THE D or É R eport
D ore L aw . com
60 DAYS AND A LIFETIME AGO WHAT WE’VE LEARNED FROM THIS PANDEMIC AND HOW TO FORGE AHEAD
How will you handle the next round of challenges?
In early March, every business was looking down a tunnel and searching for light at the end of it. We were all trying to create a future in the new Worldwide Kitchen Table Remote Office (WKTRO) universe we’re stuck in. So, how did we do? Did we learn anything? What’s next? Stop for a moment — really stop — and ask yourself these questions.
Companies that regularly extend you trade credit and that depend upon you continuing as a customer may agree to improved payment terms, more credit, or even an exchange of equity for debt. Use your imagination, and don’t be afraid to talk to your lenders and suppliers about your options.
As the industry slumps, you may be thinking of downsizing, but I’d suggest a different strategy for returning to profitability: reverse scaling . In the good times, management dreams of ways to “scale” or grow the business, like borrowing more to diversify into new products, services, or sectors; aggressively finding new customers or extending more credit to existing customers; and hiring and training new employees. In contrast, when you scale in reverse, instead of expanding your areas of expertise, you concentrate on your core strengths — the things you do best. Reverse scaling is a deliberative action to concentrate on the most profitable products, services, and business sectors. To do it right, consider employing a combination of these strategies:
What challenges have you overcome so far?
2. Avoid Expensive Tech Unless It
Reduces Your Costs: In the long run, new technologies make businesses in the oil and gas sector smarter and more efficient. But they’re not necessarily a good investment if your goal is short-term survival. Right now, your best bet when investing in new technology is to focus on the metrics. Will this new software reduce the cost of what you sell immediately? Will it enhance your marketing or reduce your travel costs? Will it allow you to reduce your prices? Think of this strategy as keeping your old car a little longer instead of buying the shiny new model. If what you have right now is doing the job, it might be wise to save your money and keep things as they are temporarily. 3. Eliminate the Least Profitable or Lowest-Demand Sectors: You know the expression “80% of the profit comes from 20% of the work”? We’ll, it’s time to find your 20% and do that — and maybe only that. In a growth mode, we have the luxury of trying new things and expanding into areas where we might find new opportunities and customers.
It’s important for us to recognize our “wins” in these trying times. Here are just a few for our law firm:
We learned how to work around the schedules of our spouses and kids. We transitioned to remote access for client questions, issues, and concerns. We revised how we prioritize your demands and needs. We reworked how we handle demands and deadlines for our Mineral Lien System. We learned how to help our team members cope with stress and anxiety.
1. Reduce Debt: This is easier said than
done, but it’s absolutely necessary. Instead of cost cutting or seeking out new funding sources, look for opportunities to minimize your debt burden or extend its near-term effects on the income statement. Can you lease your equipment instead of buy it? Can you sell your real estate and then lease it back? Can you repair capital items rather than replace them in order to reduce what you’re spending now? It may also be possible to refinance and convert short-term debt into long-term debt or consolidate your loans with longer payouts or lower interest rates. You might also consider using your available cash to eliminate debts with personal guarantees.
We mastered Zoom for internal communication.
We adjusted our diet and exercise routines to the WKTRO universe. (Okay, maybe this point still needs more work.) And most importantly, we learned how to trust our team to work independently.
Thanks to this pandemic, I’ve finally stopped worrying about “unsupervised humans running loose,” and I bet you have, too! With so much out of our control, I think it’s critical to reflect on these things and remember how far we’ve come.
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