Most people fondly remember the "build it and they will come" philosophy of Kevin Costner in the movie Field of Dreams. Although created in relation to a baseball field, the theme also has a lot of merit in business, or, at least, it used to. Gone are the days of simply creating a great product and waiting for customers to beat down your door for it. Today's businesses need to be creative and aggressive in ensuring ongoing product demand and a reliable revenue stream.
And then there's the COVID-19 effect. Likely more devastating than any other single event in U.S. history since World War II, the current pandemic has literally taken the legs out of many business plans, pushing some businesses to the brink of bankruptcy and forever shutting the doors on others. While some businesses have actually profited since the advent of COVID-19, most are struggling to stay afloat and apprehensive of what the future holds.
Smaller and newer businesses have, overall, been hit the hardest, since they haven't had time to build sufficient reserves to weather such a major crisis. Although the outlook varies dramatically by industry and region, business owners need to look ahead and carefully consider what the recovery mode will look like when the economy finally restores a sense of normalcy or creates a new normal.
The term "exit strategy" has perhaps never been so appropriate as it is today for businesses planning to exit out of COVID mode. Medical experts warn that we are still far from the end of this pandemic; yet, savvy business owners need to be planning already so they are ready to hit the ground running and be fully ready for the market that we may experience on the other side of the COVID-19 outbreak.
So, what can business owners be doing now to help prepare them for a more viable future?
1. Assess the financial damage. Start by updating all of your financial statements, including profit and loss and cash-flow statements. You need to accurately understand the level of damage and recognize if it is temporary or permanent. Beyond profits, you should consider all the various ways that COVID-19 affected your business. Perhaps you laid off employees or cut back on advertising. Or you may have seen long-time customers retreat to competitors or wholly different options. Will you be able to lure these customers back? If so, what will it take?
2. Recognize key industry trends and adjust your business plan accordingly. Ongoing fears regarding the virus and social distancing mandates may forever change how you do business and how your customers interact with you. If you previously relied on foot traffic, you may need to pivot and increase your digital presence to capture more online sales. The most successful businesses will be those that recognize gaps in the market and identify ways they can fill those gaps better than others can. This could include a whole new distribution strategy.
3. Invest in the business. It may seem counter-intuitive to suggest spending more money when sales may be flat or worse. However, the old adage that it takes money to make money remains steadfast. This may not be the time to retreat and cut corners. Rather, it is a time to improve in some of the most critical areas, such as upgrading digital assets or investing in employee training. To accomplish some of these improvements, you may need to seek outside financing. The government's Paycheck Protection Program offered a short-term solution aimed at keeping workers working. Now you may need more long-term financial assistance. The Small Business Administration (SBA) is one source. But, there are many other options, including term loans, commercial lines of credit, business credit cards, and more. When applying for financial assistance, be prepared with comprehensive financial documents.
4. Be an effective leader. As you move forward with new plans, don't forget to get buy-in from your employees, as they will be the backbone of all future growth. Be transparent in your communications with them, as well as your customers, so that everyone understands what is being done, when and why. Employees, especially those who may have been furloughed, will understandably be skeptical of growth plans, so it is critical to keep them updated and make them feel safe and comfortable in returning to the workplace.
5. Remain flexible. Nothing about the current coronavirus has remained the same other than its ability to constantly change. The impact on some businesses continues to be sudden and unexpected. It's important to have a solid plan and timeline in place for recovery, but it's more important to continually monitor your company's progress and keep tweaking and adjusting plans accordingly. Such flexibility must be reflected in operations, as well as in spending, whether it's for hiring, training, sanitizing or marketing.
6. Prepare for the next crisis. Most importantly, work to get your business in a better position financially than what it was pre-COVID-19. Cash reserves will be critical for weathering a second wave or some other unforeseen downturn.
The information and recommendations contained herein is compiled from sources deemed reliable but is not represented to be accurate or complete. In providing this information, neither Cortland Bank or its affiliates are acting as your agent or is offering you any tax, accounting or legal advice.