Ep12 - Dante's Inferno - Reinventing Your Business Model Through Times of Uncertainty

You have found yourself on this journey to an ESOP. Thank you for joining us today. I'm the ESOP guy, and this podcast is designed for companies or business owners that are thinking of transitioning their businesses to an ESOP or an employee stock ownership plan. Midway upon the journey of our life, I found myself within a forest dark, for the straightforward pathway had been lost. If you don't recognize this, it is the very first line of Dante's classic work called Inferno. The current ongoing spread of the new coronavirus has really become one of the greatest threats to our global economy and in our local financial markets that I could ever remember in my lifetime. In keeping with that, I have. Wanted to do today a podcast that kind of encapsulates some of the issues that that happened when we. When we in business are going through the time of uncertainty. This podcast is going to explore going into the unknown. Um, I'm using Dante's Inferno really at the risk of being somewhat spiritually dark, but I did that specifically because I know for some business owners right now, they're going into a very dark time and they don't know exactly what to do. So the question with this is, how is this really affected your business and how is this different from a normal recession period, where the straightforward path that we had just a few months ago has for some companies been completely obliterated in in such a fast period of time. Um, as we go through this podcast, uh, for those of you that are on a journey to an ESO or thinking that you might want to be, um, maybe that was in the near future, maybe now it's, it's, um, pushed out for a few years. The, the real episode here is going to be to how do you take this time of uncertainty and really strengthen your business and your organization. If you like what you hear, uh, please share it with a friend and subscribe to the podcast. So I first read Dante's great piece of literature back about 25 years ago, and it was a time where I'd, um, I, I got out of college for a few years and I started to get to read whatever I wanted to read for fun. And this was a book that I picked up and I found that it was had such really a deep significance and, and it really should as we, as you read something like that, it makes you any, any person probably, it just makes you pause and think. And it's kind of the theme of the podcast today, because we're in a time period where we really just need to stop and, and think about what's going on around us and apply that into our business. As we look at Dante's work and the first circle of hell that he comes to is, he encounters is called limbo. And it makes me think of this place of uncertainty and when we think about what the word limbo means, um, the question that has to be answered is what we, what should we be doing now in light of the changes that are affecting our business. The problem with limbo is that we're in this, this state of waiting and seeing. Um, what's going to happen and, and we can also get into a place of being paralyzed by waiting and seeing what's going to happen. Limbo can be described as denial or panic or fear, um, or lacking intentional action and on certain times like this, it's, it's very it's a familiar pattern and one that we can certainly identify with in all kinds of things, not just our business, but certainly our country. Um, in terms of how we're dealing with the pandemic, um, whatever the answer is, it doesn't not feel particularly stable. And when that happens, then, then something happens sometimes to us where we, we really freeze and we don't, we're not in a place where we, we should be. Um, when I look at this, it's really coming down to the question for this podcast as I speak to most likely people that are in charge, these are the leaders of your, the business. This is a time of, in a sense, crisis that really will test your leadership in your organization. It's really the perfect opportunity in some way, in some sense, if you're looking at it that way. Uh, to test the, the strength of your leadership and Through it, through a downturn, we're all looking at ways we can, we can improve what we're doing. And so as we look at that from that angle of testing our leadership, my first recommendation is, is kind of just a general one and it's, and it's a fairly obvious one, but it's Having a plan of action is, is really a critical element, and I think sometimes by waiting and waiting and waiting, we, we take the foot off the pedal of the gas and we're not creating the plan. We're waiting for things to happen to our businesses. And so what I'm encouraging you on this podcast to do is just to create your plan of action. So assessing the effect of the current economic condition on your business really is something that I know that most businesses are doing really well. And 11 thing that we, we found recently within our firm because we, we were working through how to help our clients with the COVID crisis. And we did a webinar recently, I think it was just last Friday, and the webinar was really designed to explain um in more detail how the PPP program worked with the SBA and how the EIDL program worked. And what we did in that webinar is we categorized each company in terms of its current effect of what was happening in their business, and we categorized them in three different ways. We had one category of company was they were hitting the wall and they were, they were, um, they had lost massive amounts of revenue. And we're in a very serious condition, um, that would be, you know, they're almost fatal in terms of what their business was going through. The second was a category of a company that was taking on water, like the Titanic. Um, they definitely were hurt pretty bad by the, by the shutdown of what was happening in the economy. And Not as grave as the first category, but definitely very serious and they need to take some action steps towards um of, of getting help immediately. And then the third um category of businesses were definitely concerned. They were what we called running low on fuel and they were, these were businesses that were Um, impacted by the shutdown, but not as grave as the first two categories. And the reason we we broke those down is so we could help the, uh, on, on the webinar, we could help, we had over 400 listeners. Um, to really understand how to categorize their business to see what would be the recommendations for each, for their action plan, but we were seguing most of that into how they each of those companies were going to be able to use these, uh, this, this economic stimulus from the government to keep their businesses going and and so really survive through the crisis. So I don't want to get into that if you want to go to the webinar and you want to listen to it, it was recorded, um, it's under Berman Hopkins.com. And you'll find that right on our web page. Um, and I think it's really good information for if you have interest in the PPP program or the EIDL. What I want to do is take a step back though and, and, and talk about How it's important to in a time of crisis is important to take a bigger picture of what's happening around you. I was reading through a Harvard Business article and the Harvard Business Review article was walking through the steps of addressing your business model, and I found the information to be really helpful and very simplistic in the sense that. Um, just put things into nice areas where you could really understand those better. And so when I launched this podcast, I'm going to put on journey to an ESOP.com, this diagram that I found in the Harvard Business Review article, and I'm going to cover some aspects of this article to help you take a step back and, and really reinvent the business model that you're under during a time where you are already assessing. Where you are with, with what's happening with your business and you're already taking steps towards what I would say is managing a very a big crisis and really managing the normal business steps that you would take to manage through a recession. So instead of working through strategies of the recession, I'm gonna walk through the steps it takes to really assess your business model. And talk about some practical ways to uh to take those steps and maybe as you reinvent your business model, build an action plan or a plan with your leadership to start engaging maybe in a new way of doing business as you go through this crisis. So The first step in this is to understand your current business model and the way that we do that, we're going to break that down into um a successful model has, has components of a business and what are those components. The first component is in really most important, I think in some sense is, what is your customer value proposition? What is it that you do in your business? That delivers the, the needed value that a customer relies on your company for. And how is that different in terms of the alternative offerings in the marketplace? So the reason this is such an important question to assess in your business is that. You have to, you know, I guess, I guess for me too, I think about what I do for a living, how does that not, I mean, do I do it for the right reasons and, and really in the end, is it affecting my customer in a way that they need to be um affected so that they get what they really need. So that is their value being transferred in that process that we're, that we're going through. So the question here is, what is it that your model does to help customers that other offerings don't address and so really making a list of those things specifically. I look for improved ways to deliver services. So just like last year, one of the things we did to reinvent our business model is we added technology that allowed our audit clients to see the whole process of their audit from beginning to end. And what that did was it, it increased the communication and that we, we looked at as adding value to the relationship to the customer, because they now when they need the information, they know it's coming, they know where we are in the process. And so that was, that's an example of of looking at what's what is value to my customers and then starting to look at ways to deliver. Um, more value in those relationships. So clearly identifying your customer value proposition also then helps you to reevaluate your target customer. So and a lot of, a lot of times as businesses grow, they get away from sometimes the core target customer because their, their application of their product or service can apply for a lot of different scenarios. As we start evaluating that, we're going to bring this back to the, the, the question in your business model. Is what is your profit formula and how does that profit formula work in creating value for your company? So those are, those are aspects of your revenue model, the cost structure of your business, the uh that leads us to the margins of what you do for your customers. Um, it could relate to the way the inventory turns over. Um, all of those are aspects of your profit formula. So understanding that sometimes in our target market, We might have customers that have a different profile or profitability profile. And when times are good, And we're making money, sometimes we don't always look at a profitability by customer report, and I, and I would definitely advise that you look at those because when you start looking at where you're more profitable within customer segments, product segments, service segments, and you're able to segregate those down to, you know, very good detail, you're able to then to really look at the question of why are we doing what we do for that specific customer. If it's not yielding a, you know, a very profitable scenario, but it's using up the resources in the process and it's adding to our cost structure to reduce our margins, then sometimes by really assessing in our business model, our profit formula, we can sometimes take and reduce things that don't need to be there. But when we're in a crisis, this is so important because we want to react. Um, obviously, we want to react to all of our customers, but when you're looking at the profile of your customers, you need to look at those from a profitability standpoint in order to prioritize, um, for the value you're creating in your business. So that's very important. The third thing is to really evaluate the key resources and processes you have in your company. Um, this is going to include things like your people, your technology, your products, your facilities, your equipment, um, your, even your training, your, um, the way that you deliver on your brand, all those are, are part of that and that could be so expansive, we could talk about that for, for several podcasts just by itself. That's such a huge, huge area. But really by better understanding your resources and processes, it puts you in a position to look at what I think are really important within this category is your uniques. And understanding what, what makes your business unique and sometimes it's the dynamics, your company has a specific um technology that really delivers something so much faster than anybody else can deliver. Um sometimes it's the uniqueness of the way that your people are structured in a certain way of talent that you, that you really can deliver something to the market that, that, that nobody does and really understanding what makes you unique. Gives you the ability, especially in a down market, to leverage those unique qualities in your business and really deliver on um on when things start to shrink a little bit, to deliver more in areas that, that are not being as um in the marketplace, um, covered like they should be. And so then you're able to pick up new business that you weren't able to before, because there's, there's changes and all that. So, for instance, when we leverage technology in our tax department, what we did is we um we're able to use technology to reduce the actual turnaround of tax or tax return from 2 weeks to 1 week. And so clearly just you know, very process driven, leveraging technology based idea and then just using that to create more value in the what we do in terms of serving our clients. So once you've done that, and those are, and I've worked through those um very quickly, um, once you've really assessed each of those areas, you're gonna want to then take some time. To move on to the next stage, which is gonna be to list out where your opportunities are in in terms of the current marketplace and where the what I'm gonna call the, the, the need to or I'm really just taking that from the Harvard Business Review article. So, so they're working through those, um, this practical, these practical steps to help you reinvent your business model. The opportunities are You know, things that are changing in the business industry and things that are changing maybe specifically in your marketplace and the, the opportunities as you recognize those and, and go into the future. Within the next 6 months, year, 2 years, you're able then to aim your, your, your, your ship, I guess, towards the direction of that as opposed to maybe the direction you were, you were on course for before. And again, the opportunity within having this coronavirus shutdown gives us a little bit of a pause and ability to turn our ships in different ways and change as we go. And so by understanding our business model better, better what we have, we can now reinvent our business model by looking at specifically at these opportunities and the need to. So the opportunities, for example, could be technology, um, I really identified like 3 just for, for my own um thought process. So, I use technology, talent and facilities as categories and opportunities and I, as I looked at technology, I said, because my business is really undergoing massive technology changes. I have the opportunity to reduce cost of delivering our services to the market that we serve, by, by even further leveraging the value that technology creates. And so the opportunity now is to, is to take a little of the downtime and really explore the technology. And apply that in the in my new business plan for what what I'm gonna use going forward. Second would be talent. Now, one of the things about the the unfortunate things about this is that there are going to be more people that are unemployed. So that means there is going to be availability to hire new talent as, as the economy starts to turn around. So being able to look at that right now and assess in my business organization, the needs that I have for talent where those needs are. This is a great opportunity to, to profile those out and then have a plan to recruit that talent, whether it be making connections now with those individuals or down the road, but at least profiling those in your organization. And again, these are just opportunities that came to my head, right as I, as I did this. The third would be my facilities, and clearly, um, we were under a um the cost of rent was, was going up, um, less and less commercial office space was available. Um, what we found in facility needs now is maybe we have less needs because our remote workforce is, is successfully working at home. And there's less and less need to to be in the office. So as things return, it may be that we um have less needs for commercial commercial real estate. So the opportunity here is to redesign our businesses around a workspace that's um more remote and more valuable to to a culture that wants to work from home. So then I look at the need to and then I start thinking like as I go through the opportunities and again, I'm reinventing my, our business model as we as we think through the the time that we have. Um, working through the next, the next game plan that we have for our, for our leaders. And I know that we need to, when I start thinking about this, I, we need to add more value to customers. We serve by building more proactive communication tools. And this ties back into the the opportunity of the technology we have before. So specifically, we need to do a better job of that. And because we're a business that gets super busy, that doesn't um always play out. So I I can, I can go back to my need to and my business plan and really address how I'm going to accomplish um being more proactive with the tools that we have. And it might be that we're able to then to use the tools like the video conferencing that we've been embracing so much more now and in incorporating that more into client um client calls as opposed to just a phone call or an email, and using things like Zoom or other whatever platforms. I also need to shift my business model around the changing demographics of business decisions that um the decision makers are changing and the way they're looking at um getting information is changing. So I need to shift my business model around delivering information in a lot of different ways, whether that be um more online or maybe it's through um more technology programs that help deliver information like HubSpot. Um, but how do I use those, those tools to automate the delivery of information out to different, uh, demographic that's changing? And really, you know, if you look at those, um, in, in a very kind of a short burst of information for you, the, the, the process of reinventing your business model really isn't that complex and it's just taking those steps and taking maybe some of the downtime that you might be experiencing to, you know, re-establish your business model and reinvent that. As you reinvigorate your business model, really stay focused, you know, in terms of, of what's going to come after the downturn and, and try to keep your eyes on that, um, as it will really this whole process to for me, I think it really helps to maintain not only a positive attitude for yourself as a business leader, but your whole team in general. So as Dante leaves hell, the quote here is, the guide and I into that hidden road now entered to return to the bright world and without care of having any rest, we mounted up, he first and I the second till I beheld through a round aperture some of the beatiest things that heaven doth bear. Thence we came forth to re behold the stars. So I love that picture because it just kind of brings us from this dark place down out into the, into the bright sunset. And I think that's really, um, what we should be focusing on. And that's really what this podcast is all about is, is looking at rebuilding your bright sunsets and your bright, um, the bright atmosphere of your business and what you bring, um, as you are on this journey to an ESOP. These are all important steps to help you continue to reshape your business model, um, so that it's stronger and stronger as you go into that transition. So, again, if you like what you hear on the podcast, please share it with a friend and subscribe, we will see you next time. Thank you.