The first quarter of 2020 has been filled with ups and downs. January started with the DJIA reaching all time highs, followed by a crash. The Coronavirus has hurt carriers that focus on transporting goods shipped in from China, but it has helped carriers that supply grocery stores. Russia and Saudi Arabia embarked on an oil war which will lower fuel prices for carriers but potentially harm the industry in the long run. Throw in an upcoming presidential election and the future will be filled with ups and downs. Here is how to successfully lead your truck company in a volatile market.
Plan for Contingencies by Playing ‘Kill the Company”
Volatile markets crush companies by following record highs with crippling lows. Companies that are not prepared for the lows crumble.
Start making a contingency plan by analyzing your company’s weak points. ‘Kill the Company’ is a great exercise that highlights your company’s weak points. Gather the leaders of your company and tell them to pretend to be the company’s number one competition for the next three minutes. Their goal is to come up with a plan to put your company out of business.
Knowing your weaknesses will shine a light on the factors that could be catastrophic. Build a plan that will get your company through the worst of times.
Build up Your Capital Reserves During the High Points
Capital reserves are like a savings account for your company. Use the upswings in a volatile market as an opportunity to build up your company’s capital reserves. Building up capital reserves will enable you to fund contingency plans or pay for essential costs, like salaries, when the company stumbles in a market crash.
Be Aggressive With Payment Collections
Volatile markets are not the time to be relaxed with payment collections. Money will be tight for everyone. Companies that owe you money will try to hold on to their cash during the downswings and wait for the upswings to pay you.
The best way to improve cash collections is to communicate with your clients frequently and to make it as easy as possible for them to pay. Starting five days before the bill is due you need to be on the phone with clients reminding them to pay you. Call them on the due date and then every day after that until they pay. An online system is the easiest way to accept payment. Enable clients to pay you from their computer by using tools such as Quickbooks
Setup Alternative Sources of Income
It is good business practice to set up as many revenue streams as possible. Doing so will mitigate risks. Having multiple sources of income will help the company survive while its main revenue source is struggling.
One common way for a trucking company to earn extra revenue is to sublease a portion of its warehouse. Subleasing to another company will generate a monthly income that helps cover your fixed costs.
Do Not Layoff Drivers to Save Money
Companies will turn to layoffs in order to save money in a struggling market. However, this leads to the quality of service you offer to suffer.
Building up your capital reserves and establishing multiple revenue streams will provide your company the money it needs to keep its staff. Ideally, it would also provide the funds to hire the top drivers that other companies laid off.
Keeping your staff intact will ensure you continue to provide great service through tough times. This will earn the loyalty of your current clients and help you gain even more business from companies that are disgruntled by their current carrier.
Take Advantage of Competition Slowdown and Continue to Market
According to the Small Business Administration,
“Savvy marketers can boost sales and market share, even if the industry in which they compete is in a slump.”
The competition that is not prepared for a volatile market will be forced to slash their marketing budget. Using your capital reserves, your company can fund marketing campaigns that capture more of the market.
Include Employees in Implementing Policy Changes
Volatile markets will force your company to implement policy changes. You must involve your employees in these changes. Doing so will generate a sense of team and ownership in the changes.
Trying to force policy changes on employees will create a sense of rebellion. Turbulent times require your team to come together and overcome adversity. Employees turning on the company will magnify every issue the company faces.
Volatile markets separate the great companies from the not so great companies. If you do not know how to lead your truck company in a volatile market, your company will struggle mightily. However, choose your next steps wisely and you will come out of these difficult times on top.