Decision Vision Episode 71: What Decisions Do I Have to Make For My Business to Survive Covid-19? – An Interview with Zahir Ladhani, Velocity Strategic Consulting
As the timing and shape of an economic recovery remains uncertain, many business owners are asking themselves what decisions they must make for their business to survive this Covid-19 environment. Host Mike Blake explores these issues with Zahir Ladhani, Velocity Strategic Consulting. “Decision Vision” is presented by Brady Ware & Company.
Zahir Ladhani, Velocity Strategic Consulting
Zahir Ladhani is a seasoned executive with 30+ years of experience leading the growth of companies, products and teams. He played a crucial role on a senior executive team facilitating the $1.3 Billion sale of a company to a Fortune 50 Company. Additionally, he has overseen leadership teams in multiple publicly-traded organizations, in the capacity of President, Vice President of Sales, Vice President of Business Development, Marketing Director, and Director of Finance.
Zahir is a talented communicator and proven leader who understands corporate culture, the collaborative process, and how to assist organizations and their leadership teams optimize the balance between people, performance and profit.
Zahir Ladhani is currently the managing director of a business coaching firm, Velocity Strategic Consulting, and teaches Strategy at Kennesaw State University’s EMBA Program.
Michael Blake, Brady Ware & Company
Michael Blake is Host of the “Decision Vision” podcast series and a Director of Brady Ware & Company. Mike specializes in the valuation of intellectual property-driven firms, such as software firms, aerospace firms and professional services firms, most frequently in the capacity as a transaction advisor, helping clients obtain great outcomes from complex transaction opportunities. He is also a specialist in the appraisal of intellectual properties as stand-alone assets, such as software, trade secrets, and patents.
Mike has been a full-time business appraiser for 13 years with public accounting firms, boutique business appraisal firms, and an owner of his own firm. Prior to that, he spent 8 years in venture capital and investment banking, including transactions in the U.S., Israel, Russia, Ukraine, and Belarus.
Brady Ware & Company
Brady Ware & Company is a regional full-service accounting and advisory firm which helps businesses and entrepreneurs make visions a reality. Brady Ware services clients nationally from its offices in Alpharetta, GA; Columbus and Dayton, OH; and Richmond, IN. The firm is growth minded, committed to the regions in which they operate, and most importantly, they make significant investments in their people and service offerings to meet the changing financial needs of those they are privileged to serve. The firm is dedicated to providing results that make a difference for its clients.
Decision Vision Podcast Series
“Decision Vision” is a podcast covering topics and issues facing small business owners and connecting them with solutions from leading experts. This series is presented by Brady Ware & Company. If you are a decision maker for a small business, we’d love to hear from you. Contact us at decisionvision@bradyware.com and make sure to listen to every Thursday to the “Decision Vision” podcast.
Past episodes of “Decision Vision” can be found at decisionvisionpodcast.com. “Decision Vision” is produced and broadcast by the North Fulton studio of Business RadioX®.
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Show Transcript
Intro: [00:00:02] Welcome to Decision Vision, a podcast series focusing on critical business decisions. Brought to you by Brady Ware & Company. Brady Ware is a regional, full-service accounting and advisory firm that helps businesses and entrepreneurs make vision a reality.
Mike Blake: [00:00:21] And welcome to Decision Vision, a podcast giving you, the listener, clear vision to make great decisions. In each episode, we will discuss the process of decision making on a different topic from the business owner’s or executive’s perspective. We aren’t necessarily telling you what to do, but we can put you in a position to make an informed decision on your own and understand when you might need help along the way.
Mike Blake: [00:00:41] My name is Mike Blake, and I’m your host for today’s program. I’m a Director at Brady Ware & Company, a full-service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia. Brady Ware is sponsoring this podcast, which is being recorded in Atlanta per social distancing protocols. If you like this podcast, please subscribe on your favorite podcast aggregator, and please consider leaving a review of the podcast as well.
Mike Blake: [00:01:07] And so, today’s topic is another in our series of COVID survival topics. But this one is going to be a little bit different. And the question, really, is actually a number of questions all rolled up and mashed up into one. And so, the topic is, what are the decisions I have to make, so that my business survives COVID? And by now as we record this in early June and Happy Father’s Day in advance to everybody who is a father listening to this podcast, and as we record this, we are now, more or less, in something approximating recovery phase of this pandemic at a time, also, of tremendous social unrest and potentially change. We’re just in an environment now where there is no textbook, there is no wise man or woman to tell us exactly what to do based on experience. It’s all about kind of feeling our way through.
Mike Blake: [00:02:25] And so, whereas most of our topics do address a high-level strategic decision, the reality is that many businesses are not really in a strategic posture. As I was talking to our guest and our producer a little while ago as we were setting this thing up, and we talked about when you have a loaded gun pointed right to your head, your thought process at that point is not strategic. Your thought process at that point is not, “What is happening to my retirement plan and my 401(k)?” It’s, “How do I get out of this situation now? Get out of the building.” We’re going to figure everything else out at that point.
Mike Blake: [00:03:08] Now, I understand that’s a dramatic and it’s a graphic image, but I do think that there’s some truth and there is some relevance to that. But we are now, you know, after sort of huddling ourselves, at least certainly, I was, away from the pandemic to reaching a point where we are kind of have our hands wrapped around the bars and shaking them, being asked or asking to be let out of our mass house arrest, and now, all of a sudden, the doors open with differing speeds depending on what state you’re in. State, meaning geographic location.
Mike Blake: [00:03:58] And, you know, when that happens, I think to some extent, we’re sort of the dog that catches the car or what would happen if Wile E. Coyote actually captured the Road Runner? I’m not sure he’d know what to do with it. And so, now, this next phase is, okay, you know, what is this checklist? And you’ll read a lot of stuff that talk about, well, you know, let some of your employees continue to work from home and everybody’s going to walk around like they’ve got OCD and wash their hands all the time and creating distance between office and cubicles.
Mike Blake: [00:04:36] And that’s all well and good. It’s important. There’s plenty of information out there. There’s nothing that we’re going to do it. But then, you know, as a decision maker, you’re now going to be faced with many, many micro decisions if you are or even not so many micro decisions, but they’re all tactical decisions. And tactical decisions can take on equal or superior importance relative to a strategic decision.
Mike Blake: [00:05:07] And so, that’s a long preamble to saying that if this episode seems a little bit different, it is, and that’s by design. And the reason is because when you reopen your business and you expose yourself to the wide, weird world out there, it’s not about one decision anymore. It’s really about probably 92, at least. Well, we’re not going to go over 92 decisions, but we are going to go over probably about a dozen or so, and hopefully that this will be something that—or we hope is that, this will be something that you can you can take pieces from, and apply to your own situation as is, you know, what we try to do here are the Decision Vision podcast.
Mike Blake: [00:05:53] And helping us work through this is my friend, Zadhir Ladhani who is Managing Partner of Velocity Strategic Consulting. And Zadhir brings more than 30 years of, in the trenches, experience with software, the service companies, consumer companies, services and human capital companies, pharmaceutical companies, and management consulting. As you’ll hear, he’s a very talented communicator and he’s a proven leader whose drawn businesses and product lines and was a key member of an executive leadership team that led the sale of its company to a Fortune 100 acquirer.
Mike Blake: [00:06:34] Zadhir works with senior executives and leadership teams to scale up businesses by improving their discipline around people, strategy, execution, and accountability for sustainable growth. He has worked with numerous clients and using the complexity that growth often brings, allowing leaders to focus more time on building their businesses by leveraging transformative tools, processes, and principles. He holds a bachelor’s degree in mathematics and accounting from the University of Waterloo in Canada and a master of arts in international relations from the Fletcher School of Law and Diplomacy at Tufts University in Boston, Massachusetts. Zadhir, welcome to the program.
Zadhir Ladhani: [00:07:10] Thank you. Thanks, Mike.
Mike Blake: [00:07:12] So, I’m going to ask you the question that I have to ask or everybody has to ask, every guest ever who comes on any program in the world, which is, are we in a recovery now? If not, when do you think it’s going to happen? And are you on the V side recovery camp, or are you on the slow slogging recovery camp, or somewhere in between?
Zadhir Ladhani: [00:07:33] So, Mike, I appreciate the introduction, and I am on the slow recovery side. I’m not on the V recovery side and I actually don’t think we’re in the recovery phase yet. If you look through what we’ve gone through, and I look at this from a lens of three phases, we went through the lockdown phase where we were trying to flatten the curve. And some parts of the country never flattened the curve. We would continue to grow it. But we decided to get into the second phase, which is the recovery phase, as you called it, but I think I call it the fight phase, that we’re going to go fight this.
Zadhir Ladhani: [00:08:10] And then, when the vaccine or a therapeutic is available is when, potentially, the full final phase of this comes in. So, I think we’re in this middle phase, which I called the fight, where the infections and the number of people who interact with this disease will increase, decrease, increase, decrease. And we’re going to see spotty places in the country, spotty places around different states and different parts of the state in different phases.
Zadhir Ladhani: [00:08:45] So, they’re going to be brush fires we’re going to have to put up around the country. If you look at why I say that and why I think it’s a long U, until a vaccine is available, there is no surety of how we will fight this. There are so many unknowns about this COVID-19 that every other day, we’re hearing something new and we’re learning something new. And so, anything somebody is forecasting, it’s coming out to be different. And so, I would say, we plan for the worst, and then hope for a better one. And businesses work on that well. Look, people are saying there’s a vaccine coming up, right?
Zadhir Ladhani: [00:09:23] Normally, vaccines take 20 years, and now, we’ve got a prognosis that we’re going to have a vaccine by the end of this year. I really hope we do. And I know there were over 150 candidates in the work, and we’re taking every piece of red tape out, and we’re trying to shorten the cycle as much as possible, and we got the best scientists we’ve ever had around the world working on it. And globally, humanity has gained. But sometimes, things take time. And we hope we can get through this. But my view is it’s a long U with ups and downs as we go through it.
Mike Blake: [00:09:59] You know, I think your observation is very smart, that the fact of the matter is, we don’t understand everything there is about the coronavirus. And the knowledge is evolving. And, you know, it reminds me, I think coronavirus is sort of the eggs of the disease realm. What I mean by that is for years, I think it’s still going on, is that doctors are telling us eggs are terrible for us, but now, they have the right kind of cholesterol, so they’re great for us. But then, maybe that kind of cholesterol, it has a limit, so they’re bad for us again. And frankly, I don’t know. So, I just see the eggs now and I roll the dice, right? But I mean, COVID is kind of like that.
Zadhir Ladhani: [00:10:50] Yeah.
Mike Blake: [00:10:50] You know, there’s even some there’s even some real discussion as to whether or not, not just ideological, but medical as to, again, how necessary masks are.
Zadhir Ladhani: [00:11:04] Yeah.
Mike Blake: [00:11:04] And, you know, we just don’t know. And I’m not going to make a statement as to whether or not somebody should wear a mask or not, but the fact of the matter is that whichever position is out there, there’s plenty of information, and frankly, some good information that supports one way or the other, right?
Zadhir Ladhani: [00:11:22] Yeah.
Mike Blake: [00:11:22] So, I guess maybe I want to go right off the script here, and that is that maybe the first decision you have to make is, do I think it’s a V recovery or slow recovery, right? Because if I think it’s a V recovery, then the other things we’re going to talk about today may have a different answer or a different spin to them as opposed to if I think there’s going to be a two-year recovery, say, that, you know, the Fed thinks is out there. Is that fair too or am I making too much of it?
Zadhir Ladhani: [00:11:54] No, you’re not making too much of it, but my pushback would be, if you make a decision that it’s a V recovery, what are the decisions you’ll make in your business? And what if it’s a U recovery, what would happen to you? Plan that out and forecast. And then, do that if you work towards a U recovery, forecast out that, what if then it’s a V? Which one gives you the higher probability of survivability? And my supposition to you would be plan for a U, hope for a V, you have a better chance of success versus you plan and act on a V, And it becomes a U. You see where I’m going? And so-
Mike Blake: [00:12:35] I do. And then, to that end too, we’ll talk about this a bit later, we may very well have a W kind of recovery.
Zadhir Ladhani: [00:12:44] Yes. And if you look at the stock market in the day we’re recording this, the stock market was way up, and then yesterday, dropped. And this morning, it just started to go back up again. Like I think we’ve got to be cautious and not get carried away with the fad of people jumping up and down and most people starting to get out there and what you see in a very quick manner. Think of it a little bit of a longer term because of the unknowns. One of the biggest things of this is the unknowns that we have is the thing we need to keep in mind.
Mike Blake: [00:13:15] So, how to lie? And I am a business owner, I’m a shareholder in my company, so how do I assess my own company as to one that’s likely to recover as opposed to one maybe that isn’t likely to recover?
Zadhir Ladhani: [00:13:33] So, I think you’ve got to do the scenario planning around the U. And so, what I recommend to my clients is do a scenario planning that says you will have a 20%, a 50% or an 80% drop in revenue over the next year and a-year-and-a-half. And then, do your net income in a cash flow on those three scenarios. You put your expenses towards the 50 to 80 and run your business. And go forward with that planning phase, and that will give you as much opportunity to survive as possible.
Zadhir Ladhani: [00:14:15] The other thing you need to do is conserve cash as much as possible and reduce any frivolous expenses or even potentially some expenses that you just are nice to have versus need to have, and that will ensure. Now, the next key thing you need to do is what we’re seeing in COVID is a lot of trends that were happening pre-COVID have accelerated. And what you want to do is how do you evolve your business to get on those trends and make sure your business is essential in getting on those trends. And we can talk more, I’m sure, when you get to that level.
Mike Blake: [00:14:57] You know, that 80% drop in revenue, that’s a jarring number to me, right? I mean, I understand where you’re coming from, to me, that says an absolute catastrophic business scenario. I mean, realistically, how many businesses can survive an 80% drop in revenue for any period of time?
Zadhir Ladhani: [00:15:18] Depends on their cash reserves and depending on their things they have, right?
Mike Blake: [00:15:23] Okay.
Zadhir Ladhani: [00:15:23] So, I’m not suggesting that will happen, but would you rather do a premortem or a postmortem on your business? And so, we’re asking people to do a premortem which visualizes which it will be. So, therefore, before you get there, you can avoid that, right? If you know what will happen if you get to an 80%, then you start to think, what are some of the actions I do need to take today? And then, we start to talk about the customer. Who are our customers? How do we retain them? How do we become essential to them? How do we go after different other customers and go capture them? What is the evolution of our business we’re doing?
Zadhir Ladhani: [00:16:00] We have a client in Atlanta who has restaurants and they evolved from they were never a delivery, they were never a takeout service, and this is nothing new, but they figured out an interesting way of doing delivery and take out service because a lot of restaurants have done nothing shocking, but if they hadn’t been ahead of it, they could have been impacted by that thing. One—yeah.
Mike Blake: [00:16:25] So, we’ve talked about expense management and we talked about cash management. What are a couple of other specific things that businesses should be looking at to make sure that they’re in the survival group and not on the not survival group?
Zadhir Ladhani: [00:16:40] I think what you want to do is in your customers that you have today, you want to be close to your customers and understand what they are going through. And before they react to you, one, if you’re close to them, you will know where they’re going. So, because you’re starting to predict how your business is going to impact and you figure out how you become essential to them. As soon as you start to get hints and ideas that you may not be kept on, you need to start to see what businesses you need to evolve to. I’ve got a client who was in a particular business and they figured out there was an adjacent business that they could evolve to. They were never in that, but due to COVID, it was a revenue stream, and it was bringing in cash, and they added that onto it, and move that on. And it became a great revenue stream for them.
Mike Blake: [00:17:33] You know, that essential nature, I think, is a really important point. And a former guest on this program, Rod Burkert, has been preaching to people in my profession, business appraisal, to figure out how do they turn themselves from a vitamin into medicine, right? That nice to have, should have versus something that makes pain go away that is truly essential.
Zadhir Ladhani: [00:18:01] Right.
Mike Blake: [00:18:01] And, you know, candidly, that can be very painful thinking because what if what if you sort of look at your business in the cold-heart light of day, you’re just not medicine, right? Your business model has been built on selling vitamins, right? You’re GNC, for example, right? You cannot convert to a drugstore overnight. You are in the vitamin business, and that’s where you’re going to stay. And so, maybe one of the decision points then is not only, even before you get to, how do I make myself medicine, but is that even realistic, right? And maybe that gets to the premortem, the 80% drop in revenue.
Zadhir Ladhani: [00:18:46] Right.
Mike Blake: [00:18:47] I’ve yet to scale my business to a—you know, the world will still need vitamins. They still want some vitamins and vitamins don’t go away.
Zadhir Ladhani: [00:18:54] Right.
Mike Blake: [00:18:54] But clearly now, they’re taking a backseat to the medicine, I guess.
Zadhir Ladhani: [00:18:59] Exactly. And what you do also is look at the trends COVID is causing, do know that every time we’ve had a major event in the world, be it The Depression, be it the oil crisis in the ’70s, be it the 2008, we’ve never reverted back and there’s a new norm that happens. And what is the new norm that would happen post this? And we’re starting to see some trends of this. And can you evolve or pivot? I’m trying to resist using the word pivot, but can you pivot towards that addition to your business and move away from some of these businesses? Like I would say, look, if you’re a retailer, if you don’t have an e-commerce strategy or a digitization strategy, you’d better be thinking about this, right?
Zadhir Ladhani: [00:19:47] Because the demise of retail has been, and I’m not saying it’s going to go away, but I think it’s been precipitated. In every business, be it a doctor, or an accountant, or a lawyer should have and need strategy because whatever we’ve done in the last eight weeks or something, we’ve moved to telehealth in the fastest way possible when there was so much resistance from the hospitals and the doctors. And now, overnight, we’re speaking to our doctors and doing telehealth or teleappointments. Now, we’re going to be used to it as consumers. Now, my doctor better have that service available because I may not want to go and wait in the waiting room. I can get it done through my laptop.
Mike Blake: [00:20:25] And speaking of retail, you know, I got to tell you, I love the curbside service. You know, this microphone that I have now, that John, our producer, begged me to get because the other one made me sound so lousy, you know, I barely slowed my car down, and they just chucked the thing in the back, I lowered the window, and like in a football passing drill, they just sort of chucked it through, right?
Mike Blake: [00:20:53] I mean, that was great. I love that. I mean, even if we kill coronavirus tomorrow, I hope they don’t get rid of that because, you know, saving the time of even having to park, and get out of the car, walk in, yeah, I get it, I can walk in, I get it, I feel like I want to be treated like Cleopatra, and they sort of lift me up on one of those thrones that the servants carry around town and stuff, but I love that, right?
Mike Blake: [00:21:23] Frankly, I’d pay a premium for that. As somebody said, you know, if I bought us a 50-dollar item, we got to pay two more dollars to have the thing put in your car for you, yeah, I’m in. So, you’re right. I mean, I think there are some emerging business models and we’re not even close to being there yet. I cannot imagine what’s going to happen in education. You know, schools are not opening. And when they do, a lot of the students aren’t going back unless there’s no other choice, I think.
Zadhir Ladhani: [00:21:54] No, I hear you. I ask who is sending us information, saying, what will you do with your child? And my response back would be, you tell me what safety precautions you’re taking to make that decisions accordingly.
Mike Blake: [00:22:06] Yeah. So, you know, a fascinating thing has happened. A lot of this, I think, is now going away, but it could come back if we go into a W-shaped recovery, which I think there’s a good chance it will happen. I don’t think it’s drop dead, but I think there’s a good chance. How did businesses survive just not being able to operate for three months? And what lessons do you think businesses are taking from that so that if we do go into a second trough, that they can survive that second halt?
Zadhir Ladhani: [00:22:48] I think in the first instance, a lot of businesses were caught by thinking it’s going to be a short-term close. And I think the government acted very, very quickly in all the incentives and money that came through, and the speed that it came through helped the companies. I think businesses are learning to conserve their cash now even more than they were before. And even consumers are learning that. What we’re hearing in some reports that consumers are really not spending as much money as we were. Our bank account seems a little bit inflated because we’ve been sitting at home.
Zadhir Ladhani: [00:23:23] And so, we seem to have some extra dollars in our bank balances. And businesses are that. I think businesses have learned to conserve cash. Some businesses moved a little slow in cutting expenses. Now, I think they’re being cautious in increasing them back. So, I think businesses are learning from this and will not revert back to the old days. I’ve heard companies and CEOs tell me, I’m not bringing my travel budget back to the norm it was. I’m not bringing my people back yet to the offices, right? And so, I’m going to keep my nonessential expenses down.
Zadhir Ladhani: [00:23:58] Now, you go to how long can they survive? I think that’s a predicament on the business and in the amount of money. We’ve got rent abatement going on. That leaves in July. We’ve got many things that are issues about to drop in July, August, September, and we’ll have to watch what happens to those businesses then, and how effectively they work. We’ve seen very large chains send letters to their landlords, and saying, we need rent abatements and we need you to work with us, right?
Zadhir Ladhani: [00:24:31] One of the largest chains out there in the world has sent that letter and they’re asking for those for a long period of time, not just until now. And I think businesses need to do that. The other aspect is I love using this, is the old military strategist, Colonel John Boyd used the OODA, meaning is O-O-D-A, right? You observe what’s the situation around you, orient yourself, and then decide, and then act quickly. And when you act, you start observing again. You orient, decide, and act.
Zadhir Ladhani: [00:25:07] And it’s similar to Jim Collins’ view around, and I hate to use this, but Jim Collins, he wrote, before you act, throw some bullets before you fire your cannons. Meaning, find your target with a few bullets. And I would ask businesses as they’re evolving and trying to survive this, you need to evolve. You can’t just stand still. And as you evolve, you want to test and fail fast, to learn fast, and keep testing, and be a testing organization because this is an evolution, and we’re going to have to evolve. You can’t stay the same and you can’t stay stagnant.
Mike Blake: [00:25:42] You know, I need to ask another question. This is not one that we’ve really talked about. But I know you can catch up with a fastball here. And again, our producer, John, is going to love this question, and that is, how do you navigate pricing in this environment? And what I mean by that, you know, a friend of mine who also happens to be my dentist was talking to me about what it’s going to take to reopen his practice and start filling cavities, drilling, and doing whatever it is a dentist do, right?
Mike Blake: [00:26:24] You cannot deliver those services for the same price today that you could 90 days ago, right? My wife just went to the dentist, and then face shields and two masks on at the same time. And I’m sure they were also sterilizing the thing, like they’re using some sort of disinfectant like those old sorts of pump-operated DDT and insecticide things they used to have in the old-time cartoons, right? But at the same time, there are other businesses that are desperate—actually, let me go back.
Mike Blake: [00:27:03] You know, restaurants. You know, I ventured into a restaurant last week for some takeout and, you know, half the tables are gone. You know, so now, they’ve got half of their serving capacity, but they’ve got the exact same overhead they had 90 days ago, right? The way the math works is that their prices must go up, you would think, right? Maybe not. So, on the same token, you know, if you’re an attorney right now and a lot of some legal services are considered medicine, others are considered vitamins, right?
Mike Blake: [00:27:39] Maybe you considered lowering your prices for a minute because you just want to get work in the door, right? And I can’t even imagine what airlines must be doing. Their pricing mechanisms have been so Byzantine anyway, what they’re doing now has got to be some form of calculus. And I’m talking too long, but I’m thinking about this question kind of real time, I mean, how do you think about pricing in this kind of environment? And do you agree, that’s a really critical micro decision or decision that a business has to make as they reopen here?
Zadhir Ladhani: [00:28:14] It’s a very, very, very important decision. And I would first want to take something off the table when you talk about pricing. Most companies have very good core values of their business. And some of them call for integrity. Some of them call for, we’ll take care of our customers. Some of them call for, we do what’s right, et cetera, et cetera. So, number one thing I want to take off the table is this is not the time to price cap, right? And then, if you’re a leader who’s thinking, I’m going to take advantage of this, look, this is a time for your values to be in action. We, as human beings, are naturally good people, live those values, and be good human beings. So, take that part out of the question.
Mike Blake: [00:29:00] So, you’re saying, I should cancel that hundred-dollar for Lysol can auction off of eBay?
Zadhir Ladhani: [00:29:05] Absolutely.
Mike Blake: [00:29:05] Okay. I’ll do that as soon as we’re done.
Zadhir Ladhani: [00:29:09] Yeah. And so, next one I would come is at any time, how do you develop your price? You develop your costs, you look at your competitor, and you look at your market dynamics, right? And what the market’s willing to bear. However, if you just do it like the old way, and yes, you bring your costs in trying to make it, you need to decide in this world, will the consumer come? And is a competitor going to figure out a different way? As you rightly said, will a competitor figure out a very cheap way?
Zadhir Ladhani: [00:29:41] And this is the time for businesses to be disrupted. And especially if you’re an accountant or a lawyer, there’s an e-business. I’m sure there’s an e-business out there that’s about to disrupt all the accountants and lawyers out there and other service providers. And so, you increase your prices. You’ve got to figure out your strategy, how you manage the costs. If we go down to the dentist line, you’ve got to look at how you cut your other overheads and stuff, because sometimes, people may just say, I want to not do my cleaning in six months, I’m going to delay for 12 months, right?
Zadhir Ladhani: [00:30:13] And then, go down that way unless it’s hurting and I need really my filling done and it’s killing me, it becomes essential. Then, if you gouge me, you know I’m not coming back, right? I’m going to find somebody else because that trust will be broken forever. So, it’s a very dicey situation. And this may not be the time to increase your margins. It may be the time for your survivability to continue the revenue while not losing money, yet, not increasing the margin business is where I would be today.
Mike Blake: [00:30:45] So, when we talk about pricing, and we’re touching upon this now, this is a good segue to the next question, which is, you know, we’ve talked about expense management, let’s talk a little bit about the sales side. And I want to talk about observing what your competitors are doing. And one of the things that really interests me about this period of times, is I’m trained as an economist, and economists have a favorite term called revealed preferences, which means that people say whatever they want, but if you want to find out what people actually care about, look at how they act and look at how they spend their money, right? And the fascinating thing about this time from an economist’s perspective is the revealed preferences and people’s tolerance for risk, right? At the end of the day, you know, I think the decision of whether you wear a mask or not, I think, boils down to a revealed preference of risk, right?
Zadhir Ladhani: [00:31:56] Yeah.
Mike Blake: [00:31:56] And so, why does this relate to competitors? Because, you know, talking about pricing and talking about how you become more efficient, I think there’s another lever to that, which is, what if my competitors are comfortable taking more risk than I am, right? Maybe the restaurant down the street is going to cram people maybe six inches closer and get a couple more tables or they’re going to—I don’t know the business wound up, but I think you get my point, is that out of out of desperation or they think they’re being clever, but they’re not or that, you know, they just simply have a higher risk tolerance.
Mike Blake: [00:32:40] You know, competitors are going to do things. Some competitors will do things that other businesses wouldn’t necessarily feel comfortable with. But then, they’re going to have to make the decision, do I mimic the risk profile of my competitor because I don’t know or do I use that as an opportunity to differentiate myself somehow? And how do I do that in a way that is, you know, civil and appropriate?
Zadhir Ladhani: [00:33:12] So, I would answer it with a nuanced way, is one, it depends on the market you’re in and the risk tolerance of your consumer. And you let your consumer’s risk tolerance also help you make that decision because if you’re in a risk-tolerance level where the consumer is looking for the safety at the highest level, then you want to be careful, because then, you won’t get those. But if you’re in a market where the consumer is willing, now, do you go there and take that risk tolerance because of your competitor?
Zadhir Ladhani: [00:33:43] I would say also depends on what you’re looking for. Is it a short-term gain or a long-term gain? And I go back to your values. And as an organization’s values that, would you be willing—when big companies develop their core values, one of the questions I ask them is, are you willing to take a financial hit to live your core values? Then, only are you sure about your core values. Otherwise, they’re just words, right?
Mike Blake: [00:34:10] That’s revealed preferences right there.
Zadhir Ladhani: [00:34:12] There you go, right? And this is the time that that core value is being tested. If it is your core values to go with that risk tolerance, yes, go, but if you stated to your employees that this is how we’ll behave and this is who we are, and all of a sudden, at a time of crisis, you evolve, you think your employees are going to believe you as life goes on, right? And trust is broken. So, I would think be living true to who you are and don’t change is a very key thing. Now, do you evolve with the market? Absolutely. But you’ve got to decide on that mechanism in that.
Mike Blake: [00:34:51] So, we touched on this a little bit, but I want to come back and hit it explicitly, is that, let’s assume that this is, in fact, going to be some sort of W-shaped recovery. In fact, there is a possibility that COVID is just with us for a long time. There’s no guarantee that we’ll find a silver-bullet vaccine. It could be partially effective, like the flu. It could be completely effective against the or it could be something entirely different, right? How do you think a typical business or how are you advising your clients to prepare for a world that may very well be sort of on again, off again, on again, off again?
Zadhir Ladhani: [00:35:38] So, we’re continuing—you know, I initially said the postmortem, that idea, we’re continuing to do that. So, in the past, before COVID, we would develop a three-year strategy, and then develop a quarterly annual plan and the quarterly plan, and reassess it every quarter. Now, we’re actually going in and assessing our strategy every month because things are changing so fast. And sometimes, we do it more often or because there’s a necessity to do that and there’s a crisis coming.
Zadhir Ladhani: [00:36:08] So, we recommend to our clients have a monthly review of your strategy, monthly review of your forecasts, not just your profit and loss, but then, take it to a cash flow level. And actually, weekly or biweekly, let’s look at our cash levels. And we continue to evolve that. We don’t get exuberant when sales go up or revenues come up as this V, or W, or a squiggly line continues, we stay cautious. And you can see people start to say, okay, we’re back. Let’s bring these things back. And we always become the naysayers to the organization, said, let’s put the, what if we’re going to go down?
Zadhir Ladhani: [00:36:49] Until you see a major long-term trend, let’s keep to this level and continue to evolve because do know, we’re not going back. It will be a different world that we’re living in and it will continue. And especially, Mike, as you said, if this is going to be a long-term fight level, we’re going to be a whole different type of people in how we live. You know, it’s acceptable for me and you to meet and talk with masks on now, which, you know, eight weeks ago, we would have never done that, you know. We would have sat-
Mike Blake: [00:37:20] They wouldn’t let you into most places of business with a mask.
Zadhir Ladhani: [00:37:24] True.
Mike Blake: [00:37:24] I mean, can you imagine going into a bank right now? Right? I mean, really, 90 days ago, right? Now, it’s expected to go in with a mask, right? But if you do that 90 days ago, you would have been stopped at the door.
Zadhir Ladhani: [00:37:39] Exactly.
Mike Blake: [00:37:40] So, it would be interesting to see if there’s some sort of facial recognition technology that somehow accounts for masking.
Zadhir Ladhani: [00:37:49] Yeah.
Mike Blake: [00:37:49] So, we’ve talked mostly tactical, but I do want to draw back a little bit and get into a little bit of a strategic discussion.
Zadhir Ladhani: [00:37:58] Yeah.
Mike Blake: [00:37:58] And that is, you know, it could be tempting, I think, should be tempting to use the current environment as an opportunity to expand, right? Money is as close to free as it’s ever going to get. The government, by hook or by crook, and I’m not going to comment on what I think the soundness of the policy is, but the fact of the matter is that they’re knocking us over the head and stuffing our pockets full of cash, right?
Mike Blake: [00:38:33] They want us to have cash. And it would be tempting then to sort of take that cash or go after free or very close to free money and borrow maybe with the goal of expanding or maybe renewing your technology or production capabilities. What do you think about that? Is that a temptation that a lot of companies should give into or do you think most companies are going to resist that?
Zadhir Ladhani: [00:39:02] My gut says no. It’s counter-intuitive.
Mike Blake: [00:39:05] No, they’re going to resist it?
Zadhir Ladhani: [00:39:07] I’m telling my companies, don’t do CapEx right now. This is not the time to invest money in your business. Meaning, don’t take on more debt. Conserve cash, conserve your expenses. I may be an anomaly, but this is like no other time we’ve seen in recent history of businesses. The thing it is, we just don’t know what’s going to happen. You know, normal certain crisis, the short-term is known, the long-term is not known.
Zadhir Ladhani: [00:39:37] In this crisis, the short-term is not known, right? And so, it’s such anomaly time that, what will you do with that CapEx? So now, let me then nuance it for you. If your CapEx is for normal expansion, and you do your normal IRR, and all that, I would say no. If your CapEx is going to reduce your short-term expenses, which I know there’s a couple of business out there that are reinstalling their telephone systems from the copper wire telephone systems and their monthly system costs are much lower, now, that’s a different discussion, right?
Zadhir Ladhani: [00:40:13] So, it’s a nuanced answer. I had a very good friend last night called me, and said, I want to upgrade my software in my retail business. And we went through this analysis with him, actually. And the end decision was, yes, because now, this new software was enabling him to go do delivery, which his old system was not. And his staff was having to do manual work to do delivery. That cost benefit made sense. So, it really depends. It’s not the cheap money, it’s what the efficiency, and the new business opportunity you’re able to do, and the revenue increase you’re expecting from it, then it’s a big difference. Yeah?
Zadhir Ladhani: [00:40:50] So, it’s not, money is cheap, let’s invest because we have it. I would be very, very resistant. I’ll give you an answer, when COVID started, I had a luxury car. I actually took it back on the beginning of March just before the lock down happened. And as a personal business, I said, do I need to conserve cash? I had my cash reserves, but I felt that I need to even conserve more in case this is longer than I’m anticipating, right? And so, even a small business like myself, I kind of drank my own Kool-Aid.
Mike Blake: [00:41:23] Now, let me come back to you. One of the things that I think is going to increase that temptation is the capital equipment sellers, for the most part, computers are different. But I think just out in that machine or because they just need to get inventory out the door are going to make me coming back and saying, hey, look, we’re going to offer you a once-in-a-lifetime 40% discount or I’ll let you finance the thing over 19-and-a-half years. You know, you’re going to see some pricing, and I’ll bet you, when you return that car, they probably tried to entice you to keep it with some special financing one-time deal, right?
Zadhir Ladhani: [00:42:07] Right.
Mike Blake: [00:42:07] So, is there any point at which you might be talked into the CapEx of that commitment because that price is so attractive, and you think two years from now, you are going to have to make that expenditure anyway, so why not take advantage of it now?
Zadhir Ladhani: [00:42:27] If it’s for the same business I’m doing, I would resist it again. If you’re adding more services and opportunity of business that I don’t do now and it helps me add to the trends that I’m seeing and it gives me a new revenue opportunity, then I’m looking at it. But I would be very resistant on, if it’s the same business, it’s just a good deal right now. I’m very, very cautious and maybe I’m too conservative in that way, but I’m still very cautious on the short-term.
Mike Blake: [00:42:58] So, we don’t have much more time, unfortunately, but there’s a lot more we could talk about. But a question I want to work in here is about talent. And given what you said, I think I can anticipate your answer, but I don’t want to assume, you know, I’m guessing that probably goes the same for hiring talent, too. I’ll give you an example. A resumé was sent to me by a friend of mine for an individual in my industry that’s looking for a job, has fantastic qualifications.
Mike Blake: [00:43:33] You know, that person probably would not be available, but for this recession that’s going on. And it would be very tempting to try to hire somebody opportunistically, but the business case would be very thin, would be a very speculative hire. So, I don’t think that we’re going to proceed with that. But, you know, what do you think about that? Because I think a lot of companies are going to see opportunistic hiring opportunities where they may feel like they’re getting access to talent they would not ordinarily have. Do you think about that the same way as you think Cap Ex as well or is there a different thought process that goes on there?
Zadhir Ladhani: [00:44:16] This one is slightly different.
Mike Blake: [00:44:18] Okay.
Zadhir Ladhani: [00:44:18] When you’re doing your 80% and 50% scenario planning, one of the aspects I missed saying was your own talent. Identify your own key A players. And once you identify them, let them know you know they’re your A players. Even though they don’t have a place to go today, but the better the player, the more love they need. Give him the love, show them the love because they’re the ones who are going to come up with good ideas for you. So, that’s point one. Now, in your rest of your organization, if you have B, C players, and there’s A player talent available, I would swap it.
Mike Blake: [00:45:02] Okay. So, instead of adding, you’d upgrade.
Zadhir Ladhani: [00:45:05] I would upgrade. And I would say this is the time companies can upgrade because there’s going to be amazing A players available unfortunately for them. But as more and more companies have difficulty, as I think our fourth quarter is going to see many, many companies. And so, A players will be available, I would say upgrade. And when I say upgrade, I say your B, C players, when you swap them, do it with the most dignity and let them move on with dignity, living your core values. That’s also very important. But this is the time to upgrade. Absolutely.
Mike Blake: [00:45:42] Zadhir, this has been a great conversation. We’ve covered some really good nuggets and really specific nuggets too. It’s something I’m trying to do a better job of as I do the interviews of this podcast. I’ll bet you, listeners are writing down a lot of questions. How can people contact you for more information or if there’s a question we did not cover they’d like your insight on?
Zadhir Ladhani: [00:46:06] Sure. So, they can call me on my cellphone. And my contact number is 610-453-8461. Identify that they’ve heard, you’re in my podcast, and go from there, or look me up on LinkedIn, or email me, and we’ll put that on the podcast. Catch up and they can email me. And if they reference that they heard this and from our podcast, we’ll go from there. Happy to do that.
Mike Blake: [00:46:31] Well, why don’t you give us your email because somebody may not go to the show notes necessarily if they’re driving in their car, jogging, then they want to just hear it.
Zadhir Ladhani: [00:46:38] Sure. It’s zladhani, so Z-L-A-D-H-A-N-I, @velocitystrategicconsulting.com.
Mike Blake: [00:46:46] Very good. Well, that’s going to wrap it up for today’s program. I’d like to thank Zadhir Ladhani of the Velocity Strategic Consulting so much for joining us and sharing his expertise with us today. We’ll be exploring a new topic each week, so please tune in so that when you’re facing the next executive decision, you have clear vision when making it. If you enjoy this podcast, please consider leaving a review with your favorite podcast aggregator. That helps people find us so that we can help them. Once again, this is Mike Blake, our sponsor is Brady Ware & Company, and this has been the Decision Vision podcast.
