How to build a durable business

Mike Gonzalez

Mike Gonzalez

6 minutes

How to build a durable business


The past decade has seen many businesses move with speed above all else, especially startups or growth-stage businesses. As we enter a period of economic hardship and uncertainty due to the impact of COVID-19, operators need to get their house in order to make smart and fast decisions. Whether you're restructuring now or not, here are hard lessons learned from people who have led businesses from hardship to sustainability.

  • Eliminate points of failure.
  • Organize performance reviews and employee calibrations.
  • Cut underperformers.
  • Update customer health scores and records.
  • Organize vendor commitments and audit your contracts.
  • Implement controls and limit long-term or high-risk obligations.
  • Optimize your cash conversion cycle.

Eliminate points-of-failure.

Push managers to identify points-of-failure in your operations. You don’t want to have areas of specialization that make redistributing work difficult. Emphasize cross-training and knowledge sharing. In a restructuring, you want to be able to keep the best people above all else. A couple tips from Matt Mochary's, The Great CEO Within:

Write down all processes. As soon as you or your team members find yourselves doing something for the second time, you should write down the steps of that process exactly. Place these written processes in a firm-wide Wiki.
Cross-train a second person for each role. Map each function in the company (from the Areas of Responsibility) to a backup person. Have the backup person co-work with the primary until the backup knows how to perform the role.  (Of course, having all of the processes already written down will vastly improve this training process. So have your team write down all the processes first.)

Organize performance reviews and employee calibrations.

Make sure performance reviews are up-to-date and organized. Managers should calibrate employees so there’s a view on relative performance. Stay disciplined in letting go of your bottom-performers. Strong performance management will make challenging restructuring decisions simple and fast.

Cut under-performers.

Don’t kick the can on cutting under-performers. Be systematic and disciplined in how you manage teams. When times are tough, the output or morale of under-performing teammates can be a drag on everyone else. Toxic employees can have an especially devastating impact on your teams during tough times. 

Update customer health scores and records.

Confirm customer records are up-to-date and health scores are accurate. Clean data will improve the accuracy of your retention projections and help prioritize customer initiatives. Analyze customer health data along with employee calibration data to see where customer risk falls within your team. Make sure high-value, high-risk accounts get heavy involvement from management. They should be working with these accounts already, but more direct involvement will soften the blow of personnel transitions down the road.

Organize vendor commitments and audit your contracts.

Keep a log of your active purchases and track the owner, recurrence period, billing terms, and termination date. Analyze the health of the service or status of the project. Prepare for negotiations well in advance of your termination date. Identify how the service is being used, if there are any redundancies, and do your best to quantify the value. Kick-off negotiations with plenty of time to hash things out before renewal. 

Implement controls and limit long-term or high-risk obligations.

Purchase workflows should be simple and automatically comply with policies. Buyers should be informed about best practices like soliciting multiple bids, leveraging purchase power, and avoiding redundant software and services. They should also have the confidence to set contract and bill terms inline with company expectations. Once a purchase has been made, the lifecycle of that transaction (ownership, renewals, audits, etc.)  should be put on autopilot. 

Optimize your cash conversion cycle.

Extend your payables by renegotiating billing terms and delaying payments. Lean on your large vendors with big balance sheets. Be transparent with your objectives and the impact it will have on your business. If your cash position is comfortable, then push for early-payment discounts.

For variable acquisition costs, make sure your sales and marketing commissions are aligned with when cash is received from your customers. Conceptually similar to inventory turnover, you want your acquisition costs to turn into realized cash as fast as possible. You might also want to consider your mix of base and variable compensation.

You can change your Accounts Receivable policies to collect cash faster, but given COVID-19’s broad impact, you can expect some customers to need help. 

Hopefully, you never have to go through a restructuring, but the work above will make you stronger either way. For more depth on the topic, please read our Lessons Learned Restructuring.

Mike Gonzalez

My name is Mike Gonzalez. I'm an entrepreneur and fitness enthusiast. My mission is to inspire others to do great things by leading by example, sharing my story and learnings, and enabling underprivileged with resources. I'm currently the co-founder and CEO at Trace.

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