Survival Strategies in Tough Times
The Small Business oil and gas producer in America has always faced the challenge of falling product prices from time to time.
This particular time is doubly challenging. Last week Russia refused to go along with cuts in production necessary to balance the market. This resulted in Saudi Arabia’s countering with pricing discounts that have collapsed world oil prices. At the same time, the world is facing a rapidly decreasing demand forecast due to the Coronavirus.
There are many strategies, depending on the company and several other factors, for coping with these tough times. But here are a few basic principles that most likely apply to us all.
- Denial or holding onto unrealistic expectations is not a good strategy. This particular challenge is for real. While no one knows how long this will last, we are much better off to embrace a realistic viewpoint and take calm, not reactionary, but immediate actions. Depending on a quick solution by Governments or geopolitical events to bail us out is a siren song destined to wreck us on the rocks.
- All expenses matter. No expense is too small to be considered. Little things do add up to big things. And mindfulness about expenses becomes a healthy ongoing practice. Like Peter Drucker said in Managing for Results, “There are no profit centers, there are merely cost centers.”
- Communication is especially important in tough times. We should communicate with our vendors. If we are going to be late with payments, we should tell them and even work out longer terms. I remember watching my Dad exercise this principle 50 years ago. He called Schlumberger and Halliburton, who he owed more than he could afford to pay. He told them he couldn’t pay them at the moment. He asked them to allow him to take a longer time to pay the invoices. As I recall they gave him six months to pay. He was able to make it on that basis and remained loyal to them for decades for their understanding. The same principle applies to all vendors. This is also a good time to negotiate for services. The service sector is in this with us. In fact, they are even more vulnerable. My experience is that they will work with us in good faith. They will not do it if we don’t ask.
- We should communicate with our bankers. If we have debt, and most of us have at least some, we should have an open and transparent conversation with our bankers. We should let them know where we stand financially and what steps we are taking to “weather this storm”. If we need to, we shouldn’t hesitate to ask for interest only payments. Depending on the bank, they will almost always work with us. But just like any of us in business they don’t like surprises or being caught off guard. I have yet to meet a banker that wants to be in our business. So, it is in their best interest to help us stay in ours.
- We should communicate honestly and openly with our employees. In my company, in tough times we have always had a “team meeting” where we discussed our various options. Without exception, we agreed to take cuts across the board. Yes, I let them decide along with me. We never laid anyone off because of a downturn. Letting your employees participate in your decision-making process gives them ownership in the ongoing vitality of the company and simply empowers them to care. But, at the same time if you have employees who are not carrying their load it’s a good time to move on from them.
- Maybe most importantly of all, while making tough decisions try to maintain a positive, but realistic attitude. This too shall pass.