With the coronavirus spreading across the globe, catching individuals and governments off guard, business owners have not fared any better. While the virus is having a grave impact on the health of millions across the globe, businesses have seen an equally serious impact on their bottom line. The virus is projected to hit businesses’ cash-flow and the ability to stay open post-pandemic.
While different parts of the country have been hit harder than others, the nation's businesses, their owners, and employees are all dependent on the national and global economy. Looking to those who have survived past crises, business owners are now tasked with guiding their organizations through the coronavirus pandemic.
Effective Attributes and Responses to Help with Recovery
Right now, more than ever, it is equally important that business owners empathize with their clients’ expectations and their employees’ needs while also taking steps to maintain their financial health.
Other attributes of effective business owners include making sound judgments in light of limited or incomplete data, along with providing a positive but realistic forecast of the situation to keep the employees motivated and productive. Lastly, leaders who see crises like the coronavirus as opportunities to identify trends for innovation and ways to problem solve can look to brighter days in the future.
Protecting the Business' Bottom-Line
Like other sustained business interruption events, there's a three-pronged approach that businesses can implement to increase their chances of survival. The first is to manage the shock from the initial impact and establish a protocol for the new normal in order to preserve continuity. The next step is to learn from what has occurred and adapt to the way work is now being performed to serve clients as effectively as before. The final step is to identify future opportunities to operate differently, more efficiently, and gear up for the post-crisis new normal.
To better mitigate major effects from a crisis and begin the adaptation process, the following are practical steps to emerge leaner and more efficient as the reopening process begins. Two primary actions that businesses must take is to first protect the well-being of workers, while also protecting the business financially.
- Making decisions should be streamlined because a lack of certainty can give decision-makers analysis paralysis. This can slow down important steps needing to be made faster than during non-crisis times. Moving from a chain of command to collaborative teams to make decisions can increase speed by having fewer steps and faster decision-making processes.
- Documenting all cash the business holds, along with committed and uncommitted lines of credit, also is suggested. Be sure to include lines that are pre-established with banks or credit unions, plus any existing borrowing limits from lenders; this will provide a baseline for businesses to make crisis projections. Other liquidity measures might be negotiating to extend better payment terms and refinancing existing lines of credit for better short-term payments, potential new equity injections, etc.
- Quickly modeling different economic outlooks for existing markets that are served, depending on how mild, moderate, or severe the crisis impacts that business, can provide greater insight on a business' financials. As conditions change, it will become evident how much cash is needed and what areas of a business might need to be scaled back or cut. Leaders should also look at the likelihood of not being able to serve outstanding debt, primarily as they look at liquidity and the profitability of the business' operations.
- Determine the business' mission-critical business segments. This looks at which services or products are most profitable and/or resource-intensive. This will help determine which ones are important to current and future cash flow and which segments could be impacted based on the length and severity of the crisis.
- Evaluate what businesses can do to reduce non-essential or discretionary expenses to positively impact its finances. This can be accomplished by reducing or forgoing landscaping a business' exterior or holding off on repainting a building. It can also come in the form of reducing one shift or reducing spending on employee training.
Since the coronavirus is a fluid crisis and there are many possible outcomes, business owners will implement different practices based on how this crisis evolves. Depending on the severity of the actual impact, different products or services can be stopped temporarily, employees' hours can be reduced or a hiring freeze can be implemented.