A Players, Steak Umm, Determination, Homeschool & MeUndies
26th April 2020 Evolution Partners Newsletter
“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” — Winston Churchill
Hope you’re Thriving!
I’ve been over 5 weeks in lockdown now, and I’ve found myself having a newfound appreciation and empathy for many people in our community such as school teachers, nurses, carers and doctors, who are risking their own health to look after others. That’s even before we consider the millions of newly unemployed and the business owners who have seen everything they have worked for impacted so severely in a month. I’ve been interacting with and talking to many business owners and many are tired. Physically fatigued and ‘running on empty’.
I think many people are becoming a little numb to the quantity of data coming at them and the severity of the impact in some regions. Gaining a simple, clear understanding of where we sit is difficult but I found this graph to be an interesting summary of the US situation.
That graph, from the KKR investment firm note Keep calm and carry on clearly shows the impact of the shutdown, that employees and businesses are 40% to 60% below January levels and have stabilised. “We’re not there yet” the note states, because it is preceded by advice for investors keen to understand where and when the growth will occur.
One of the structural problems that we are seeing in Australia, and as well as in North America is that some people are better off if they go onto unemployment benefits. For business owners trying to make a business viable to survive through to the reopening of the economy / lockdown, staff they employ can actually be better off if they are on unemployment benefits creating a perverse disincentive to business continuity. Now that we have stabilised, business owners are considering what happens when the Government stimulus stops? The Government is paying them to keep employees hired, but one day that will end, what happens then? We know that one day restrictions will be lifted, and likely in a staged manner, and then the business model must be profitable. Therefore again, the most important thing now, is to have a plan. To develop profit and loss scenarios where your business can survive with reduced revenues and no Job Keeper stimulus funding from the Government.
For example, consider making 3 different budgets, all without Government stimulus funding and 15%, 30% and 45% revenue reduction – how do you make the business profitable or at least break even in each of those scenarios? There is no substitute for being prepared.
Yet we know that some companies have been ‘lucky’ in their business model and are currently thriving, or have successfully pivoted to grow revenues by acting swiftly to change and are being rewarded. No matter which area you are in, it’s worth considering your talent. The quality of your staff. Because this downturn will pass, and one of the great opportunities right now is to secure A players – there is a very good chance that the top 10% of staff in your industry right now, for the first time are either stood down or unable to work and would be open to working for someone else. The thing about A players is that they don’t apply for jobs on websites – they are always approached – that’s why the traditional job board recruiting process is so difficult at attracting A players. And I discussed this in my book Made to Thrive in section 5.1 about developing a virtual bench. Also, Brad Smart, author of Topgrading has done a 3-minute video discussing how finding A players is easier in down times which is an interesting take on the subject. The point? The opportunity right now is to increase the percentage of A players in your business!
It’s easy to say “I told you so” and 20/20 hindsight is a blessing to have but I personally never really agreed with the adoration of Lean or Just in Time programs. It always felt to me like a form of Idolatry where some businesses were trying to achieve the absolute maximum efficiency, with less consideration to effectiveness and enduring greatness, and I always thought what if something happens in the business or the country? Well, something did happen, and now these same programs are being brought into question. This week in an editorial from the Financial Times entitled “Companies should shift from ‘just in time’ to ‘just in case’” (it’s behind a paywall) the editors made this important statement “The Covid-19 outbreak has exposed the thin margins on which much of global business runs. Highly indebted companies, working from lean inventory, supported by just-in-time supply chains and staffed by short-term contractors, have borne the brunt of the sudden blow. They will now suffer the rolling, longer-term impact of its unpredictable consequences. Too late, many executives and owners have realised that by pursuing the holy grail of ever-greater efficiency, they sacrificed robustness, resilience and effectiveness. In many cases, they will turn out to have sacrificed the business itself”. The takeaway? Businesses with good leadership, good strategy and good cashflows are what matters – perhaps we will see a trend toward business fundamentals once again.
Speaking of fundamentals, we’ve been seeing some of the anti-science and misinformation that has pervaded society in recent years come home to roost lately, with people looking for less ‘fake news’ and more reliable, research-backed sources. In the midst of this, an interesting ray of light has emerged. A frozen meat company called Steak Umm has a fascinating twitter account that is an excellent take on critical thinking commentary within a marketing context. This interesting Washington Post story also discusses the way they have used social media in a conversational human voice.
Finally for the business owners who are running on empty, perhaps physically and financially finding the well of determination to get through and fight another day can be difficult. Here’s an interesting story I read this week about the determination of a US president.
What is determination?
In 1912, at the age of 53, Teddy Roosevelt was shot on his way to give a campaign speech.
The bullet pierced the eyeglass case and 50-page speech he was carrying in his left jacket pocket and was lodged between his ribs. What did he do? He got up and proceeded to the Milwaukee Auditorium. “Friends, I shall ask you to be as quiet as possible. I don’t know whether you fully understand that I have just been shot.”
Was the opening line of his speech and he opened his jacket and showed the crowd his bloody shirt.
“Fortunately I had my manuscript, so you see I was going to make a long speech, and there is a bullet—there is where the bullet went through—and it probably saved me from it going into my heart. The bullet is in me now, so that I cannot make a very long speech, but I will try my best.”
For the next 90 minutes gave that speech.
This week on The Growth Whisperers podcast
On episode 2 of The Growth Whisperers, Kevin Lawrence and I talk about the following.
- Kids disrupting homeschool
Through Coronavirus kids have been sent to homeschool, Kevin & Brad look at a couple of examples where kids have been innovative in their new digital environment.
- Getting back to the office after COVID19
The Growth Whisperers discuss what getting back to work after the coronavirus means for many businesses. It might not be as easy as simply telling staff to come back. Some staff might not be able to or might not want to come back to work. Or may only want to do it on their terms.
- Government opening the economy
How will Governments open up the economy and how will that impact business owners? Brad & Kevin discuss things you should consider.
Listen to The Growth Whisperers
What I’m interested in
One of the most important decisions you make in a business is your business model. Within that, the most important decision is what will be the single economic driver you will pursue? Many businesses pursue many different financial metrics and fail to succeed, but those who discover a single economic driver, called the Profit per X and who relentlessly chase it in a disciplined manner more often than not succeed.
This week I came across an interesting Profit per X for an underwear company called MeUndies. Most people buy several pairs of underwear per year, but MeUndies provide a subscription service where you are posted a new colourful pair that you select each month. You can still buy individual underwear if you like, but the pricing is heavily skewed toward subscription. So their Profit per X is recurring subscription profit per month, and that drives a large majority of their decision making, trying to get more recurring subscription revenue per month.
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