The “Ask Peter Lorange” service now allows Premium Members to raise particular strategic issues, dilemmas or challenges and get Peter’s comments.
Question 1: From the CEO of an event management company
“We need to cut a lot of costs in order to survive, now during the Corona crisis. Our turn-over has dropped 95% almost overnight. We are concerned about whether to cut more, or less, so that we also can be ready to expand fast again after Corona. My Chairman says, “brake and accelerate at the same time”. How?”
Answer:
Try to cut all costs that are not absolutely critical, both when it comes to personnel as well as to the less critical customers. And, maintain only the most promising development activities – cut everything else. And, refresh internationally also, if not strategically expected to be key, post corona.
So, I would keep:
A core part of your development staff. Most of these are IT experts, and these are likely to be hard to find, post corona! But, be sure that they work on business development issues, and not on small-scale firefighting!
Some of your customers are more likely to be key references in the future. Try to support them even during this crisis!
Cut all salaries, say with 20-30%. This is, of course, also applying to these relatively few employees that are remaining. And you must cut your own salary/benefits in a similar way! Be consistent, and a good role model. So, how? My recommendation is to promise bonus and/or shares as a compensation for “salary lost” when reaching the end of the tunnel.
Question 2: From a part-owner in a family firm, with quite diverse investments
“How can I assess the degree of robustness of our portfolio, so that I can satisfy myself that it is sufficiently robust, in light of the corona crisis? Are we recession-proof?”
Answer:
I would consider the following four issues:
Are there actions that can be taken so as to reduce cash burn, such as:
Selling/closing businesses
Trimming costs
How appropriate is the composition of the various investments in your portfolio today?
Asset light: service/subscription?
Web-based distribution?
Is there sufficient “conservative realism” among those of you who are running the portfolio? Entrepreneurialism is perhaps relatively less of a core capability today. Realism is key!
Question 3: From the President of a manufacturing company where much of the sales traditionally have come from classic distribution through retail agents/stores.
“We are developing our online direct sales/distribution efforts, none the least to be better able to cope during the present crisis. How do we do this?”
Answer:
You need to have a strong technical development team. Traditionally, these experts tend to be hard to find – and, expensive! Hence, many companies are looking to countries such as the Ukraine, Russia and Portugal to such people. Here, you should however factor in the additional “translation costs” for getting these persons “up to speed”.
Your products might have to be redesigned, so that they are relatively small/light, and thus easy to distribute (via the postal service, FedEx, UPS, etc.). And your products should be relatively standardized, so as to minimize customer’s affinity to “try out many different versions” (garments, shoes, …) and return many of there.
A string brand name is key. Quality is often associated with such a strong brand name. And, it all comes together in the virtual marketing offering.
Finally, you must be set up to handle incoming orders with speed and accuracy: warehousing/”picking” of goods in each order, packaging, etc.
Last, but not least, look to Amazon.com!
Premium Members may submit requests for feedback via contact@lorangenetwork.com A call with Peter can also be arranged to go over his analysis. Questions and answers may be shared on the platform for the benefit of other members, but all names shall be disguised. A small fee to handle the issue shall be applied. A Letter from the Chairman about this service is forthcoming.
Comments