The novel coronavirus (COVID-19) pandemic has caused difficulties for millions of businesses — from family-owned restaurants and niche manufacturers to multinational airlines and oil companies. As the economy slowly reopens across the country, old ways of doing things clearly won't work for most business operations.
But there's a potential upside: Major economic disruptions may provide opportunities for managers and owners who can reject the status quo and "think outside the box." Over the short run, businesses that "pivot" in a timely manner may be able to stay afloat until things decisively turn around for the better. There also may be long-term opportunities to add value and update your existing business model.
Old Concept, New Twist
Pivoting isn't a new concept. Some of the most profitable and recognizable businesses in the country changed paths midstream before they truly became successful.
A classic example is Starbucks. The company didn't start out as a franchiser of coffee shops. Initially, it sold coffee makers, bulk coffee beans and other items before shifting to its current model of coffee houses with a sense of community, like those in Italy and other European countries. Now it seems as if Starbucks has a coffee shop at every busy intersection in the country — and a loyal following of coffee aficionados.
What makes the current situation different is the sense of urgency and uncertainty. With some states in various phases of slowly reopening, local businesses may have to modify their operations and adapt to the "new normal." What's more, astute business people are seizing on pandemic-inspired opportunities for creating goodwill. (See "Successful COVID-19 Pivots," at right.)
8 Tips to a Successful Pivot Strategy
Pivoting requires a transition period, especially if you're shifting to a new product line or paradigm. It's not as easy as snapping your fingers and announcing a change of plans. Here are eight practical suggestions to smooth out the rough edges.
1. Communicate. Let your customers know that you're still there to serve them and that safety is your main concern. Explain the extra precautions you're taking — including use of employee face masks, contactless payment methods, and cleaning procedures — to ensure that doing business is a safe experience.
Also, tout new products and services — such as free delivery or curbside pickup — on your website. If customers don't know what you're selling, they won't be buying. Expand the reach of your social media accounts.
2. Modify your business hours. Whether you're an essential business that's been open throughout the lockdown or you plan to reopen soon, shorter business hours may be necessary. You'll need more time for cleaning, and you might need to scale back nonpeak business operations to control labor costs. Many businesses are also carving out special senior-only shopping times, say, between 8 a.m. and 10 a.m. Post changes in your business hours at the physical location, as well as on your website and social media.
3. Adapt to meet new demands and needs. Be creative about serving customers who are staying at home. Can you offer pick-up and/or delivery services? If a car dealership can drive a new vehicle to a buyer's residence, can you do the same for your products? Or can you use teleconferencing to walk a client through the steps of a purchase?
4. Think ahead. If people can't buy your services or goods right now, you may be able to encourage them to purchase later. For example, if you own a retail outlet that's had to close its doors, you might offer gift cards for future purchases at discounted rates. When restrictions in your area have been lifted, customers can cash in. In the meantime, you've boosted current cash flow.
5. Update your website. Now may be a good time for a complete overhaul of your website. Test your online order system from the perspective of a customer and consider ways it can be updated to facilitate customer orders.
At the very least, freshen up your site and make it more visually appealing. Include all the latest information, ditch outdated or inaccurate information and fix any broken links. When it makes sense, hire a professional to handle the changes. In addition, if you don't already have an app, now might be a good time to create one to allow customers to order from your business using their smartphones.
6. Learn a new skill. Faced with necessity, managers and owners may delve into areas they previously hadn't touched. For instance, if you aren't proficient in social media, navigate new platforms. Or you could become adept at scheduling pick-ups through software. Or maybe you can do some administrative work that had previously been delegated to others.
7. Protect your employees. Remember that safety concerns should extend to both customers and employees. Let your staff know about the measures you're taking to keep them clean and safe in the workplace. In times of crisis, owners and managers should practice what they preach, because employees look to leaders to set the example.
Workers also appreciate honesty. So, inform them as soon as possible if layoffs are coming, benefits are being scaled back or bonuses won't be paid this year. When the economy starts turning around, companies will likely continue to face the long-term talent shortages they've experienced in recent years. These challenging times present an opportunity to build long-term loyalty among your workers.
8. Monitor your pivot strategy regularly. Don't rely on gut instinct or quarterly financial statements to monitor your company's performance. Timely, accurate financial reporting is key during volatile market conditions. Consider producing daily or weekly "flash" reports that highlight what's working and what's not — and then take corrective measures. For example, you might need to adjust your pricing, staffing or hours of operation to improve profitability.
Which metrics should be included in your company's flash report? Keep a close watch on revenue, payroll costs, and sources (and uses) of cash. Your CPA can help determine what other metrics would be most beneficial in your situation.
For example, a restaurant's flash report might break down revenue by day of the week and compare those numbers to the previous week, the same week in the previous year and the budget. Other important metrics for a restaurant might include average order size, food costs, gross margin and spoilage.
A Brave New World
During the COVID-19 crisis, there's no universal pivot strategy that will work for every business. Contact your financial, tax and HR advisors to help identify, monitor and seize potential opportunities in your industry.