The new coronavirus crisis has reached a new phase, where public health systems are acting to contain the spread of the virus outside China. Clearly, the main emphasis should be on containing the virus, but the economic impact is significant and has the potential to affect your business.
According to a survey from Veem, 27 percent of small-business owners believe the coronavirus will have a moderate to high impact on their revenue. An additional 30 percent expect the virus to have a moderate to high impact on their supply chain. More than half, 52 percent, say they are taking measures to prepare for a coronavirus-induced economic slowdown.
Their actions include increasing pricing, switching to lower-cost providers, reducing operation costs and protecting cash flow. Should you be protecting yourself, too? Or, do you fancy yourself bulletproof?
Yeah, sure, you should give everyone hand sanitizer and wipe down the conference tables. But, let’s think business more than basics.
Cash is king
Could you withstand a few quarters of poor sales?
Deals that seem certain might not close. Where could you trim expenses now without fundamentally hurting your business? Do you need to make that hire now, or can you rely on a less expensive temporary worker?
Should you cancel nonessential travel or client appreciation events and replace them with video conferencing and webinars?
On March 4, the Federal Reserve released its Beige Book report, and coronavirus came up 48 times. The report has a collection of anecdotes from the central bank’s business contacts, some of whom are worried about their supply chains or who are experiencing canceled travel.
In two regional Fed districts — St. Louis and Kansas City, Mo. — growth has stalled.
Recessions don’t hit the U.S. all at once. It’s like a tree in the summer, compared with the same tree in the winter. One by one, leaves turn orange, then brown, then fall off. Not all Berkshire-based businesses are well insulated for winter, and we need to be proactive.
Having gone through nearly 50 years of recessions, personally and professionally, I’ve learned an important lesson — businesses never regret making fast, decisive adjustments to changing circumstances. When the economy turns, whether the next down cycle is coronavirus-induced or not, revenue and cash levels fall much faster than the level of your expenses.
Use your accounting software to know in advance what a reduction in sales will do to your ability to pay suppliers and repay debt, then consider what changes in expenses will help you make those payments. If you can’t, then renegotiate your terms with suppliers; be sure to secure a credit line before capital dries up. If you have delivery deadlines, try to fulfill them ahead of time so the buyers don’t have an opportunity to cancel on you. If you feel as if you’re particularly vulnerable, consider business interruption insurance and be sure you have a “notifiable disease” rider that covers the coronavirus.
Check IT out
Get your information technology team to test for remote work preparedness. Give your employees the flexibility to practice working from home for a few days. Be sure that they know the processes to follow. Also, test the infrastructure, such as Wi-Fi at your employee’s home, and be certain that screen-sharing and video conferencing technology works.
If employees are using their own devices, especially if they are handling sensitive client data, review any relevant IT policies to ensure that you have the proper firewall protection and are complying with your company’s data security requirements.
It is important to be clear about performance expectations.
There is a knowledge difference for employees who work remotely full time or part time versus being only situationally remote. You’ll need to help your employees navigate that shift, but they also should be held accountable.
Get out of here
If working from home is not a possibility, waive or extend your sick day policies. We all have those dedicated staff who resist taking sick days and instead drag themselves into work, risking getting everyone else sick. According to an Accountemps survey, nine in 10 workers will come to work with cold or flulike symptoms, and 33 percent said they always go to work when not feeling well.
It’s important to know the reasons why for this: some have too much work to do (54 percent) and others don’t want to use up their sick time (40 percent).
Managers shouldn’t hesitate to send people home. Let them work from home, and give them unlimited, paid sick days, or at last extend their sick day allowances.
Be prepared for potential absenteeism by contacting an employment agency now in order to be prepared to outsource temporary staff.
Check your supply chain
According to 2016 census data, small- and medium-size U.S. businesses imported more than one-third of all imports. If you are selling inventory that’s coming from Wuhan, China, or Wisconsin, inputs could be coming from an affected area, so, you need to come up with alternative vendors.
You also could pull inventory forward while negotiating a preferred payment schedule. But, be careful about stockpiling — if the coronavirus does cause a recession, you don’t want to be caught holding too much inventory when you could be holding cash.
Demonstrate today the leadership your business needs so that you can be prepared for lean times tomorrow. Even if the coronavirus doesn’t lead to a recession in 2020, it’s better to be a year or two early than a year or two late.
This article originally appeared in The Berkshire Eagle on March 20, 2020.