Against the backdrop of a global pandemic, how should businesses maximize profitability? The pandemic has created far-reaching repercussions to vulnerable businesses, especially those that rely on long supply chains or seasonal demand.
One example of this is in industrial equipment manufacturing, where companies are unable to obtain the raw materials necessary for their orders, yet they leveraged their summer employment needs against projections from last year. Companies now find themselves fighting to stabilize business or in some cases simply break even.
In early 2020, optimistic forecasts predicted strong growth, but late 2020 and now in 2021 have brought lower revenue as anticipated contracts and opportunities have been suspended. As I sit with these business owners to uncover the path to new growth in our current market, the two questions most often asked are:
- What could I have done?
- What should I do now?
Although there will always be factors outside of our control, a key answer to both questions is careful planning. Even with a completely unpredictable event such as a global pandemic, reliable lead and lag indicators are still essential for business leaders to maximize profits. This starts by looking beyond the current crisis at lead indicators-those patterns we can control, which influence lag indicators- results like revenue, gross margin and profit.
Over the last five years, how did we prepare for the peaks and valleys? How many sales calls per day were made? What quarterly cost-cutting measures could have been made? For small businesses waiting on raw materials or suffering from the loss of seasonal contracts, consider your profit from a budgetary perspective. Could you revise the timing of your seasonal hiring practices? Are you saving for a rainy day by putting away the recommended percentage for taxes? The answer to these questions often reveals a lack of planning. The reality is that most business owners are so mired in the day to day that it can be easy to lose sight of the vision or “big picture”. The key for thriving in the current financial climate will be remaining laser focused on these lead indicators that can be controlled, careful future planning, and looking at history but never counting on it.
