Covid-19 is creating utter chaos for many small business owners. Fear is taken hold of many owners as they wonder what’s next? No one knows when or if they’ll reopen. Most don’t want to admit out loud what they are secretly thinking-bankruptcy. It’s just too difficult to fathom.
Making any kind of decision while under duress is never a good idea. We’re just not thinking clearly. This is especially true when your dream or life long work is about to evaporate in front of your eyes.
Covid-19 has forced governments to mandate closure of all but essential services in many parts of the world. In turn this has created panic amongst many entrepreneurs and their reactions range from submission to lashing out at everyone. To be fair, this is a once in a lifetime scenario. Much like a 100 year storm, most individuals and businesses are not prepared, and the aftermath will be disastrous for many.
There is no cavalry coming.
Not to be the bearer of bad news, but there is no cavalry coming, sorry. Governments can only do so much, and many small businesses will not qualify for the many programs that are being unveiled.
Many individuals think that the banks should automatically suspend all payments, but that’s not going to happen. However, if you’re business was solid before Covid-19, you can probably get some short term concessions. If your business was struggling beforehand, then don’t hold out hope.
Many landlords are small business owners themselves. They, like you, can’t afford to offer much leniency. They too have mortgages and bills to pay. Unlike residential mortgages commercial mortgages don’t usually have deferral options, so their payments must be made.
Hope for the best, but expect the worst
So, what’s an entrepreneur to do? To state the obvious, batten down the hatches. But instead of just fretting away, it’s time to get proactive and lay out a plan. Actually, it’s time to lay out two plans. The first plan is based on your business starting up in 4-8 weeks and the other is the worst case scenario plan, business shutdown. Regardless of which way it goes, working on your plans will be a distraction from all the noise and give you something to do.
Plan #1 – 4-8 weeks
Assuming you’ll be able to restart, you’ll need to put a game plan in place, so here’s a primer on the things you’ll need to think about.
• Call your landlord- If you haven’t already, it’s time to make that call and ask how you can work together. They may or may not be willing or able to offer any concessions. But you do need to know, don’t assume, ask the question.
• Business most likely won’t return to the pre-crisis level, so how do you plan on managing it? How much staff do you need, short and long term? You need to let your employees know your thoughts.
• How are you going to get your customers back? My suggestion is to call them and let them know you’re planning to restart as soon as you’re able. An alternative is to email them. But it’s far less personal.
• Depending on your business, do you have to do a thorough sanitizing?
• Do you have product that expires? What’s your plan on disposing of it?
• Do you have receivables? How do you plan on collecting these? Are you prepared to offer the same concessions you’re looking for from your suppliers?
• Call your suppliers. Has your status changed with them? If you had credit with them, is it still available? This is important to know. If you no longer have credit available, how do you plan on getting your supplies?
• Make a regular habit of checking your on your place of business. Some leases and insurance policies have clauses stating that you must check the premises regularly.
Plan #2 – Business shutdown
This is not fun, but you need to be prepared if this becomes the inevitable. Planning a measured shutdown is far better than doing nothing and just letting things happen. As soul destroying that this can be, there’s an old adage that says, “if you find yourself in a hole, quit digging!” If shutting the business down is your only option, it’s best to initiate it sooner rather than later, to stop the financial bleeding. Now is the time to get your head around this potential outcome, so that you are in control. The following steps should get you started in the event a windup is necessary
• Contact your lawyer and discuss the situation. Find out what needs to be done to close a business and the cost to do so. Get their input and direction on how to handle your suppliers, including your landlord.
• Contact your accountant and ask them what your liability is regarding taxes owed and their role in a business wind up.
• Make a list of all your payables. This list includes absolutely everything. This way you’ll know how much you owe.
• Make a list of any receivables you have and your plan to collect on these. The more you collect, the less you’ll end up owing.
• List all your inventory and contact your suppliers to see if you can return any unused product. Otherwise develop a plan to liquidate.
• List all your business assets i.e. equipment. These can be sold. Just remember that their value will be significantly less than you paid or what you think they’re worth, as many other businesses will be liquidating at the same time.
• Contact any other creditors to determine what you owe them. Some will be willing to negotiate a lesser amount or some form of payment plan.
• Make sure you complete all the necessary paperwork for laying off your staff, if you haven’t done so yet.
Regardless of your experience or years in business, no one could have foreseen what has gripped the world economies as a result of Covid-19. Most recessions and depression come upon gradually over time and gives people the time to adjust their course in order to weather the storm, but not this time. It was immediate and without warning.
What you do next matters. How you do it also matters. So, by putting your plans in place now, you’ll be prepared, in control and be able to live to fight another day.