Protecting Your Business in Times of CRISIS

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Hopefully you're having a great week so far. Today I'm going to talk about doing business during tough times, doing business during COVID was tougher than ever on everyone. I had a great conversation with somebody on the success story podcast and we were speaking about how he operated his business during COVID and how he grew and navigated and doubled down on what worked and sort of shelved what didn't. And all the ideas and insights came from him. And so to give you some context, I have a podcast, success story podcast, where I interview incredible business leaders. On the podcast, I sat down with Vincenzo Guzo. He is a dragon on CBC's Dragon Den, AKA Canadian Shark Tank. He owns the largest private movie theater chain in North America. He's built businesses and brands in cinema, real estate, medicine, hospitality. He's done a lot over his career. But we were speaking about how his movie theaters have fair during COVID and I thought it was an interesting topic because he operates in a brick and mortar space where entertainment was significantly impacted by COVID and obviously everybody had some sort of repercussions from COVID but brick and mortar businesses in particular in terms of businesses that thrived versus really hurt. Brick and mortar businesses were up there in terms of businesses that really had a tough time and a lot of people were not so lucky, right? And Vincenzo Guzo, he not only made it through COVID, he thrived during COVID. So we spoke about some of the things that he did to protect his business in times of crisis and then some of the things that hopefully you can learn and take from him for your own business. So we had a conversation about this. I thought it was a great topic. I wanted to put a video together on it and then I'll add some more context from my perspective, my point of view as to how to properly implement some of the things that he taught over. So first I want to give you a little bit of a background on Vincenzo Guzo if you don't know him so you can sort of understand the level that he operates at. So he was a dragon on the 13th season of CBC's Dragons Den. Of course if you know Shark Tank, you know Dragons Den where investors are pitching to the dragons and then dragons choose whether or not they want to invest in the people. But the point is the people that are the dragons are highly successful business leaders. In 2012 he was recipient of the Queen Elizabeth II Diamond Jubilee Medal. He was also knighted by the order of merit of the Italian Republic and continues to be recognized for his achievements in business and entrepreneurship. Now in my interview he spoke about a lot of things but most notably and most importantly was how to thrive during some of the most to mulch to his times in recent history. So no one could have prepared us for the devastation the COVID caused. Let's be honest, businesses were shut down. We weren't allowed to go inside, go indoors. People had to figure out how to go virtual. The cinema and film industry which is Vincenzo Guzzo's core business was hit especially hard during COVID-19. To put things in perspective between 2019 and 2020, the revenue tied to theatrical entertainment or movie theaters dropped by $9.2 billion in the US. The entertainment industry as a whole saw the lowest market revenue since 2016 dropping by about $30 billion. 2020 there were only 338 new movies released in cinema as opposed to the usual almost 1,000 over an entire year. Needless to say, cinemas were the companies that should have and did suffer the most substantial blows based on the COVID pandemic and environment. But cinema Guzzo, Vincenzo Guzzo's brand and line of cinemas was not one of them. In fact, his cinema chain bounced right back into 80% operational capacity after the cinemas opened in Quebec last year. Benchmarked against the operational capacity had pre-COVID. So what did he do differently? So the first lesson he taught over was to face reality then adapt. When the pandemic hit, he had just spent $12 million on launching a new cinema, one that was open for three days before it was shut down. To quote Guzzo, it was a cash flow draining experience but at the end of the day, that is what I think unifies the people who are successful in a crisis period. They live on a shoestring budget because they know investing during the crisis is when times are cheapest to do it. Rather than dwelling on the closure of his new cinema and financial losses, he adapted. So he looked at the new market conditions and he found ways to work within them. It's after the pandemic that everything explodes, right? So for example, this is Guzzo again. We have a real estate that we're no longer going to be building a theater on, they purchased land. So they're going to build industrial space on it. We know that we have anywhere between 24 to 36 months to make that happen in order to take advantage of the industrial space's popularity and opportunity. During the pandemic, he used the spare time to focus on other branches of his business endeavors such as medical and hospitality, which he knew would be in high demand when the crisis eventually ended. He used the time to increase production and make preparations for the post pandemic world. So he weathered the storm and doubled down on the highest value opportunities, the highest ROI opportunity. So not everybody has different types of categories of business to go into, but even within the context of your own business, if you have one particular part of your business that is not doing so well, do you diversify into other areas of business? During COVID, I was working and I was heading up a SaaS company, a software company, and we were actually selling software to broadcasters as well as stadiums. That was shut down very quick. We diversified, we launched four different products during COVID, and we were testing out new markets, we were testing out new strategies against four different products that allowed us continue to maintain operations while building out a product that we took the market after COVID, which was exceptionally successful. So again, different scenario, different industry, same story, you double down on what's working, but you can't just dive head first into the thing that's obviously draining cash, but there's always areas for you to diversify. What can we learn from this experience first and foremost? It's important to face reality. So when conditions change, you can't keep doing things the way you always have. You need to be willing to adapt, even if it means making tough decisions and sacrifices, but do those knowing that you're gonna allocate those resources or that energy somewhere else. In fact, according to a recent world bank working paper, the businesses that survived the pandemic shared some commonalities, most of them shared innovation. Those that innovated survived. So the beginning of the pandemic saw an enormous outbreak of digitization across businesses, they scrambled to find ways to keep their operations afloat. Everybody was moving virtual. From online stores to video conferencing, companies were finding new and innovative ways to connect with customers to keep businesses running. In the music industry, for example, these are just great examples, by the way, of how different industries manage and navigate the pandemic. So diversifying resources from things that weren't working, doubling down on things that were. So artists took the virtual conferences and concerts in order to make money to keep their fans engaged. Small businesses learned how to sell their products through social media and online. Vincenzo's approach was a little different. He didn't go 100% online. He focused on expanding his business into new sectors that he first saw being successful post pandemic, immediate explosion after recession. The lesson is still the same. It's always good to have a plan B and be willing to experiment and try new things in order to stay afloat. The second lesson that he taught over was to think critically before you panic. So it's not easy to keep your cool during a pandemic, but it's important to think critically and rationally about your business. You may find that there's no reason to be panicking at all, which could save you a lot of stress and ultimately lead you to make better decisions. For example, Vincenzo balanced reflections on the state of his business, likely saved him from throwing in the towel and basically probably cannibalizing some of his cinema ventures. So at the beginning of the pandemic, everyone thought this was a nail in the coffin for movie theaters. People were going to get used to staying at home. People were going to get used to streaming. I think they've got to realize that not everybody lives in a 1,000 square foot condo. Or rather, not everybody lives in a 14,000 square foot home. And a lot of people live in a 1,000 square foot condo. The truth of the matter is, if I work nine to five in an office, the last thing I want to do when you're done at the day is to close yourself up and to stay at home. So he also understood human behavior. So even though there's modernization in terms of how we consume content, he understood that social habits and behaviors are ingrained into people and those don't always change. To the point where an entire industry is destroyed, an entire industry changes evolves and is different, but it's not completely destroyed. So Vincenzo maintained his informed optimism through the pandemic as he predicted his cinema's bounce right back to success after the lockdowns were lifted. So he didn't close anything. He obviously stopped operations. He refocused his efforts, he refocused his money and his staff and his time and attention, but he didn't kill any projects. He could have killed them. He could have stopped paying rent. He could have given up his leases or at least bought out his leases and sort of maybe felt a little bit safer if he didn't have those assets that were obviously burning cash. But ultimately he did have foresight to understand that, yes, digitization affects all industries, but there is still a human component that still drives certain behaviors. So now this isn't to say that keeping your chin up and being the optimist will always save your business. What you need to do is look at your specific situation and make an informed decision without resorting to hysterics or giving up before the race has even begun. The next point that he made was to put your time to good use. So his final insight was basically to focus on where you should turn your attention to in a time of crisis. So when his cinema was shut down just days after opening, remember he opened a cinema, it was open for three days. He began to think where should he turn his attention to now that the new cinema is out of action. As a result, he ended up developing other business endeavors and sort of checking some goals that he wanted to check off that he hadn't previously had time to focus on. So all of a sudden the movie theater wasn't taking 24 hours of his time and his team's time. So they took a chance on buying real estate that was retail based and entertainment based. The new direction you take as a business could relate to the business itself or it could be that you take a new career direction altogether. The important thing is not to dwell on what's happening and focus on what you can make happen. So he focused on three main points. He focused on facing reality than adapting. He focused on thinking critically before you panic. Then he focused on putting your time to good use. Let's talk about a few other businesses that navigated COVID particularly well. So Moriarty's Gem Art. They were a thriving jewelry store in Indiana. When the pandemic struck, the owners, Steve and Nancy Moriarty knew that sales would be tough going into the pandemic as a brick and mortar store but the company didn't waste any time. Almost immediately they pivoted into a new market space and began producing something new, YouTube live streams. Rather than relying on jewelry sales alone or worse yet giving up entirely, they decided to run weekly streams in which the Moriarty family featured special stones from their vast collection. And what do you know? The simple pivot did the trick. With the extra publicity, Moriarty's Gem Art began making thousands of dollars in sales one show even fetching a whopping $20,000 in sales in the thick of the pandemic. Giving up is an option. Bankruptcy is an option. Sometimes one or both of these are called for, especially if you need to be focusing on family issues or other struggles. However, you should always be looking to pivot rather than to drop off altogether. Sometimes all takes is a slight change in your operations in order to deal with a crisis that arises. Here's a few other tips. So we have Benchenzoguzo's tips. We have a great case study, but look at a few other tips for crisis proofing your business. Prioritizing and maintaining your customer base. So in times of crisis, it can be difficult to track all your responsibilities, but it's crucial that you stay in touch with your clients and continue to serve them as best you can. You can do this by staying in communication, via regular email and social media updates, offering sincere apologies for any services or products that can't be fulfilled during the crisis period, coming up with alternative ways of serving your client base, where possible running loyalty programs to remind your customers that they are valued even in times of crisis. The majority of revenue comes from just usually 20% of your clients on average. That's a pretty common law, the 80-20 rule. You're committed to customers who trust the product or service you provide. These are the ones that pay your bills. These are the ones that usually make up the majority of your revenue. So keep these clients on your side, be empathetic with their life situation, and you'll have a solid base to return to when the crisis is averted. And not all crises are COVID. There's a lot of temporary short-term crises where these rules and these ideas still apply. Reduce unnecessary expenses and cut down where you can. However, people is not where you cut down. So in all the examples that I just gave actually, there was very few layoffs. Businesses approached COVID differently, but in Vincenzo Guzo's case, there were almost no layoffs. So he found other uses for the people that he had on his team and in his company. It's fair to say that money is a primary concern when a crisis strikes your business as it always is, which is why cutting costs, where possible, might just make things a little bit easier. But what you do have to do is you always have to lay out your budgets, understand what you can do without. For example, are there software subscriptions? Are there maybe ancillary team training events, business-related services that you don't need right now? Are you able to maybe pause some of the orders or the supplies that you have coming into your business if you don't need them? I know in particular, Vincenzo Guzo renegotiated his leases with landlords for the actual period of the pandemic. There's a lot of places you can probably cut costs when times are tough. I would always focus on cutting things that do not impact another human being's life, if possible, which means that you're keeping your staff on and you're keeping them, you know, they're keeping them paid and fed, and then you look for the other things that are allowing you to do business maybe comfortably, maybe you scale some of those back, but try and cut unnecessary expenses but try not to cut people, especially if you do have a great rebound strategy in place. I think the people and businesses that cut people are the businesses that don't properly have the foresight and don't have a rebound strategy in place, which means they're not great at building businesses in times of crisis. Maybe they're just great at building businesses when times are good, which begs the question, are you really good at building a business? Lastly, communicate with your team members. So this is arguably one of the most critical steps that you can make when weathering a crisis or a financial storm. So when things go wrong, it's hard enough to navigate rough waters without losing your communication lines. You can maintain your open communication by having scheduled meetings every single week if you don't have them already or each half week to discuss developments, updates, financials. I'm a big fan of radical candor, sending out regular messages as soon as anything changes and being totally transparent about the good, the bad, and the downright ugly. Even if it is, we have six months runway until the lights are no longer on, obviously, this is something that you should communicate because that will get your team, that'll galvanize your team. And ultimately, at the end of the day, if you can't pay their salaries after six months, they deserve to know ahead of time. Letting your employees or your colleagues know that you're there to support them, that they aren't facing anything alone, you have to make sure your team knows what's going on at all times, there's no point in hiding the facts. You're in this together and with transparency, you can support one another until you're out the other side. So nobody prepared us for what we went through in 2019, through to 2022. The struggle is by no means over for businesses. The entertainment industry is still trying to regain its footing. Small businesses are starting over from scratch. Tourism is still nursing its wounds, but that being said that this is a necessary conversation to have, not just for businesses struggling through COVID-19, but also for crises that may arise in the future. How do you handle another recession of the same scale or even worse? So thankfully, you learned from people, like Vincenzo Guzo, who are inspiring us to take a resilient but optimistic approach in situations where the worst might be expected. With his insights and extra tips, hopefully you've learned something that can help you better future proof your business so that when the next crisis hits, you'll be more prepared and you will handle that and navigate that a little bit more eloquently. I hope you enjoyed today's video. If you found value in it, please, please hit that like button, hit subscribe, leave a comment below with any other business topics, any other lessons you wanna learn over. I'll try and get into it. Have a great day. See you soon.