daily not only will enhance your experience but make a difference to those around you, improving overall morale and productivity.
2. Price Increases: If You Don’t Ask You Don’t Get!
Expenses are climbing at unprecedented rates with all the challenges surrounding rising costs and cash flow needs. Whether it’s raw materials, staffing, trucking or other obstacles, everything is increasing in price. Having said that, a number of companies have been able to pass along a portion or all of the costs to their customers, a simple example being dollar stores charging $1.25 instead of $1, or a 25% increase. The first inclination usually is to absorb the costs because it is less confrontational and there is almost always a fear that your hard-won customers will go elsewhere. In my experience, what continues to remain true is that if your presentation to your customers is crisp, factual, and detailed, they’re usually pretty receptive. For the most part, customers are accepting certain levels of price increase. And even if you may not be able to pass it along, for the most part your customer will respect you for making the ask.
3. Financial Check Up – When Was the Last Time You Met with Your Lender?
The financial markets are flush with dry powder: money to invest and/or lend. If you haven’t met with your lender in the last nine months, it is time! Review your rate, covenants, availability, cash management systems to fully ensure that you are not leaving anything on the table. Is your lender/partner servicing your company’s needs and maximizing value for you? Are they paying you enough attention? Consider a market assessment; think about other lenders that might be interested in your business -- the time to reassess may be upon you. By utilizing this approach, you will be in the forefront of your lender’s mind for the right reasons. And the best time to make an ask is when there is plenty of money available and you don’t necessarily need it.
4. Cash Flow Dashboards: Is Your Business Trending in the Right Direction?
More and more, with executives’ schedules jammed, having key dashboard metrics from where leaders can access the knowledge to make real-time adjustments is critical. Those that provide trends and track cash flows and operating performance should be at the forefront.
Review and assess the collection and payment patterns. Look at opportunities to aggressively improve and enhance the businesses cash position. For example:
- Are you taking advantage of cash discounts?
- Are the trade terms market or better?
- Are you paying your vendors more quickly than necessary?
- Has inventory turnover improved – why/why not?
- Are you working on the 80/20 rule?
- Do you have the right # of SKUs – proper breadth and depth of inventory
- Are you customers paying on time?
- When was the last time you considered raising prices?
- Are you tracking your customer’s performance? It’s more essential than ever.
- Identify key touch points for when/why you should connect with your customers.
Gross and Net Profit Margins
- Track performance by customer and product:
- Should certain customers be fired?
- Should certain products be deleted?
- Year over year margins – why the change?
- Material variances:
- Are they being tracked, by month and quarter?
- Is the material difference for the better or worse and why?
- Identify opportunities, and build action plans to take advantage or pivot.
5. “Catching a Breath” and Taking Stock: It is More Important Than Ever
The best leaders, despite the speed of change and daily pressures, have the ability for self-assessment, self-actualization, and evaluation. Making time to stay in touch with your leadership team and employees and ensuring your stakeholders know you are engaged -- and care -- will better position your company for an excellent year and into the future.