Making it through tough times





3-24-20



The Covid-19 Pandemic has resulted in stock markets tanking and government bailouts. People are nervous and businesses are worried about a forthcoming recession. Is your AEC firm ready if this becomes reality? Read on for tips to help you succeed.





These are trying times indeed. The Covid-19 virus certainly has most of us scratching our heads and wondering what is coming. While this current time of uncertainty is definitely unique, it is likely not the first time you and your firm have had to deal with trying times - and it won't be the last. It's time to make sure our people thrive in the best way possible and that we keep our businesses afloat in a way that makes us stronger and more profitable on the other side. Here are some tips and best practices to get you on the right path.


The first, and the most important, is the same for all trying times, in business, and in your personal lives: Don't Panic. There is a lot of hysteria across a wide array of news, politics, financial markets and businesses. Just like we look to our leaders to calm the fears that can get out of hand, your employees and your clients will appreciate your level headed approach to the decisions that need to be made. Emergencies usually tend to look much bigger in front of us than they do in the rear view mirror. Keep this in mind and take the necessary time to make proper assessments, ask the right questions and think through all decisions carefully.


Keep a close eye on your cash flow. If you're not already doing it on a regular basis, start doing so weekly. If you don't have a 13 week cash flow report, now is the time to create one. As recessionary pressures increase, your access to cash is extremely important. Lack of cash is the number one complaint by companies that do not survive economic downturns. Your employees are the largest expense in A&E firms. As cash becomes tight your organization can turn into a house of cards. Employees need their paychecks now more than ever and even your top talent and key employees will jump ship to a more robust company if they start losing their paychecks. Just having a large A/R is not enough, timing is very important and a well updated cash flow forecast is the tool you need to stay on top of it.


Step up your communications with clients. Accurate cash flow predictions only result from strong open communication with your customers. Often this is done at a lower level of the organization where AR personnel are talking with client AP personnel. Now is the perfect time to elevate these conversations. Use the current state of affairs to talk with their leaders about how they are doing in their businesses. Include current news, current projects (and their AR), and what they see in their future. Listen carefully for issues in their world that may put a squeeze on their ability to pay you. In addition, given the fluid nature of day to day economics in the current environment, make these calls more frequently than you might otherwise be used to doing. You'll be better informed and your relationship with your clients will be stronger as a result of your communication and concerns.


In addition to client communications, make sure you have an open dialog with your bank. Check on your line of credit and discuss with your banker options for increasing it. If you have a good cash flow forecast include this in your conversations so your banker understands your situation. He'll want to know your needs as well as your forecasted liquidity. Even during good times, your line of credit can be a life saver when cash flows aren't lining up with expenditures. During a downturn it's even more important. Knowing precisely when A/R turns to cash relative to timing of expenditures helps to lay a road map for the use of your line of credit. If there are some potential high risks in that A/R keep your banker abreast of them and any contingency plans you've made in preparation. At the end of the day your firm may survive as result of that relationship and your access that credit.


Tighten your belt. It's a given that we watch our expenses closely, but it may be time to take a closer look. Are there initiatives that could be put on the back burner due to lack of a reasonable return in the current environment. Make these decisions carefully. If you have a good handle on your cash flows along with projections for the initiative, or the big project that you're wondering if you should take, then complete a Net Present Value analysis to make a go/no-go decision. In addition, it's unfortunately a good time to look at those in the organization that aren't a good fit. This is easily one of the hardest things we have to do as good managers but if there are those that aren't holding their own it may time for them to go.


If your firm is in a good position and you've done all of the above and more, then it's time to invest. Research shows that companies that found a way to invest in themselves during the downturn come out significantly stronger than those who merely weathered the storm. Look for initiatives that could have long lasting implications for the viability of the firm. Implementing technology that is currently selling at a reduced price or finding that top talent from a firm that isn't doing as well are just a couple of examples.


Lastly stay positive. Remind yourself that you've survived tough times in the past and you can do so again.