Is it sensible to continue your operations?
By Dave Driscoll
No company could have been prepared for this unprecedented situation with the coronavirus altering every aspect of our lives. How we proceed during and after the COVID-19 pandemic will impact multiple aspects of our futures.
All business owners have been impacted by this crisis in one way or another. Businesses deemed “non-essential” were required to shut down operations, impacting service workers, restaurant employees, salons, and retail shops. Office environments have been required to enforce social distancing, working from home if at all possible, in the effort to avoid human-to-human contact. Some companies can adapt to these measures, but others must lay off employees to comply and/or manage costs due to the declining revenue resulting from the pandemic situation. Manufacturers that could not re-engineer their businesses to accommodate the requirements were forced to discontinue operations. No business has immunity from the unprecedented logistical and economic consequences of the pandemic.
Emotionally, owners are scrambling to conform, survive, and make the right decisions in light of these circumstances. As harsh as it may sound, be sure to consider ALL your options, rather than being blinded by the conviction to slay the beast and re-open at all costs. Although the SBA and other resources are tossing lifelines to small businesses, the decision to partake of these programs should be carefully considered.
Frankly, if your business was not strong leading up to the COVID-19 crisis, it will not be strong coming out. Surviving in the new normal will be even harder.
If your business had productivity or cash flow problems going in, participating in government borrowing programs will not conquer those issues, only increase debt that must be repaid eventually.
Businesses in those distressed situations are at a fork in the road that will define the future for their owners.
As strange as it sounds, not considering all your options is the easiest fork to take – essentially, deciding not to decide. Plowing forward and hoping for a better day simply prolongs the sleepless nights, stress, and negative emotions without increasing the likelihood of success.
Use this time to consider your alternatives to address the struggles the business faced before the crisis.
Is downsizing the business into fewer core lines a better way to capitalize on your strengths? Being the best in fewer markets is better than being mediocre in many. Analyze your current operating budget and make the tough decisions to remove overhead. Look to industry statistics for guidance on expense ratios and right-size your business to your revenue.
Is now the time to talk to a competitor about joining forces? Efficiencies do come with size, and in some industries the market may be overserved; merging with a competitor may help both companies survive. Your competitor is also dealing with the coronavirus crisis and would likely respectfully welcome a discussion to create a stronger company together.
Or is it time to decide to close the business? Owners must be rational enough to realize when “the monster is bigger than they are” and it’s time to make those tough decisions to stop the bleeding and protect your physical, emotional, and financial health. The orderly wind down of a business is not a defeat. Strength and courage are necessary to recognize if your business is unsustainable and then proactively manage the process. Creditors will be supportive and open to negotiation in those efforts.
It’s better to manage than to be managed. Stubbornly ignoring reality too long leaves little room for alternatives or negotiation. Owners will be completely exposed to the loss of business and personal assets, and may have judgements hanging over them for years. This is a sad and frightening reality to accept.
The COVID-19 pandemic has brought the business community to the reality that all options must be considered. Holding out hope for a better day is an understandable emotional response to today’s crisis. However, hope is not a strategy for success. The challenge is to thoroughly analyze your options and make smart decisions with strength and conviction.
My sincere wish is for all my fellow business owners to discover and realize the best options for their way forward.
Dave Driscoll is president of Metro Business Advisors, a business brokerage, valuation, and exit planning firm helping owners of companies with revenue of up to $20 million sell their most valuable asset. Reach Dave at [email protected] or (314) 303-5600. www.MetroBusinessAdvisors.com.