In the past two years I have been working with several of my clients to deal with business disruption caused by the COVID-19 pandemic. My approach is to help them prevent crossing the business event horizon.
An event horizon is the boundary of a black hole, where even light can no longer escape its gravitational pull. For business, it means that once you cross the event horizon, you won’t be able to recover and will go out of business. This is typically caused by cash flow issues.
I help my clients to think through three questions:
1. What’s your current time before reaching an event horizon in case of severe cash flow disruptions?
2. What can you do now to expand this time without jeopardizing future business? Think of:
- Set up a credit line at the bank.
- Get access to governmental support.
- Cut all non-essential costs.
3. What can you do to escalate to the maximum to expand this time even further? Think of:
- Cut all cost not associated with creating an immediate positive cash flow.
- Boost short-term growth, for example with attractive customer incentives.
When an emergency hits, immediately start with actions based on question number two, and define the criteria when to escalate and activate the actions based on question number three.
When severe economic volatility happens, it provides huge opportunities for innovation, expansion, and growth. The precondition, though, is that your business survives. Therefore, regardless of the possible impact of big events such as COVID-19, this event horizon exercise is a useful strategic exercise to do on a regular basis.
What do you need to initiate today to stay as far away as possible from your event horizon?