The new landscape of today presents both challenges and opportunities for business owners. The New York Times recently reported that more than 40 million people—the equivalent of one out of every four American workers—have filed for unemployment benefits since the coronavirus pandemic grabbed hold in mid-March.* While many aspects of the pandemic are not within our control, in this article let’s focus on the proactive approach business owners can take to lead to opportunity when reopening—and into the future.
The overarching methodology is simple: Step back to look at the big picture, and then step forward with intention.
A common problem for businesses affected by the pandemic is cash flow. Assessing your business’s current liquidity needs is a fundamental first step.
Identify your key sources of capital and expenditures, taking indications from experience and leveraging scenario analysis to make projections about the future. Then draw up a plan outlining the short- and long-term needs of your business. This plan should be based on a business roadmap specifying what your new business model will look like using a phased approach aligned with the state’s guidelines for reopening.
Dig deep into the largest of your cash outflows—expenses such as real estate, labor, food and beverage (if you are a restaurant), equipment and supplies, utilities, and insurance. Is there an opportunity to proactively speak with your landlord about rent abatement or deferment? If that’s not an option, ask if there’s an alternative mutually beneficial arrangement. For example, requesting to pay occupancy carrying costs only for a period in exchange for an extended lease term. Or applying deposited funds toward rental payments. Your lease may also have terms allowing for rent relief, such as condemnation, force majeure, environmental indemnity, or quiet enjoyment provisions.**
Review your supply chain; are you able to negotiate reduced pricing with any of your vendors or suppliers? Can you support limited operations with reduced staffing? Once you assess where your business is today, you can begin tackling the largest sources of pain and profit, one-by-one. Conduct best- and worst-case scenario analyses and put a strategic plan together for each potential outcome. Plan for the worst case—but stay open to creative solutions and potential upsides.
Ultimately, you want to be able to answer the questions “Does it make business and personal sense to reopen?” and “What are my options to move forward?” with your new strategic plan as the baseline for those answers.
The key drivers to any business’s success lie within its people, processes, technology and data. Understanding where your business’s strengths and weaknesses in these areas are today will help you adjust for a strong future. At blumshapiro, we utilize this approach as the basis of our Business Enterprise Review framework, providing a roadmap to help our clients realize their future-state business goals. Let’s start with people.
One of the largest expenses for many businesses is personnel costs. Review the reopening guidelines in your city to assess what changes and restructuring your space will require. Determine how this will translate to a possibly limited operation and the required staffing needs to match that. Assessing the right people within your staffing and providing the flexibility and incentive to return on a limited basis is important. Once identified, consider including those personnel in your reopening discussions. You may find your employees’ perspectives to be invaluable as you assess how to open.
When looking at your underlying business processes, consider all aspects from your supply chain to procurement to what your new operational process flow will look like as you reopen. With an ever-changing business climate, many businesses are finding that their underlying processes need to evolve as well. How will you reach your customers online? How will reduced inventory needs affect your vendor relationships? Be open to potential upsides. Has a move to online ordering allowed you to reach a new audience? What does the purchasing behavior from repeat online customers’ orders tell you about your services or merchandise?
How you manage this change both privately with your staff, vendors, and investors and publicly with your customers is critical to moving forward. Communicate to all parties the changes taking place—whether it be new product or service lines, how your products or services will be delivered or consumed, or how your business is working to comply with newly imposed government regulations. Be prepared to make ongoing adjustments and receive feedback along the way.
With the move to almost exclusive online ordering, payment processing and delivery, industries are changing how they conduct business to adapt to increased regulations and safety precautions in response to COVID-19. Ensuring your customers’ information is secure and their experience with your business’s online platform is as seamless as possible will help ensure any technology mishaps do not hinder future business sales. Take advantage of social media and online platforms when communicating with and soliciting feedback from your customers. For businesses that are understaffed and unable to answer phone calls, leveraging available technology provides a communication forum to keep more customers informed with less manpower.
Oftentimes, business owners fail to see the value in one of their greatest assets: data. This could include customer data, vendor information, detailed sales information, and inventory data. Using data and information already captured through your regular business operations to support decision making is increasingly valuable during times of uncertainty. Delving into your data can provide insights such as peak traffic times, customer demographics, the sources by which new customers find your business, and what products or services are generating the highest margins for your business. Using this information to drive decisions such as which product or service lines to offer, what new business hours to set, and where and how to market to your customers will help you become more efficient, make well-informed decisions, and move forward during these times.
Finally, use this information to continue to monitor the health of your business: What is selling, what has the best margins? When is our highest traffic time? How is traffic coming to us? Via online sales, walk-up ordering at our window? Continue to evolve and adapt. This is an iterative process.
The more you can leverage this information that you already have, the more confident you’ll be in the decisions you are making moving forward. Don’t let this information sit stagnant. It is one of your greatest assets.
After analysis and assessment comes implementation and evolution. Many businesses find themselves exploring new territory they never anticipated they would enter. For example, an up-and-coming Tiki bar and restaurant in Ohio reopened its patio dining with a completely new menu item, “bar pies and Mai Tais,” a pivot inspired by Saturday-only take-out specials that sold out every weekend.
Other businesses in the industry are now offering meal and cocktail mixer kits to go, conducting online cooking classes, rolling out customer profile technology, and leveraging crowdsourcing forums and social media platforms as they find new ways to engage customers.
Don’t be afraid to test the waters and explore new territory. During chaos, there is also opportunity.
As you assess where your business is today and how you will phase back into operations, know that you are not alone and that there are resources available to help. Take advantage of government grants and federal SBA loan programs under the CARES Act like the Payroll Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). Stay in communication with your peers. Create an industry round table to discuss what’s working, what’s not working, shared resources for information, how you’ve overcome or risen above some immediate challenges, and what challenges you are currently working through.
By taking a pragmatic and informed approach to reopening, you can best position your business to successfully emerge with a new strategic direction.
*Cohen, Patricia. “‘Still Catching Up’: Jobless Numbers May Not Tell Full Story.” The New York Times, May 28, 2020.
**Teeter, Adam, host. “COVID-19 Conversations: Restaurant and Bar Real Estate Attorney Eric Bernheim on Navigating Landlord Negotiations.” VinePair Podcast, May 20, 2020.