I’m writing this because I’ve seen a concerning lack of concern among a number of entrepreneurs about the COVID-19 pandemic, even while I see other small business being hurt already. So, please pay attention. This is longer than my usual posts, but is important for your business.
Back in the late 1990’s, I was a partner in what was then known as a New Media marketing and strategy firm. We had consciously chosen to work with blue chip brands rather than with what were called dot com startups. We correctly predicted that many of those latter businesses did not have business models that would endure, so we chose to work with companies with established and longstanding businesses. In that way, we believed, we would continue when the inevitable “clearing out” happened.
This did happen in what was known as the Dot Bust. It was the sudden, crashing end to the Dotcom boom. What we didn’t predict was that our stable and solid traditional clients would get caught in the panic despite their more solid business models. We lost between $400k and 500k in pipeline business in the matter of a few weeks.
But to complicate it, that work wasn’t “lost” in the sense of truly cancelled. It was postponed. So, we felt we had to retain our specialized team to service our clients when they made the decision to go ahead. Which they…just…didn’t…do. Managing through that period was exceedingly difficult, but it offered a number of lessons that are directly relevant to what’s developing with the current pandemic.
McKinsey recently published a report directed at large enterprises about implications for business of COVID-19. It acknowledges there is considerable uncertainty about the relative likelihoods of 3 different scenarios. One is quick recovery, which would see things stabilize by the end of Q2. This is somewhat dependent on the disease being seasonal in nature and dissipating as temperatures rise, combined with aggressive containment measures. No one knows yet whether the disease will display a seasonal behaviour.
The second forecasts sustained transmission with a global economic slowdown through the middle of Q3. The third scenario results from inadequate health and containment responses in key regions, allowing for greater spread and significant impact on economic growth. Among other things, travel restrictions are imposed and remain in effect until mid-way through Q4.
There are basically 5 stages to the spread of the disease. In the US and Canada, we are at late stage 1 or early stage 2. Here’s what that means. There are those who are posting memes about how the number of cases of COVID is so much lower than seasonal flu and, therefore, there really is nothing to worry. Those people are missing the train heading right at them. If the disease is not limited by seasonality, we are looking at the second or third scenarios.
In certain regions, events are being cancelled. Gatherings of more than a couple of hundred people are being prohibited. Consideration is being given to closing schools. Large companies are asking people to work from home. All of this, if it expands, will have impacts on restaurants, transportation, retail. If people panic, many will be reluctant to have workers come into their homes. And so on.
I hate writing this stuff. It’s not my nature to be Normie Negative. But one of the great skills in business is risk mitigation. You’re better to prepare for a storm before it hits than when you’re in the middle of it. The truth is that, whatever your plans were at the start of the year, they have now changed.
So, what should you do? I would suggest you pay attention to 4 key areas, illustrated here:
1. Supply Chain Management
I’ve had clients already see problems with foreign sourcing. If your suppliers are in China or Northern Italy, you’re probably experiencing some hiccups already. If you get most of your supplies from just one source, you are at risk if they are forced to temporarily suspend or curtail their production. So, here are some thoughts:
➢ Ask your suppliers what their preparedness plans are. Have they stockpiled? Do they have teams split up so that if one team is disrupted, others can fill in? How are they adding to their protocols to minimize the impacts of infection?
➢ Look for alternative suppliers you can turn to if something happens
➢ Order some extra inventory now to sustain you for a longer period of time, possibly with a somewhat reduced sales forecast. However, this is subject to category 2.
2. Cash Flow
I was speaking with another coach who had a client just purchase a large and expensive truck, the day before they spoke about cash management in these times. That might be dangerous.
If there is a reduction in business, do you have adequate cash reserves to sustain you? This is absolutely critical. During the dot bust period I described, we were managing cash on a daily basis. It’s taxing. It can be emotionally hard. But it’s absolutely necessary. Here’s what you can do right now:
➢ Try to increase or obtain a line of credit. This is admittedly not easy for everyone right now. But if your sales are still strong and you have a good plan, you may be able to acquire this. You may also want to get credit cards, but be cautious because of the higher interest rate
➢ Collect. Receivables. Right. Now. Not everyone is on top of adjusting for COVID yet. By April, if forecasts hold, they will be. And what will people do? They’ll start to push off paying their suppliers, so get your money before they start hoarding. Even consider discounts for cash upfront.
➢ Suspend any large capital investments. In just the last week, I’ve actually kept a couple of clients from making non-revenue generating investments that could have drained their cash flow.
➢ Payables. So this is a tough part of the conversation. There is an ethical question for you here. You don’t want your customers to stop paying you just because they’re having a hard time. Can you justify doing that to your suppliers?
There is the Golden Rule to consider. When my firm got into that mess, we moved all our suppliers to 45 days, told them that was happening and then religiously paid them on day 45. It was hard, but it earned us a solid reputation and ensured our work was done first when we did have work for them. If you must hold off on payables, I will suggest one counterintuitive action for some. You may hear advice to avoid paying those who have the least power to “come after you.” I’d suggest instead that you look after the most vulnerable first.
3. Care of Team
To avoid any disruption, it’s important that the team is looked after. Without good protocols, one person contracting the virus could mean closing down all operations. Here are a number of thoughts. Not all will apply to every business.
➢ Telecommute where possible. My old Kung Fu teacher used to say “The best way to avoid a punch is to not be there.” Where possible, have people work from home. Services like zoom and slack and others allow for productive collaboration from a distance. Plan for mail and banking; plan for how meetings and reporting will be conducted. Think about this upfront. Working from home could be something that will happen for a while, so you need to have processes for it.
➢ Consider “teaming”. By that I mean, get your people working in teams where they don’t interact with each other. In that way, if someone on one team becomes ill, that one team may have to be sent home but others can continue working. This won’t work in a lot of environments.
➢ Enact strict hygiene practices. Everyone must use hand sanitizer every single time they come back into the workplace. Anyone with a cough, cold or fever should be sent home. Anyone who has been in contact with an infected person should be asked to self-quarantine
➢ Prohibit handshaking
➢ Try to create a 6 foot personal space principle
➢ Curb non-essential travel
➢ Educate employees. I’ve seen posts where people say “for younger people like me, it isn’t that serious. So I’m not going to change anything.” The problem is that if the disease spreads rapidly, hospitals can be overwhelmed and there may not be enough equipment and staff to care for critical cases. This is a time where we each are responsible for the well being of each other in our community.
➢ Support for employees. This is a tricky one and each business has to consider its own resources and values as well as the resources of its team members. When someone is sick with the virus or has come in contact with someone who is, they need to stay home. The community requires that. But the community isn’t fully supporting that. There are people for whom missing one paycheque means not making rent. Consider what you can do/ are willing to do to encourage them not to hide the illness and come into work out of financial desperation.
I have one client who is offering to pay the groceries of anyone staying home. Some bigger companies are paying people full salary. Some may consider paying their rent. I had a client in another economic tough time whose team decided they would all take a temporary reduction in salary to ensure no one was laid off. Require people to take their vacation times during this period. Like people who help out in a flood or earthquake, this is a question of how much we contribute or give up to support others.
And what about layoffs? This is going to be a consideration for a lot of businesses if the options above don’t work. It is always a challenge as it impacts morale significantly. You could do a reduction in hours first. If you have to do layoffs, do it all at once rather than the horrible exercise of layoffs each week.
4. Customer Relations
The basic principle here is to be proactive and transparent. Yesterday, I received an email from my optometrist outlining all the steps and trainings they have implemented to ensure their environment is safe and sterile. I have a client who does a type of environmental cleaning. For certain chemical applications they use full on facemasks that are superior to those used in hospitals. They’re one step down from a hazmat suit. The company is communicating with customers, sharing that they will now use those masks on every job.
Interestingly, they are positioning this not just as a way of ensuring customers are safe, but also to ensure their staff are protected when they go into new environments.
So, think about what protocols you can put in place. They will impact margins somewhat, but they may preserve work. Show your clients that you care and that you are on top of it so they feel more comfortable. It won’t keep everyone from making decisions to postpone work, but it just might preserve some. Some ideas may include:
➢ Hand washing or sanitizing upon every entry into the workplace, even for visitors
➢ Frequent disinfecting of surfaces people may come into contact with, ideally after each interaction
➢ Use gloves if handing things to people
➢ Have visible hand sanitizing “holsters” as are frequent in hospitals. Encourage frequent use
➢ Prohibit handshaking with customers
➢ If you’re in a business that requires you to do physical work in an environment like some form of home renovation, consider putting up a plastic barrier around your workspace.
➢ Tell customers you are doing all of this, including the ideas you’re implementing from above to support your team.
➢ Market like mad using low cost/no cost marketing techniques (Referral strategies, social media, education based marketing, strategic alliances) or media if you have budgets. It is possible/probable that as things progress, lead generation and conversion rates could both decline. That means you need to engage in more activity to generate the same business. Get on it now.
With respect to customers, think about shifting your customers or how you service them. You might have to do a bit or a lot of a pivot. If people aren’t coming into your business, you may have to go to them. Think about staffing and packaging to make that happen. Naturopaths, therapists can service online. Chiro’s, hair dressers, massage and others; you may need to think about going to them. If they are coming into you, ensure your environment is spotless and sanitized. And above all, whatever you do, communicate, communicate and above all else, communicate with your customers. Get ahead of their concerns so they know you are thinking of them.
If you’re in B2B, think about what industries are doing well. The way toilet paper (go figure) and hand sanitizer are flying off the shelves, you know some people are doing well. Online retailers and delivery services are doing well. Some kinds of consultancies will flourish. You may need to shift your focus to service industries that are doing well in these times. Don’t be timid about it; go hard.
The last thing to think about is looking after you. I remember when managing through the dot bust that it could be highly stressful. At one point I was paying staff out of personal savings. I cut out a lot of personal activities. But I also remember how our team and how my now wife (then girlfriend) and the partners of my colleagues rallied around each other and supported each other.
This is one of those events that are outside your control. But you do have control over how you respond to it. There is power in that if you remember that no matter what happens, you WILL be ok. There are brilliant scientists hard at work looking for both treatments and vaccines. We are so fortunate they are out there working on our behalf. For your team and your customers, be the most positive person in your business to inspire them. There will lots of negativity. Leaders will distinguish themselves by being possibility focused when others are panicking.
If you’d like to discuss how I can further support you in your business, please reach out at firstname.lastname@example.org