Weathering COVID-19: 5 things one cabinet shop is doing
March 19, 2020 | 10:16 am CDT
There is no doubt that the threat of the coronavirus is real, and the uncertainty of its final reach is unsettling. In most situations, I’m not a worrier, nor do I get stressed when things are happening that are out of my control.
So, keeping true to my usual form, I am planning and putting my business in the best place I possibly can.
Before I jump into this article, I want to emphasize that I have no idea what the best plan of action is because this is uncharted territory. The actions we’re putting into effect are what we feel are responsible and necessary for our company at this time.
1. CUT OVERTIME
Overtime is sometimes tough to avoid when you’re a small, growing company. However, I believe that since we are all in this together, that most of our customers will be receptive to the potential delays that this WILL cause in everyone's business. So, if delays are inevitable, then there is no use burning extra dollars trying to get product out quicker.
Right now, it’s important to conserve as much cash as possible.
2. SET A SCHEDULE WITH EMPLOYEES THAT ARE PARENTS
With school being out and daycares closed, many parents will have a hard time juggling their work and childcare schedules. In fact, we have about a third of our employees that are single parents.
We have stations in the shop that are set up with a pair of employees. For the time being, we are trying to establish a schedule where at least one person from each station will be present during work hours. Our goal is to keep production moving while also allowing parents more flexibility with their schedules.
3. CLEANING — EVEN MORE THAN USUAL!
Our typical morning routine is to clean the shop from 7-7:20 a.m. to get ready for the day. We have added 5 minutes to that as well as 10 minutes at the end of each day. During this extra time, we’re actually wiping down all buttons, handles, nail guns, brooms, etc. with sanitizing wipes. I don’t know if it will solve every issue, but it makes us feel better!
The financial burden of this whole period is the only part that really troubles me. As with most manufacturers, much of our future cash flows are wrapped up in accounts receivable. To combat this and reduce AR as much as possible, I have made a template email to send with every invoice urging our customers that have terms to pay before the deadline. I’m also offering a 1% discount.
For my local customers, if they are not a higher-volume account (for example, they only do 3 - 4 projects per year), we are doing the pre-work to get them on board for a COD transaction. Most have been receptive to this and seem fine with paying on delivery. A couple have even sent a check before they get their product.
5. REASSESSING BREAKEVEN
Breakeven is a number that every business owner should know. Part of breakeven is factoring in your labor as overhead. The reason for this is that month-over-month labor stays pretty consistent. If part of your workforce is not at work, then your capacity has effectively reduced by your dollars/employee/month ratio. If your capacity has shrunk, then your overhead needs to shrink with it.
It stands to reason that if you have less overhead, you also reduce your breakeven by some amount because your fixed costs are lower. However, we all know that business never seems to be exactly linear, and these things can be tricky to figure.
I am running several different breakeven scenarios with half my workforce, and another with 25% of my workforce. Regardless of how many workers we have, our doors will be open as long as it is responsible. If we can be producing margin dollars to reduce our other obligations, then it makes sense to stay open. That said, if it becomes necessary to shut down, then everything I said above does not matter, and we will all weather the storm together at home!
- Let us know what steps you're taking in the comments.
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