Businesses are getting hammered by the economic side of the COVID-19 pandemic. Small and midsized businesses are especially vulnerable, since they don’t possess the cash cushion or political pull of their enterprise cousins. A decade ago, after the financial collapse that led to the Great Recession, I edited a collection of ideas for small businesses struggling to survive in brutal economic times. Now’s a good time to revisit and update some of the ideas from “Lessons from the Great Recession” and complement them with some newer ideas from other sources.
Cash is inevitably king in a time like this, and many of our “Great Recession” contributors focused on understanding, managing and hanging on to the precious cash you have. Serial entrepreneur and author Camille Rose focused on the importance of planning — especially getting a crystal-clear understanding of current and impending expenses. I like Entrepreneur’s recent advice about building or updating your cash flow budget with lists of both fixed costs that must be paid to “keep the doors open” and variable costs that might be reduced — especially those that aren’t generating cash.
Inevitably, many small businesses will face the awful prospect of reducing payroll. Entrepreneur points out the importance of tailoring the right mix of approaches; for example, maybe there’s room for furloughing people or reducing hours and sharing the pain rather than outright terminations (which will lead to unemployment claims that might increase your future costs).
In “Lessons from the Great Recession,” Corporate Turnaround CEO Jerry Silberman pointed out the importance of — and opportunities available for — negotiating debt. We’re already seeing large national retailers starting to work with real estate firms to do so: Landlords might prefer to take lower rent while a store or office is closed than to see a tenant walk away from a lease or declare bankruptcy. You might be able to do likewise.
If debt may loom as an issue, planning sooner, more realistically and more proactively is the only solution. It’s crucial to know the full extent of your exposure and think strategically about who to negotiate with and what to offer. Silberman recommended budgeting what you can legitimately afford to pay each creditor, rather than responding reactively to the collector who makes the scariest threats, calls the most often, charges the highest interest or is easiest to settle with.
Speaking of cash, a massive $2 trillion federal relief program has been passed. Many small businesses are in the habit of staying away from government programs, fearful of the paperwork and hassle. But there’s likely to be enough here for small businesses that you ought to spend some time making sure you get what you deserve. Learn more about this from New Jersey’s Small Business Association head on Tuesday.
As Rose and other entrepreneurs pointed out a decade ago, planning in the face of coronavirus may also involve repositioning your products and services. Today, the most obvious example is the need to transform a sit-down restaurant into a takeout/delivery service, or to add online commerce to a business that never offered it before.
We’re seeing service businesses ranging from psychotherapists to schools to dance and yoga studios moving their services online, via tools like Zoom. If that’s part of your plan, look for tips on doing that more effectively, so you can use today’s tools (hardware and software) to capture as much of the in-person experience as possible.
Whether you change your offerings or not, staying in close communication with your customers will be crucial — and that means regular, appropriate and honest communication (that doesn’t presume your business is the most important issue in their lives right now). Invite your customers to tell you what they really need from you right now. It might be something you can deliver that you’d never even thought about.
One contributor to the book pointed out that tough times can be opportunities for low-cost business acquisitions. True then, that’s likely to be true now, too. Competitors or complementary businesses may be reconsidering whether they want to continue at all — whether because they can’t get financing or for many other reasons. They might be acquirable (or willing to sell a customer list) at extremely low cost. Of course, as attorney Andrew Sherman pointed out then, tough times don’t change the need for scrupulous due diligence, clarity about what you’re trying to accomplish, and careful deal structuring and negotiation.
There will be better times at the other end of the coronavirus crisis — and, as Rieva Lesonsky put it a decade ago in “Lessons,” now’s the time to start planning for the recovery. As Mark Cuban notes, now may be the perfect time to fix the business problems you were too busy to deal with in better times. If you’ve needed a new website, start planning and building it now. If you’ve been intending to move to a cloud-based accounting or human resources system, consider doing it now.
More broadly, whether strategy recommends changing your product/service mix, acquiring a competitor or anything else, focus on what you want your business to look like (and be ready to accomplish) when everybody can safely re-emerge and start spending again. Because they will. And, when they do, you’ll still be an entrepreneur: definitely wiser and, ideally, more innovative, too. Learn more about leading in a crisis from one of the top business leaders on April 1.
James Barrood is the former head of the New Jersey Tech Council.