Prepping for a Business Slowdown: Part 1
So often, the idea of a business slowdown has business owners stressed and panicked. And I get it; the mere idea of a revenue drop can be very stressful — even if it is beyond our control.
It’s very common for businesses to have revenue patterns that are tied to outside forces, like the time of year. Thus, sometimes the business slowdown we dread is completely normal and not something we can completely control.
For many online entrepreneurs, summer can be s-l-o-w in terms of new business and revenue generation. I’ve supported several clients where this was true each and every summer regardless of how we tried to prevent it.
So rather than stressing about it, why not simply plan ahead in terms of cash flow?
Planning ahead is hugely helpful not only because it helps your business budget but also because it allows you to redirect that time and space to other projects proactively during a business slowdown.
Many people opt to simply slow down over the summer and spend more time traveling or hanging out with family and friends. Others decide to take advantage of the time and space to lay the groundwork for an amazing fall. Either approach is perfectly delicious depending on your personal needs and preferences.
This post will give you three different areas you can focus on if you want to use those extra hours in the summer from a business slowdown to do some internal upgrades.
One of the most common roadblocks to creating necessary systems is time and space, so leveraging a business slowdown can be the perfect time to dig into building an Operations Manual or simply shoring up any other system needs.
Start with a thorough review of what you already have. If you don’t have a central repository for systems, this could be more challenging. During this process, consider not only what you have but also how accessible it is.
Once you have a good sense of what you already have, ask yourself some key questions:
1) What is missing? Think about any new activities you regularly do or any new services or products you’ve added.
2) What needs updating? Consider any systems that haven’t been reviewed recently. Look at anything you’ve changed in recent months that may not have been updated.
3) How well-organized is my documentation? Think about how easily accessible your systems are and whether they’re actually helpful as is for your team.
After you get a good sense of the current state of affairs, make a specific project plan to tackle what you identify as your priorities. Even during a business slowdown you likely don’t have unlimited time! Be sure to be realistic about how long your priorities will take to avoid overwhelm.
Then, get to work and get building.
As helpful as a solid cash flow projection and budget can be, they are also somewhat time-consuming to initially set up. When you’re in the hustle and bustle of the busy season, it can feel less necessary to devote the time to them because the revenue is flowing.
In reality, these tools are just as important during a business slowdown as when it’s busy — but getting them in place anytime will pay off!
So, let’s begin with your cash flow first.
Start by looking at any guaranteed revenue for the next several months. Depending on your client or project turnover, you may be able to project just a few months or perhaps even longer. Here, you only want to look at the revenue that is secured — whether by an existing payment plan or contract.
Then, look at your lead pipeline and do some estimating of how much business you’re likely to close. Consider you’re average close rate as a starting point and mix in a bit of ambition or caution depending on your preferences.
Now, look at your basic recurring expenses, like:
- Your salary
- Contractor costs
- Tools you need to run the business
- Taxes or other fees
After documenting the basic expenses you know are required to run your business, start thinking about any extras you’d like to add. This could be things like:
- Bonuses for you and/or your team
- Professional development, such as conferences, coaching, or consultants
- Upcoming business travel
- Expenditures for things like computers, printers, or other tangible tools
- New software needs
With a solid list of all these expenses, you can start looking at how it all plays out. Start looking at when the revenue is coming in versus when the expenses are due. Depending on how healthy your cash flow is, you may need to look at this day by day. Get as specific as you need to here to balance efficiency and accuracy.
As you build this out, start with the end results. Do you have a negative or positive situation at various points? What about at the end of your projection?
It can be tempting here to start stressing about any gaps, but this exercise is primarily intended to be informational and helpful. Once you know what’s projected, you can make strategic decisions on how to move forward.
If you have a lot of negative cash flow points, for instance, you may decide to make a plan to increase revenue or raise capital through investment or loans. This is a very different scenario than if you have a lot of positive cash flow with a surplus.
It’s also important to look at the entire period to make the best decisions.
For instance, if you have a decent cash buffer to cover regular expenses, it’s easier to ride out days or weeks of revenue. However, if you’re always running right against zero, these negative days can be more important to pay attention to.
Most of my clients are monthly retainers who pay at the start of the month with a few clients who pay during the month. This means I have several very high cash influxes during the month. So while most days throughout the month are technically negative because there are only expenses and no revenue, it ultimately isn’t concerning because of the high influxes of cash at certain points during the month.
In addition to cash flow projections, consider building a budget so you can stay on track for expenditures throughout the year. A budget is such a useful tool to help make smart decisions — and it doesn’t have to be restrictive at all. Use the budget to plan for what to do with excess revenue or to hedge your bets during any business slowdowns.
Build in as much detail and specificity as you need to here. Breakdown categories in ways that make sense to you! This is your tool, so build it for you. Want more on how cashflow and understanding your bookkeeping is important? Check out these resources from Do Your Thing.
Summer can also be a great time to evaluate your team. It’s always better to proactively address any needs before they become a problem, so even if all seems well, this can still be a helpful exercise. Training a new team member is a large undertaking, so the extra space a business slowdown allows is a great time to take this on if it’s needed in the long-term.
- Look at your existing team and consider things, like:
- Who does what on a regular basis?
- Who is cross-trained to fill in on other tasks as needed?
- How competitively are you paying your current team?
- Are there any specific professional development needs you’d like to address?
Get a sense of the good, the bad, and the ugly with your current team before going broader to consider things, like:
- What skills are you missing on your team?
- What capacity do you have for additional workload with your current team?
- What kind of team additions make sense based on your projected cash flow, projected workload, etc.?
Again, once you have the facts, make a project plan for what needs to happen. Whether it’s training for current team members or searching for additional ones, get to work step by step.
Leveraging Your Business Slowdown
Depending on your needs in these areas, you may be able to tackle several of them, or you may need to focus on just one major project during your business slowdown. What you do will depend on a combination of what needs to be done as well as how much time is available for such projects. If necessary, do some estimates here to make strategic decisions.
I recently had a great planning session with a client where we dug into her three major priorities for the summer. We estimated how much time each priority would require and then started breaking it down week by week. We combined that with the “normal” business requirements to see what we were left with. Then, we evaluated how feasible those priorities really were.
Let’s use some real numbers as an example. If you have three projects — writing a book, creating and prepping an hour-long talk, and updating your signature course — start by deciding how much time each one will take. So, let’s say the book is 100 hours, the talk is 20 hours, and the product updates are 50 hours. You have a total of 170 hours of estimated project work to complete.
Then, look at how much time you realistically have available to work on these projects.
If your summer business slowdown is eight weeks, and you estimate you’ll have an average of 20 hours per week to devote to projects, you have 160 hours to allocate.
The math here is not too terrible; your available time is only a little under what you’re estimating you’ll need. In this case, tackling all three projects could work out — even if it’s a tad ambitious.
This is very different than if you only had 80 hours available for projects. In this case, you’re likely setting yourself up to fail, so you’d best be served by adjusting your goals to be more in line with the available time.
So much of your success at anything starts with the initial planning stages and feasibility projections. If you start out knowing you’re likely to fail, you’re already at a disadvantage.
I encourage you to instead start from a place of strength, and make plans that are realistic and manageable with a dash of ambition. This allows you to make the most of any time available.
One quick bonus tip: Be sure to block off any upcoming time off for the remainder of the year. Don’t get so caught up in your summer schedule that you don’t properly plan for the fall or winter.
There you have it! Three internal focuses you can devote your extra downtime to if your summer months slow down. Each one is sure to strengthen your overall business and pay off for weeks and months to come.