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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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60 DAYS AND A LIFETIME AGO
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Sometimes those areas are profitable, and sometimes they aren’t, but the business almost always loses money for some period of time before the fruit of their labor is realized. Now, though, we need to question everything. Is one business unit propping up another, poorer performing business unit? How much are you willing to lose today? It would be cheaper and smarter to eliminate unprofitable or marginal sectors of your company now, then use the cash you save to invest in expansion down the line. 4. Turn Down New Business: Am I crazy? At a time when your company is losing customers and begging for new business, why would I tell you to turn down work? Well, just like in the good times, some customers are risky bets who won’t pay you for your product or service. While you may once have been able to take the loss, it could cripple or kill your business right now while we’re in an industry recession. The truth is, good credit decisions are even more important in bad times. You want to reduce your credit lines while working closely with your best customers to maintain those relationships. In the meantime, watch out for the weak players out shopping for new suppliers because they couldn’t satisfy the trade credit extended by their previous ones, and turn them away at the door. Focus on your core business. Be deliberate and selective. Think survival mode. 5. Make Acquisitions: Have you ever eyed one of your suppliers and thought, “We buy so much of this company’s product. Maybe we should just buy the company and keep the profits”? Well, maybe now is the time. Maybe your supplier needs that call right about
now. If your business applies reverse scaling successfully to generate positive cash flow, you might be able to buy a key supplier for peanuts and keep them in business. In this kind of “not-so-hostile” takeover, you can also acquire the key talent that attracted you to this supplier in the first place. You can apply the same logic to acquiring a competitor. Though it’s less common, you could also consider purchasing one of your customers. When it comes to buying a customer, prioritize the big fish that might go out of business or take their business elsewhere if you don’t reduce prices, extend credit terms, or make other concessions. Then ask yourself, “How does the cost of making those concessions compare to the cost of buying them?” The biggest caveat of “buying low” during a downturn is that it can end up adding to your debt. To avoid overburdening yourself, consider seller financing and/or renegotiating terms with the lenders of the company you’re buying. Done right, this can be a win-win-win situation: You save money and acquire talent, the employees of the company you acquire continue getting their salaries, and their lenders continue to get paid. I hope you consider these ideas. The only absolute in this crisis is this: Inertia is not acceptable . If we play our cards right, we can handle this recession together and survive to thrive another day.
5 WORDS TO CONTROL THE CONVERSATION
In the third quarter of 2019, Apple’s quarterly report showed an unexpected slip in profits. Even iPhone revenue had slipped. But instead of taking a bad hit, Apple’s stocks spiked higher after the report was released. Why? Apple CEO Tim Cook used five magic words. Knowing how to successfully talk about your business is key to continued success. You know your work better than anyone else, so you know if things are going well or if you need to course-correct. However, the outside perspective doesn’t always match the reality of the situation. If someone comes in with concerns or outright anger because of what they think the situation is, you need to reframe the conversation and quickly show them the bigger picture. Tim Cook does this with the simple phrase, “The way I see it …” When addressing concerns about Apple’s dip in profits, Cook took control of the narrative and presented the message he wanted people to focus on: Apple’s record service growth.
“The way I see it,” Cook said, “we had the strongest hardware portfolio ever. We’ve got new products on the way. The pipeline is full of great new stuff on the product and the services side. We’re very fortunate and have worked very hard to have loyal customers ... The installed base is growing — hit a new record. That’s obviously a good thing. And we’ve got the wearables area that is doing extremely well.” Suddenly, investors weren’t worried about the iPhone anymore because Cook reminded them that Apple’s wearables and services alone were close to a Fortune 500 company. Cook provided important context about his company by taking control of the conversation. Controlling the conversation is how leaders steer their teams through stormy weather. They pair their deep knowledge of the business with effective communication skills so people understand the bigger picture and aren’t hung up on details that only show half the story. Keep in mind that leaders
like Cook don’t mislead people with false or exaggerated information. They stick to what’s true while reframing it in a way so outsiders will better understand. If you need to reframe the situation or explain some complicated aspect of your business, start with the magic words: “The way I see it ...”
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DON’T LET YOUR EMPLOYEES FALL BEHIND THE CURVE! WHY YOU SHOULD PRIORITIZE GROWTH AND EDUCATION
If you manage any part of a business, then there’s a good chance you love to learn. That’s because in order to grow a business successfully, you need to be constantly learning. The process looks a bit different for everyone. Maybe you read, invest in coaching, or participate in a mastermind or trade group. Whatever your strategy, we’re willing to bet you’ve found ways to continue pushing yourself and expanding your knowledge. If you don’t prioritize continuing education, you should! Lifelong learning is a common thread among the business greats. Warren Buffet, for example, is said to spend half of each day reading and learning. Bill Gates reads an average of a book a week. How often do you read a book, attend a seminar, or educate yourself on something that might help you do your job better? And what about this: Do you encourage your employees to do the same? Even if you feel confident in your own continuing education, you can take the next step as a manager. Not only should you practice these habits of success yourself, but you should also encourage your employees to follow in your footsteps. At most companies, training ends just days or weeks after hiring. Employees are told,
“Do the work the way you were trained” and their managers walk away. As a result, those employees don’t spend any time thinking of ways to make things better, faster, or easier. That mindset can cause businesses to miss dozens of valuable opportunities. As they focus on growing the business, managers often ignore the growth of their employees. That’s a critical mistake because improving your business and improving your employees go hand in hand. Employees might not be as motivated to learn and grow on the job as you are, but given access to the same resources you have, they could surprise you with how much they blossom. Can you imagine how much success you’ll have when your employees begin contributing ideas about how to improve your business? Right now, with the industry struggling and positivity low, those contributions could make the difference between success and failure. Find ways to encourage employee growth and the results will speak for themselves.
GRILLED BASIL CHICKEN AND TOMATOES Inspired by TasteOfHome.com
You can’t go wrong with grilled chicken and tomatoes on a warm summer’s evening. It’s a simple recipe that packs a flavor punch.
INGREDIENTS • 2 tbsp olive oil • 1 clove garlic • 1/2 tsp salt •
8 Roma tomatoes
4 boneless skinless chicken breast halves (4 oz each)
3/4 cup balsamic vinegar 1/4 cup tightly packed fresh basil leaves
DIRECTIONS 1. For marinade: In blender, combine olive oil, garlic, salt, vinegar, and basil. Cut 2 tomatoes into quarters and add to mixture. Cover and process until blended. Halve remaining tomatoes for grilling. 2. In bowl, combine chicken and 2/3 cup marinade. Cover and refrigerate for 1 hour. Reserve remaining marinade. 3. Heat grill to about 350–400 F. Lightly oil grates. Grill chicken until internal temperature reads 165 F, about 4–6 minutes per side. Grill tomatoes until lightly browned, about 2–4 minutes per side. Discard remaining marinade. 4. Serve chicken and tomatoes with reserved marinade.
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How Reverse Scaling Can Help Your Company Survive
Communicate Like an Apple CEO
Are Your Employees Falling Behind?
Grilled Basil Chicken and Tomatoes
The Secret to Leading in a Crisis
UNSURE OF HOW TO LEAD YOUR BUSINESS THROUGH A CRISIS? ‘THE AGONY OF DECISION’ HAS ANSWERS
With more than 30 years of experience mentoring massive international companies and nurturing business leaders at top American universities under his belt, Garcia is the perfect person to give voice to these tough lessons. His prose is self-assured, knowledgeable, and easy to read, which makes “The Agony of Decision” a surprisingly comforting book for an entrepreneur going through hardship. There’s a reason BookAuthority named it one of their best crisis management books of all time!
When business coach and scholar Helio Fred Garcia published “The Agony of Decision: Mental Readiness and Leadership in a Crisis” back in 2017, he had no way of knowing that a pandemic would break out just three years later. Now, his book about how to make tough calls under pressure is more relevant than ever for entrepreneurs. “The Agony of Decision” teaches that when your company is on the line, it’s quick thinking — more than smooth communication, effective execution, or even expertise — that can save it. The book offers a framework to guide you through the decision-making process, helping you identify and weigh each outcome, then choose the right one. Answer that first big question, Garcia teaches, and the rest of the tumblers will click into place, allowing you to lead your company forward. To prove it, he weaves his personal experiences and decision- making scaffolding with notable stories of past business failures and successes. As one Amazon reviewer writes, “Helio Fred Garcia provides a thorough discussion of the do’s and don’ts of crisis response with both current and historical events (remember Exxon Valdez or Tylenol?) that clearly demonstrate the right way to respond … and the gateway to disaster.”
In the last few months, the coronavirus has proven to be the
ultimate test of crisis management. If you’re in the process of figuring out how to lead your business effectively through the turbulence and could use a decision-making toolkit to help you when the phone rings with bad news, “The Agony of Decision” might be your ideal summer read.
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