Most businesses have now either reopened, or are about to reopen. After weeks of little or no sales, we are ready for the flood gates of customers and cash flow to open, too. Some business who were deemed essential have been up and running continuously, many at full tilt with record sales. Regardless of what you’ve experienced so far, you’re in for a change in your cash flow pattern. One that’s driven by the shape of your recoveries. Note the plurality: recoveries, not recovery. Why? Because what you experience in the next 8 weeks may be very different than what you experience in the months that follow. So let’s talk about the future – both short-term and, gulp, longer-term.
The Shape of Things to Come: Short-Term
What will happen to sales when customers finally break free from orders to stay at home? Your sales pattern defines your recovery, and is driven by a combination of pent up demand and customer sentiment about safety. It’s time to think through your unique dynamics and estimate the demand for your product or services for the next two months.
As an example, consider a remodel contractor with a significant backlog of orders to fill after months of down-time. Sales may hockey-stick out as they work hard to catch up, particularly if they can complete the jobs without putting customers at risk. Following and communicating workplace safety guidelines may lessen the impact of consumer fears. With a strong selling focus to refill the pipeline, the short-term future may seem bright.
Now consider a hair salon. Your customer opportunity is use it or lose it. You can’t get those hair-cuts back from the past two months. Still those “would be” clients are desperate for a cut and color. A glut of pent up demand is ready to hit. You’ll be really busy. Unfortunately, you can’t ramp up capacity because distancing requirements limit the number of clients you can safely serve. You may even have lost staff, further reducing capacity. If it’s hard to get one of your precious appointments, you may lose clients. Proactive scheduling and communication will help retain clients while pushing demand forward, especially for clients who aren’t yet comfortable coming out of isolation.
Now consider a hotel property in a popular tourist and convention destination. Recovery occurs when cancelled business meetings and vacations are rescheduled and travel trends are back to “normal”. That may not happen in the next two, three or even six months.
These three examples show how pent up demand and customer sentiment may shape sales patterns differently for different companies. How will these factors shape your sales patterns for the next two months? Does your sales pattern lie behind Door #1, #2 or #3?
Door #1 – Sales trending up consistently, even greater than before
Door #2 – Initial spike followed by slow, gradual ramp up
Door #3 – Slow, drawn out downturn in business (with or without an initial spike)
For those of you who picked Door #1, congratulations! But – is this increase from real pent-up demand like our remodeler’s backlog, or is it just the backlash of customers who want to break free from isolation and go shopping? Is this new level sustainable beyond two months?
If you picked Door #2, maybe it’s not as exciting as Door #1, but a slow but gradual ramp up may provide time to adjust to new protocols and organize appropriate staffing and inventory levels. BTW, what’s the plan to get those sales ramped up?
If you believe your sales pattern lies behind Door #3, slow with a drawn out downturn, when does it rise again? You are no doubt asking yourself in the wee hours of the night, “How long can I sustain?”
In any event, what you experience in the heady and perhaps terrifying first weeks of reopening does not tell you the whole story of your recovery. You must look beyond the next two months to the next phase of survival, and hopefully revival.
The Shape of Things to Come: Longer Term
Long-term survival and revival depends on demand influences that may be harder to visualize. How will sustained unemployment levels of 10% to 15% impact the shape of economic recovery. How will a depressed economy impact your business over the next six months? Here’s my take on what those shapes might look like and why getting a handle on this is so important for the future of your business:
- The first few weeks may not be reflect what the rest of your recovery might look like.
- One-size-fits-none. Determine what your recovery might look like based on your industry, region, and customer or client base.
- Why this is so important? The shape of your recovery drives your cash flow plan. The better the plan, the better your chances of having enough cash.
- Sales = Survival. Cash = Revival