As I write this, conditions are changing quickly and dramatically due to the coronavirus pandemic. This article presents strategies for company owners to handle this situation and limit the financial damage to their business. I'll cover three main areas on which owners should concentrate. The key to the action plan should be to act (and react) calmly and deliberately.
Note: This article does not discuss how to handle employee issues and the associated financial implications. That topic is subject to numerous laws that are best discussed by someone with human resources and legal experience.
STEP #1: EDUCATE YOURSELF
Business owners should keep well-informed about the pandemic but should not over-expose themselves to news or social media speculation. Much of the coverage is superfluous; few articles have new or useful information.
Instead, owners should spend more time studying their business in detail. Examine the following in detail:
- supply chains
- cash flow
Use this information to forecast how different events could affect each of these factors and determine response to those effects.
STEP #2: WATCH SUPPLIERS CAREFULLY
Recessions often bring logistics and supply chain issues. This pandemic is magnifying these problems. We have numerous clients in the transportation and logistics industries who are reporting problems, including delayed/cancelled ships, cancelled orders and empty trucks. These problems appear widespread, as colleagues in other industries are reporting the same issues. I suspect these problems will begin to filter down once existing supplies are depleted.
Will your suppliers encounter critical shortages? If they do, these problems will likely cascade all the way down. Consequently, owners should perform due diligence on suppliers. This effort will take some detective work. Owners can take the following steps:
- Run regular credit reports on key suppliers
These reports provide valuable information about suppliers’ financial health. Information about their own supplier payment habits is very useful. Suppliers who are financially weak may not be able to withstand supply chain issues.
- Speak to representatives from the company
One thing I learned in my front-line days in the finance industry evaluating companies is that you have a better chance of getting useful information by asking “loaded” questions that are open-ended. Ask, “How are you managing all the supply issues arising from the pandemic?” Or, “How are your suppliers dealing with their late shipments from Asia?”
- Do your research
Search the internet for relevant company and industry news. However, trust information only from reliable verified sources.
STEP #3: DON'T STOP MARKETING AND SALES ACTIVITIES
Companies reactively lower their marketing and sales investments during difficult times. Predictably, that leads to lower sales and increased financial problems. It can be a vicious cycle.
Remember that businesses can grow even in the worst times. I know companies in the construction industry that survived and grew during the recession of 2007 to 2009. It's not easy, but it is possible.
Invest marketing and sales dollars selectively. Develop multiple potential marketing strategies. Test each strategy for effectiveness and quickly discard those that don't work. Lastly, many sales in the glass industry are relationship-based. The catch is that they take time and effort to develop. Spend the resources to develop these relationships. These investments will eventually pay off.