By: Nick Mungor, Partner at Novo Advisors
Featured in SFNet Midwest Quarterly Newsletter, Q3 2024 Issue
In today’s ever-changing business environment, managing costs is a critical component of maintaining profitability, especially when faced with stagnant, declining, or unpredictable revenues. Many companies have grown reliant on their existing cost structures and find themselves paralyzed when the time comes to reduce expenses or reimagine their business operations to support lower revenue levels. This challenge has become more pronounced in the wake of COVID-19, which has drastically altered revenue streams for many businesses — sometimes for the better, but now settling back to reality, or “old normal”.
Accurate revenue forecasting has always been tough to predict, but the pandemic has amplified this difficulty. Companies have experienced revenue changes due to factors such as shifts in consumer spending, industry-specific market softness, and significant changes in their workforce. The uncertainty makes it hard for businesses to decide when to pull the trigger on cost reductions. Many have grown into their new, larger structures, making it harder to scale back on technology, personnel, or operations.
Read below as we dive into the critical importance of cost management, especially during periods of decreasing revenues. We’ll explore the procedures companies should have in place for managing costs and strategies they can take when action is necessary.
Nick Mungor, a partner at our firm, highlights a common situation he sees:
“Companies often struggle to grasp that if they were a $100 million revenue company but are now down 20%, they should not fixate on the decline. Instead, they should focus on the fact that they may now be an $80 million company, which they likely were a few years ago and operated well. By stepping away from the emotions and conducting a look-back exercise, they can identify what is needed to return to the efficient operations they had at $80 million. While some costs are harder to unravel, having a plan and taking action, even if disruptive initially, is almost always better than doing nothing.”
To navigate through these revenue downturns, businesses should consider the following strategies:
Businesses must remain agile and proactive in managing their cost structures amid uncertain revenue forecasts. By understanding costs, having contingency plans, and making informed decisions, companies can navigate through revenue fluctuations and maintain financial health. At Novo, we are committed to helping businesses navigate these challenges. We offer strategic guidance and practical solutions to reconfigure cost structures in ways that support long-term sustainability.
A huge thank you to the over 100 bankruptcy and turnaround professionals who joined us last month to celebrate our official NYC launch party at Ophelia Lounge in the historic Beekman Tower. The weather was perfect for the 360-degree terrace on the 26th floor showcasing NYC’s stunning Manhattan views. The food was flowing as were the cocktails, including Ophelia’s signature — the Purple Tuxedo. Novo Advisors’ current NY team includes Sandeep Gupta, Matt Cohn, Rob Vanderbeek, Kevin Neuman, and Claudia Springer. We hope to see you all at the next one!
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Novo Advisors (Chicago) August 18, 2023: Thank you to everyone who made it to Offshore Rooftop to enjoy the Air & Water Event with us. If you were not able to attend, we missed you and look forward to seeing you next year.
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Novo Advisors (Philadelphia) May 4, 2023: Thank you to everyone who made it to Steak 48 on Thursday to help celebrate our growing Philadelphia presence. Claudia Springer (Principal – Philadelphia) is our contact in the area. Sandeep Gupta (Founder & Managing Partner – Chicago), Tom Caulfield, (Principal – Chicago), Nick Mungor (Partner – Chicago) were excited to meet everyone. If you were not able to attend, we missed you and look forward to seeing you at our next event.
What a great way to spend the day, enjoying the Air & Water Event with our wonderful clients. Thank you to everyone who attended this event, your involvement and support made it a truly exceptional gathering.
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Novo Advisors provides this cash forecast template and video to help you construct a basic cash forecast that you can use to enhance your management of the business and communicate effectively to your stakeholders.
Download the Excel template here
