In the early days of March 2020, only a handful of business owners thought COVID-19 would negatively impact their business. By the end of the same month, you'd be hard pressed to find anybody who wasn't bracing for impact.
The toll COVID has taken on businesses is more than financial. Leaders report feeling frozen or stuck as they struggle to find some way forward, making overwhelming decisions that don't just impact them, but their employees, clients and communities. To top it off, many feel like they can't talk openly to their peers. So, despite the fact that so many owners are in the same boat, many are experiencing an intense sense of isolation.
“When you look at business and the personal aspect of things, leading an organization gets pretty lonely at the top,” said Scott Smith, CEO of FarWest Fabricators. “We all carry a tremendous burden and commitment to our employees, our suppliers, our customers, our shareholders, our board of directors. From a personal perspective, if we couldn’t be in a place to keep the business going — it’s just traumatizing to have to deal with that."
Sudden, Seismic Shifts
Scott is a partner with OneAccord who’s been heading up operations at FarWest, a sheet metal fabricator in Moxee, WA, since 2019. As he and his leadership staff approached the end of 2019, they were optimistic. Revenues were $14 million and Scott anticipated 10 percent growth in 2020. At the end of February, it looked like he was right. Then March happened.
“We came out of January and February and were within $40,000 of being on plan,” said Scott. “We were just marching right to it. In March, the county of Yakima shut down, about a week before the governor announced it for all of Washington State. As soon as we got news of the shutdown, we lost 40 percent of our business. You could just snap your fingers and say, ‘There went 40 percent.'"
Scott knew the company couldn’t sustain operations for any extended period of time. With almost half of the business suddenly lopped off, they would eventually burn through their cash reserves, then bank covenants would become an issue and the ramifications would be huge.
"We really needed to change course.”
The story of FarWest's pivot, however, doesn't start in March of 2020. It starts with the effective leadership that was already in place in times of calm. For that, we need to go back to 2019.
Fortune Favors the Prepared
In Q3 of 2019, Scott and his leadership team sat down to create their strategic plan for 2020. Part of this plan was to grow the business, not only through expanded products or finding new customers, but by leveraging the company's existing capabilities in new ways.
"We have a beautiful facility, so we have capacity from a facility perspective," said Scott. "We’re a contracting sheet metal fabricator, so one of the things we really wanted to take a look at bringing in was what I refer to as assembly work or box-build work; instead of giving somebody the metal parts, we could actually put our supply chain management to work and procure other parts — electronics, wire harnesses, etc. Then we could build the metal, put products together and either deliver sub-assemblies to the customers, or do a full box build."
Scott and his team started looking for this kind of opportunity. They had some prospects, none of which turned out to be the right fit, but they kept looking. In their preparation for expanding the business, FarWest was primed for a pivot.
Oddly enough, the fallout from the very pandemic that threatened FarWest's survival also provided the opportunity they'd been looking for. Early in March, after 40 percent of the business had dried up overnight, COVID was becoming a household word and hand sanitizer was hard to come by. Scott got a call from someone in OneAccord’s network who had a client in janitorial services. The client wanted to supply a couple thousand hand sanitizer stands to a large customer and wondered if FarWest could help.
"I looked at it and said yes," said Scott. "This was, from a manufacturing perspective, right in the sweet spot of what our business does."
FarWest doesn't typically handle full design, but they went ahead and designed a sanitizer station. Scott's production facility manager promised a prototype within hours, which Scott knew was impossible.
“You can’t get a prototype done that quickly," said Scott. "About two hours later, he texted me a picture of the prototype that he had developed and I just about fell off my chair. So we partnered up with this customer, their name is Clean Shop Supply. If you go to cleanshopsupply.com, you can see a whole bunch of sheet metal fabricated items that we have made. And, in addition to supplying them with metal fabricated products, we have been sourcing masks and thermometers and other things that are all part of the PPE space that we’ve been selling into."
Light at the End in the Middle of the Tunnel
FarWest found the opportunity they'd been looking for, and it helped pivot the business.
“This caught on very quickly," said Scott. "If I take a look at the last 60 days, about 20 percent of our revenue has come from these specific products that we have co-developed with our customer."
As of June of 2020, the company was within 5-10 percent of their original plan.
"We've kind of created a customer from a grass roots effort up. We feel very optimistic about where this is going and obviously would like to continue to see this brand develop. It’s made a very meaningful impact on our business in a positive way and has also given the leadership team a shot in the arm of enthusiasm and excitement.”
Scott stressed that the ability to pivot the business stemmed from the strategic planning his team had conducted long before the pandemic turned things upside down. They went into 2020 actively looking for ways to expand; before Clean Shop Supply, they had already looked at about a half dozen different possibilities.
"We had the idea that it was going to be one thing, but with that we were just very open to seeing other things and other opportunities," Scott said. "And when this popped up, because it was so much in our sweet spot and we could execute superbly against it, and we had the capacity in supply chain management, manufacturing and facility, it just hit the strike zone of a good opportunity for us."
Key Takeaways for Pivoting a Business
FarWest's pivot wasn't just about getting a new customer, it was about making an addition to their existing business model. Scott pointed out that adding something new to the business stemmed from their active search for something they knew they had the ability to handle.
"We knew we had capacity and this just happened to hit on all cylinders for us, so it was a very good fit," he said.
As a business owner leading through difficulty, it's important to understand the situation. Things have changed for everyone, but even though the majority of business leaders have faced incredible difficulties, there is still hope for the future. It's also important to always be looking for the possibilities in this uncharted territory. Opportunities to pivot your business can come from anywhere.
When looking for your pivot, remember:
- Actively search for new possibilities
- Think about your capabilities, not just your products and services
- Take action instead of waiting for things to come to you
- Don't be afraid to make mistakes: Failure may not be an option, but mistakes are
- Keep fighting until something happens
“Managing through these times, you just have to get in a mindset of ‘We’re not going to quit,'" said Scott. "We’re never going to quit. We need to continue to figure this out, regardless.”
Are you ready to pivot your business?
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