Keep the Embers Burning. Set Up a Bare Minimum Business Model to Help You Survive the Current Financial and Social Crisis.
A Campfire Analogy for Business Survival
During unprecedented times, small business owners need to rethink how they approach their business and look at their operations in a new way.
I enjoy watching reality shows about surviving in the wild. My all-time favorite is Alone, where contestants are dropped into a remote location by themselves. They try to survive as long as possible by living off the land and the last person standing wins $500,000. What helps a contestant become the winner? Keeping the fire going, along with having the mental fortitude, is the key to long term survival.
If you can’t start a fire and keep it going in a moist environment with wet wood, you’re out of the game. Fire is required to cook food, to sanitize water, for warmth, and protection. You don’t always have a roaring fire, sometimes it dies down. But, if the embers are still glowing red, you can add more wood to the pile, even if it is slightly wet, and the fire will come back.
What can you do during the economic hardships posed by COVID-19 and during other challenging times? You need to keep the embers burning in the harshest of conditions. Even if the embers flicker and get down to the lowest amount of heat, don’t let them go out. It will be much harder to start a new fire than to stoke the embers and reignite the flames.
Let's apply this analogy to your business. The embers represent the minimum scale of operation you need to set up to keep your business going. Forget about how high the flames were before when your business was cooking. Now more than ever, you need to maintain a few hot embers by adding small pieces of wood to the pile sparingly. Keep your business going using the lowest amount of resources possible.
Bare Minimum Business Model
A bare minimum business model is the concept of operating your company using the least amount of resources required and determining the minimum amount of revenue needed to keep the business going. The bare minimum business model will look different for your particular operation. At a high level, you need to align your supply and demand (cut costs to keep in alignment with lower revenues) and use your cash sparingly.
Demand
Your demand is down, way down. And it is not clear how long it will stay that way. A terrifying situation for sure. Still, you have to do your best to forecast what your sales will be moving forward. Make best-case, medium-case, and worst-case forecasts then plan for the worst-case. Do you remember what it was like when you first started your company and it was just you running the show with little to no help? Can you get back to your roots? The key here is to separate emotion from the process. The situation is what it is and you are in survival mode now. Be draconian in your decisions and move quickly.
Marketing
Although marketing may be helpful right now, remember the world is frozen. Marketing may not have the same impact right now as it did before. You can no longer rely on the same metrics you used in the past to determine marketing spend. Focus on one to three top marketing activities and keep a close eye on your spending and monitor the results carefully.
Customers
Your best customers may be the ones to help get you through this. Leverage your email and/or text list and stay in front of them. Simply let them know you’re still open and that you need their support. They may be able to provide you with just enough business to keep the embers glowing.
Supply
If you are an inventory-based business, work on procuring or producing just enough inventory to satisfy your demand forecast. Try to get supplies just in time. Don’t trade your precious cash for excess inventory right now. Secure only what you need only when you need it. In a service-based business, assess who on your team has the expertise to serve your clients and how many total hours it will require based on your best-case, medium-case, and worst-case demand forecasts.
Cash
It goes without saying, but avoid spending your cash. Reach out to all of your accounts payables and ask them what their plan is for responding to this crisis. Set the stage for delayed and reduced payments, but with a desire to continue doing business with them, now and into the future. Vendors should be understanding and will appreciate you starting the conversation.
Once the market starts to show signs of recovery, add very small pieces of wood to your glowing embers. This means as demand creeps back up, invest in your business conservatively and gradually.
Keeping the embers burning is the key. Forget how big your fire was a few months or even weeks ago. Forget how big you want to make your fire down the road. Simply do the work that will allow you to keep the embers glowing all day, every day.
Good luck, have faith that you will get through these challenges, and remember tough times don't last, tough people do.