At Procida Funding & Advisors, we regularly speak with senior management when they’re under pressure. Acquisitions, turnarounds, and hyper growth are situations that we navigate frequently and with great detail. The impact of COVID-19 has thrown the entire economic environment into unprecedented territory. All conversations have shifted to putting out the fires caused by Shelter-In-Place orders and their impact on businesses. Every industry is affected differently— for example, restaurant, hotel, and hospitality industries are much harder-hit than businesses selling goods and services that cater to the needs of a nation suddenly stuck at home.
Even with the diversity of experiences, we believe that there are some steps that will benefit your business regardless of the industry.
1. Create a COVID-19 Response Team
Companies must create a COVID-19-focused crisis team that can directly address and prioritize the unprecedented issues it has caused. Identify people within your company whose job responsibilities during the pandemic will include being a COVID-19 Impact Team member.
It will be crucial for you to introduce your Impact Team to your company as a resource with whom they can share their COVID-19-related issues. This business strategy is a measure born in crisis, but it is a response that will provide relief for other personnel that have been navigating their unique challenges alone until now. The purpose of the Impact Team will be to accept information from all levels of your business in order to detect, address every issue related to the pandemic impact. Effective management will understand that this team is a radar as well as a SWAT team. This team will keep you aware of unexpected changes and struggles that arise on every front, so that you’re not blindsided at any point.
2. Formulate an Economic Crisis Cash Strategy
To survive this unprecedented moment, your business goals need to include a strategic plan that may be more short-term than you might be comfortable with. In the past, recessions have hit gradually and had far less impact. Recent developments have changed the rules of how institutions interact with each other in record time. Even if all of the changes are not recorded formally as rules, the eligible borrowing base criteria and loan arrangements are changing every day. In this crisis, the terms of customer and supplier agreements have to change, at least temporarily. This is the time to use short term thinking, even if you’re not used to it. Debt and returns will most likely rise, unfortunately. This is a good time to take advantage of deferred payments wherever you can, and view your borrowers with a more critical eye. This is also a critical time to establish a cash reserve and reconfirm your relationships with essential suppliers.
3. Consult with Turnaround Specialists
The economic environment caused by the pandemic makes turnaround strategy a valuable expertise to have. We’ve benefitted from an advantageous business environment in the United States in recent years, but the planning, organizing, and management that may have worked miracles in the past is not going to get you through a pandemic. This is a moment for management teams to consider consulting with turnaround professionals to help you weather the storm and minimize damage as much as possible.
4. Establish a Strategy to Secure Capital
Many businesses have struggled to gain capital. There are many factors that have created this environment: Banks are attempting to prioritize Payroll Protection Program (PPP) loans, putting out fires with their own clients, negotiating relief packages, and following their own crisis response plans. Non-regulated entities may have more power, but they may still face portfolio and funding issues. In a constantly-changing environment, the skilled advisors at Procida Funding & Advisors can quickly assess your situation and the market, and provide a targeted approach to get your business out of survival mode and positioned for capital gains.
5. Preempt the Second Wave
Billy Procida often says, “chance favors the prepared mind.” There is tremendous political pressure to open our economy, which opens the country to the risk of a second wave of COVID-19. It is not our intent to make politically charged statements, but for the sake of being prepared, it’s important to consider the likelihood of a second Shelter-in-Place order. Unfortunately, but realistically, you should keep your crisis strategy for COVID-19 at hand, because you may need it again sooner than you expect.
6. Don’t Lose Workflow Momentum
Working from home has its own set of challenges. Suddenly people are working while also having to homeschool their children and worry about their families. Distractions and crisis stress abound. The supports of childcare, social outlets, and our normal routines are suddenly pulled out from beneath our feet. Hopefully at this point most people have been able to establish new routines and expectations for productivity, but it is more important than ever to keep your team motivated, focused, and regularly completing each day’s tasks. Keeping everyone on the same page, project management, and deadlines are more important now than ever. Be sensitive to keeping morale high, establishing positive company culture, and maintaining accountability and confidence among your employees.
7. Innovate New Strategies for Success
Identify new ways to use your assets. The current disaster has created a world full of new needs and problems that you might be able to solve. Companies have given themselves a competitive advantage by switching their functions from solving “peace time” needs that are currently irrelevant, to solving the problems at hand. Many clothing stores are now manufacturing PPE. Adapting to the new environment may be the way to survive.
8. Buy or Merge with a Competitor
If you can’t get through this time alone, see if you can form a mutually beneficial partnership in some capacity with a competitor. This may benefit you in the long term, as well.
9. Remember the Lessons of Previous Recessions
Keep your focus on liquidity right now instead of getting lost in profitability concern. Don’t lose a solid brand by over-focusing on getting costs lowered. Click here to read more of Billy Procida’s articles about past recessions, and how to bullet-proof yourself from them.
10. We Will Get By; We Will Survive
You’re going to have to make incredibly difficult decisions, and your reputation is on the line. This pandemic will pass, but give serious thought to the impetus behind your decisions, and make them for the right reasons. The decisions you make now will shape your brand, reputation, and standing in the business world far beyond the short timeline of COVID-19.
Stay positive and accept these challenges as opportunities. Maybe this is what your company needs to make impactful changes that will position you for future success.
For more information regarding COVID-19 and PPP loans, contact us.