The world economy has ground to a complete halt. A looming recession is at our doorstep. As deaths and infections continue to surge everywhere, it is time for business owners to assess the impact of the journey toward normalcy; both for family and for business.
Looking beyond this lockdown, we can expect big losses. We also acknowledge that this crisis is full of uncertainty. While we are all in a state of shock and making sense of this disruption, it is important for business leaders to take a step back and make a full assessment on the severity of the impact and immediately plan on how to navigate, weather, and hopefully bounce back as quickly as possible.
In a well written Forbes article by globally recognized family business expert and author Prof. Dennis Jaffe, he highlighted that "Today’s pandemic crisis is turning everyone’s world upside-down in ways that couldn’t have been anticipated just a short time ago. After a half-century of observing and sometimes resisting the increasing pace of change and the many innovations disrupting our behavior, we are now encountering a situation that makes it impossible not to change. However, there appears to be no clear way to reasonably plan what to do next or how to manage the extent of the upheaval. Yet every day we must act and even make some tough choices—despite the lack of any reliable information about the best direction to take."
He further added that "Every business, large and small, is feeling threatened, and every family faces deep challenges just to stay afloat. Without being able to go to work or attend school right now, we cannot imagine how life will return to some sense of normalcy. That uncertainty and inability to control makes us anxious. And when we’re anxious, we can do impulsive, short-sighted things."
As a family business advisor, my piece of advice to entrepreneurs and business leaders is straightforward, Never, never give up even when the going gets tough. Sail along despite the headwinds and manage your emotions! When we help turnaround businesses, our go-to-mindset will always be on a long term view but in our current situation, it’s nothing but crafting a short term future.
Time can be our friend or foe depending on how fast we decide. It is important to align our strategies with well-defined roles within the ownership and management team. Every owner must learn how to adapt by constantly tinkering with business models outside his industry.
Focus on solutions
At this juncture, it is in the best interest of owners to break down the issues on the important, the critical, and the urgent; to prioritize those that need immediate intervention. As one starts sorting the problems, one can now rationally focus on how to move forward with a certain degree of confidence.
Identify the current financial state of the business. Along with the lockdowns come the drop in sales. Thus, the business must attempt to preserve cash while maintaining the workforce. Ideally, contingency plans must be in place to define how to maintain cash flow as well as human resources.
While letting employees go may be inevitable during this crisis, business owners must carefully balance between the preservation of the business and being humane. Apart from maintaining cash flow and the workforce, certain factors also come in to play:
- Capability and commitment of the leadership team
- Control of Operating expenses
- Managing inventory levels
- Compensation cuts of the senior team
- Temporary or permanent layoffs
- Elimination of dividends
- Rationalizing or deferment of capital acquisitions
- Communication plan for partners, employees, customers, and suppliers
Contingency planning applies to all, even business owners who see theirs as small because any inaction can irreversibly damage one's business.
Without a plan, this crisis can take the business out overnight! It does not distinguish between big or small businesses. Just like when starting one’s business, every day was all about survival. That instinct must be reactivated. You must take action, move fast, rise to the challenge. Decide on things that need to be done. Now!