HOW LONG IS YOUR RUNWAY?
If there is anything I have learned over my experiences since the first oil crisis in the late ’70s (gas rationing to a 16-year-old was the end of the world) through the credit crisis of 2008 and all the other crises in between, it is to stay calm and build your runway as long as you can. Whether it is your runway for business or life, build it now.
HOW WE HANDLE THE NOW
There is not much I can say about what is happening in the world today as it relates to health and our economy that has not been noted by thousands. There is so much noise; social media, traditional media, webinars; it is time to turn it off and refocus as a person, leader, family, and country. Remove the emotions from your actions and become a thinker as this too shall pass. How we handle the NOW is what will matter next week, next month, and the next crisis.
“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.
The new COVID-19 world we are experiencing is just now starting and the “getting back to normal” is not next week or next month, it most likely will take two or more years for emotional and financial normalization because of so many unknowns and the Lag Effect.
CAPITALIZE ON PREPAREDNESS
Just like a stone that is dropped into a pool of water, there is an immediate swell of waves where the first few will be large, more powerful, more defined. We are in these waves today. The next few waves are broader, not as deep but they continue to expand over time. In my opinion, this is a two-year period. Plan for it. After this period, the waves turn into ripples until they flatten and are no longer visible or at the forefront of our daily actions.
How we handle these waves today and in the near future will define us personally and professionally for decades to come. My recommendation from experience, build your runway to manage through the next several years and be prepared to capitalize on your awareness when the waves turn into ripples. What can you do today to be prepared in 12-24 months from now?
RUNWAY LENGTH = HEAVIEST LOAD
A cargo plane is by design able to carry small or heavy loads. The runway built for the cargo plane must be long and wide to handle the load at full capacity. The runway you build for your business must mirror a cargo plane runway to handle a full load whatever it may be and whenever you may need it.
PLAN FOR A LONGER RUNWAY
After the 2008 credit crisis, when our business runway was shorter than planned, we decided that we would not repeat that experience again. Tom & I personally managed through 2008-2010 but it was not easy. We realized that if we faced another similar crisis, we needed a calculated plan and a longer runway to manage through another crisis not knowing when that day would come.
Over the next several years, we built Presario Ventures with a business model/runway to handle future market corrections with capital preservation and time in mind. We did not know when we would need to use our runway, but we knew it would get used someday. Whatever we did, we needed time to be able to stay in the game.
BUY YOURSELF TIME
Conscious decisions we implemented for Presario were utilizing a longer-term fixed debt, which buys us time. Holding substantial cash reserves per asset, which buys us time. Applying a defensive investment strategy for capital preservation, which buys us time. You get the picture.
Just like a cargo plane that needs a longer runway when it carries a heavier load, we had prepared for that load or the next crisis. Today, we have more cargo to carry than we did two years ago; however, our runway is much longer than in 2008. There is calm in our business and barring any major world events, we have planned accordingly.
CONSIDER IMPLEMENTING THESE IDEAS WHEN BUILDING YOUR RUNWAY
Today, if you are not sure how much cargo you can handle, here are a few ideas you can implement in your business and/or family to help you begin your build.
- Communicate! Communicate with your family, customers, lenders, suppliers, everyone in your sphere. This may be daily in the beginning but weekly and then monthly should be your norm.
- Do not try to please everyone. Focus on what is essential to stay in business. Cuts are expected. Do not assume that you will be back to normal operations in the next 90 days.
- Set short-term milestones. 30 days, 60 days, 90 days, etc. Make these goals revenue and or expenses related. If the goals are not met, more cuts should be agreed upon early in the conversation. You cannot be expected to have business as normal and fund payroll for an extended period of time without expense reduction and stable revenues. Communicate this to your team members often. You must keep the business in business. The entire team needs to be flexible and get on board.
- Put your house in order. Anywhere you can fill the holes in your business no matter how small, plug it. You have the time, stay focused.
- Look for additional revenue sources. You will probably find that some or all of your current business is in a holding pattern. If so, use this time to have a skull session with your team. What revenue ideas can you consider and implement that are complementary to your ongoing business? Is there something you can apply today? Does your business model need a complete overhaul? Take a serious look at how you can grow as a business and a leader. Every idea should be embraced and considered.
- Show gratitude for those who manage through these challenges with you. These are your teammates and family. A kind word, a small compliment, will carry tremendous value in your family, corporate culture, and will flow through to your customers.
- 12-24 month operational changes should be expected. Anything shorter, you may get caught in an unfortunate position. If this crisis is more concise, you win either way.
PLANNING AND PREPARATION ARE KEY
Building a runway to survive and prosper is one thing I have learned over the past 35 years, and planning and preparation are key. Communicate weekly, reevaluate monthly, and stay focused on what YOU can control. You must stay in the game and keep the business in business. Building your runway to handle a heavy load, will only make you stronger today and more prepared for tomorrow.
“It is better to have it than not need it than to need it and not have it”. George Ellis.
Darin Davis, Real Estate Entrepreneur & Investor