Want Greater Stability, Revenue, and Profits? It Starts with Knowing Your R!

by Howard M. Shore, Date: Jan 07, 2021

Want Greater Stability, Revenue, and Profits? It Starts with Knowing Your R!

In my 30 years working with CEOs and executive teams, I’ve found five phases that a company is typically in. And while years like 2020 certainly seemed to exacerbate some of the issues companies are dealing with, once you recognize which phase your business is in, you can take the corrective steps needed to right your ship or propel your growth to the next level.

The Five Rs

Businesses are usually in one of these five phases: regressing, rebuilding, restarting, resuming, or rocketing? Which one of these sounds like where your business currently is? The answer to the question is essential for determining the next steps.

Let’s take a look at each R.

Regressing

You once had an amazing business—stable, profitable, growing—then the unforeseen happened. Perhaps it was an economic downturn, an act of mother nature, or, as in 2020, an unimaginable virus or social unrest. It could be as simple as what you have always done got you here but won’t propel you to the next level. Whatever the cause, now your business is going backward or has lost momentum. Cash flow is down, and perhaps you’ve had to lay off staff—or you’re considering it. Maybe the demand for your service is gone, you lost your largest client, and your customer base will likely not coming back. At this point, you’re not even sure where to begin to fix it.

If you’re regressing, you’re not able to resume yet because you’re still sliding down the mountain.

Contrary to what you might think, regression typically represents a company problem, not an industry one. It would help if you had a better strategy to ignite topline growth. Your strategy problem may have been caused by a change in the market you have failed to address. There is plenty of opportunities to grow! The right strategies allow you to increase your market share.  In regression, I find that companies have captured the bulk of efficiencies from operational effectiveness and have squeezed much of what is possible out of the existing revenue base. The problem is understanding how to grow faster while increasing operational effectiveness.

All is not lost for businesses in this phase, but strategic moves need to be taken to turn the ship around and start sailing again.

Rebuilding

Did your business get derailed in 2020? Perhaps you had to close down while we were all sheltering-in-place? Or your business experienced a substantial downturn due to a poor economy or an act of nature? Are you burning through your cash reserves?

Understanding your cash situation, the nature of your circumstances, and recognizing the conditions will persist is essential to understanding your next moves. In many cases, it’s not about changing your business model so much, and it’s not about finding new customers. It’s about understanding the best course to take until the market resumes an average pace. You must have a strong handle on your cash runway, decide how many people to keep on the payroll, and have strict cost controls. In some cases, you can or must pivot to take advantage of short-term opportunities.  You may need to change how you do business to acquire, keep, and serve customers well.  You’re not giving up on your business; you know, it’ll be good again. More permanent market shifts may require a new business model. Most importantly, you mustn’t run out of cash before you can recover.

The first industries that come to mind when I think are rebuilding include event, entertainment,  travel, hospitality, and dining.

 When rebuilding, there are several vital questions:

  • What is your cash runway?
  • How can you lengthen your runway?
  • Do you need to pivot?
  • Who do we need on the plane as you go down that runway?
  • Is there a more profitable model to take advantage of the situation?
  • Is there a short-term market opportunity you can exploit?

Businesses that are rebuilding need to identify shortcuts to rebuild faster and more effectively.

Restarting

When you’re in the Restarting phase, you’re doing just that—restarting—and most of the time, you’re doing it from scratch. It’s Day One all over again!

Perhaps you had to close your business during the lockdown, or you were affected by a natural disaster that forced you to close for an extended time. You may have lost your office or retail space, and you probably lost your employees as well. You may have a great product and a valid business model, but you’re essentially opening again, so you have to hire mostly new employees and maybe find a new location. Or perhaps you’re now taking everything virtual, and you have all new software—so much “new” to deal with.

When restarting, you need to make sure you’re taking advantage of strategies that will get you back into profit and positive cash flow quickly.

Resuming

If your business is in the Resuming phase, then things feel like they’re business as usual. Maybe you experienced a slight hiccup during shelter-in-place, but you still have a good cash reserve, cash flow is still positive, and you’re continuing to operate without much disruption.

The tricky thing about being in this phase is that, while things are humming along fine and dandy, you’re likely missing out on golden opportunities available for business owners in your position who may be sitting on a strong balance sheet with lots of cash. Many businesses are taking advantage of the weak players and using that cash to acquire market share, talent, or technology. Not everyone is in your situation, so this is the time to find opportunities that will likely benefit both you and the other company.

The other thing you should do during this time is to make sure you have a strategic plan to avoid having to pause your business in the future. Make sure you can weather any storm.

Rocketing

This last phase—Rocketing—would seemingly be a great place to be…and it is! And it’s a much more favorable place to be than Regressing, Rebuilding, or Restarting! Your business is skyrocketing in terms of growth, scale, and profit. And like a business in the Resuming phase, there are many opportunities for a business in your position.

Is your challenge that you are too busy managing your day-to-day operations even to see these opportunities? Or maybe you’re too burnt-out to think about these opportunities, much less find them? Did you find that your business was not built for this level of scaling? In many businesses, operational effectiveness falters as growth accelerates. When that happens, you squander cash and profit opportunities. Revenue is vanity, profit is sanity, and cash is king!

Did you know that some of the biggest companies were bought, acquired, or built when there has been a significant economic downturn? Now is that time again. So if you’re not thinking, “Hey, how do I become an opportunist,” then you’re probably missing out on your next-level growth. It would be best if you found ways to take advantage of your momentum. Don’t take your feet off the gas!

You must continue to look out at the future! Past performance is not a guarantee of future success. You need to consider how to sustain your growth for years to come. To quote Marshall Goldsmith, “What got you here won’t get you there.”

Businesses that are rocketing need to find ways to keep the rocket soaring while also finding ways to take work off your plate so you can do what’s important to you.

What to Do Next?

Which of the scenarios above sounds like your business? Not sure what to do next? We want to offer you a valuable option to get—or keep—your business on the path of exponential growth, profitability, and increased cash flow.

To learn more about how to take your business to the next level, order Howard Shore’s Wall Street Journal bestseller, The Leader Launchpad, here.

Sign up for a free 30-minute consultation where one of our expert coaches will address these five things:

  1. How to get new clients without changing your sales team or process
  2. How to scale without your profits shrinking
  3. How to create consistent growth this year, so it’s not always up and down
  4. How to make the crucial decision of hiring more or letting go to make sure your payroll works in this changing time
  5. How you, as a CEO, can get half of your time back

No high-pressure sales…that’s not who we are. You’ll get value from our time on the phone and will have actionable steps to begin applying right away.

There is good news for you regardless of which phase your business represents. You need to take the next best steps to get you where you want and need to go.