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DWC BLOG
The necessity of good teamwork for long-term success is shown by crises like the Covid-19 pandemic. Each person and entity have a role to play as an individual player, and the timing of that role is just as crucial as the function itself. During a crisis, people become more risk-averse in general. They are less responsive to diverse points of view and opinions. They have a tendency to fall back on prior behaviors and solutions that, sadly, no longer function in times of crisis. Their connections decrease as a result of their self-serving activities. They don't have networks to help them take advantage of existing possibilities or find new ones. Given the urgency of the situation, business owners must share knowledge and learn from one another's experiences. This will reduce duplication of effort and allow others to validate, utilize, and improve on current work. Collaboration is an art form in and of itself. Before you begin a partnership, keep the following four points in mind: Focus on your best abilities It's nearly impossible to change your natural abilities when you're in the midst of a crisis. To promote collaboration, concentrate on your strengths. Define the shared goal Above all, you must have a well-defined and shared goal. Only after you know what you're aiming for can you start working together effectively. So, before you start working on a collaborative project, think about what you want the group to accomplish. This will provide people with a sense of purpose and direction. Find the possible collaborators After you've determined your objectives, you'll need to find the people who can help you reach them. Consider those with appropriate expertise, experience, and abilities, as well as those who are effective at challenging assumptions and bringing various viewpoints to the table. Keep in mind that collaboration works well when the team members can identify how they complement each other. What is the benefit to them? S ome people will be ecstatic to participate, but others may be less enthusiastic. They may view it as an intruder on their time, and they may be concerned about the additional work or stress it may entail. So, before you ask someone to work with you, consider how it will benefit them. It might be appealing to identify a larger strategic goal, such as fine-tuning a process to generate revenue. Making a pitch about the personal benefits to individual collaborators, such as career advancement, the access to the new skills and bigger opportunities, can also be beneficial. So, how about you? Do you get the feeling that your company is struggling and that you need to collaborate but are having trouble getting started?
What is financial distress? In short, it’s a condition in which a company is unable to meet its financial obligations. There are many forewarning indications of a company in trouble. The first place to look for a sign of distress is a negative cash flow. Cash flow is the lifeblood of a business. Detect the issue early by looking at your cash flow statements. What is negative cash flow? Negative cash flow occurs when a business spends more money than it makes within a given period. Is all negative cash flow bad? Negative cash flow can be justified when a company is only starting its business. It is also common when the business is in expansion and heavily invested for future growth. Regardless, both situations reveal that the business has not been able to generate enough revenue to cover the cost. This financial imbalance is not sustainable for business to operate. If a business spends more than it earns, it will lead to problems, unless it is deliberate and well-funded. So, negative cash flow is not always bad, but a constant shortage of cash is not healthy for business. What is the cause? There are three main activities in a cash flow statement. One or the combination of activities can cause negative cash flow. Operating activities When a company makes profit but short in cash, it sends warning signs. The business may face a falling margin, which means the profit is declining and no longer enough to cover its operation. It also indicates the revenue does not pace at the same rate as the costs. Financing activities Usually, financing activities are associated with mature companies obtaining money and paying back to investors through capital markets. When the money paid back higher than the money obtained, negative cash flows occurs. Investing activities Investing activities involve the use of cash in the long term, such as acquisition or disposal of assets that are considered as investments. Negative cash flow naturally will arise when the investments made have not generated the return. When should we be worried? If a company can generate positive cash flow from operation, negative overall cash flow isn't necessarily bad. However, it should be considered as an early requirement to analyze further. To generate positive cash flow from operation, you need to look carefully on spending decisions. Focus on generating healthy revenue and managing accounts receivable so that your business stays afloat. Implement the discipline to generate positive cash flow from operation. Failure in early detection can easily lead your company in financial distress. Know the implication of negative cash flow and be prepared for those risks.
The word crisis originated from the Greek: “a turning point, a crucial time that can get better or worse". The word “crisis” is an umbrella term where emergencies and disasters alike fall within. While crises tend to include both of those possibilities, it is also about risk and opportunity. How can we spot and seize an opportunity during a crisis, or even better, create it? Adopt and adapt your market It may take some time for people to understand the full impact of a crisis. But even in severe downturns, some companies are able to gain an advantage. They may be benefited from the market shift that has occurred. How does that happen? In 2018, Deloitte Insights released a study how retail customers behaved based on their income brackets. Based on US Bureau’s standard, there are three income brackets: low (less than $50K), middle ($50-100K), and high (above $100K). This study shows that income factors and expense pressures have squeezed the middle-income to fall into low-income, which leads to the trend of income bifurcation. Another article by Deloitte in 2020 mentioned that a slowing economy due to pandemic has widened the income gap, made the bifurcation even more relevant. If your company is serving low-income customers, this trend naturally creates more opportunities for your business and potentially boost your revenue. This is evidenced by the growth of dollar store chains such as Dollar Tree, Family Dollar, and Dollar General post-pandemic; more than half of new store openings in the U.S. in 2021 were dollar stores.[1] However, if your business is for middle-income customers, you have to adopt a new sales strategy and adapt the core to meet shifting customer needs. Pay attention to the new trends. With emphasis on climate change for example, agriculture business needs to adopt conservation technologies and the new demands for genetic improvements varieties that can survive in the heat and drought. Another low hanging fruit for a farmer can be extending business to preserved foods rather than selling fresh produce only. Understand the issues early to secure your positioning. Innovative way, new way The pandemic not only reshaped customers' spending patterns but also accelerated the pace of new ideas in the market. Given the speed of the changes, including some regulatory processes, it is important to stay close with your customers, supply chains and other business enablers to keep the pace to meet demand. You may have the same product or service offering, and prefer to concentrate on your core and strength. That is alright. But one thing for sure, you need to do it differently. Use an innovative way can improve your chance to win a competition. The shift from sit-down dining to primarily take out is a widely-seen adaptation in the food industry to the COVID-19 pandemic. Furthermore, restaurants who may not have an online presence prior to the pandemic, have now used services such as website hosting and food delivery applications. As the overall demand changes, so does the supply. Leverage external partnership to extend your reach. Understand the overall supply chain and how your offering fits in the chain. One of the lessons of the pandemic is that even competitors or firms that are seemingly unrelated can form allies. Your ability to be innovative and quickly adapt with the new way is critical to improve your opportunity. ________________ [1] https://abc7chicago.com/dollar-stores-make-up-nearly-half-of-new-store-openings-this-year-general-tree-family/10592846/