Small Business

COVID-19 Recovery Strategy

About the author

John Cameron is British Columbia’s most experienced Business coach. In the early 1990s, John owned and operated a small business through the recession.

Later, as a business consultant & coach, he helped several dozen entrepreneurs successfully navigate their companies through the 2001/02 recession and the 2008/09 financial crisis.

In good times, in between recessions, John developed world-class business improvement programs for companies with 5 to 15 employees. (and/or subcontractor workers) These programs were marketed with his ROCK SOLID brand. They’re ‘road-tested’ and proven programs that work exceptionally well for owners who want to convert their business into strong companies that operate profitably and smoothly. They also build a strong foundation for long term profitable growth.  Testimonials Here

Some Background

Recent Pattern during Recessions

What can we expect in 2020?

Comparing 2020 and the Coronavirus Crisis to the last two recessions – in 2008 the financial markets collapsed because the financial markets themselves were broken. They were polluted with worthless subprime mortgage securities. This recession started on Wall Street and the impact made its way to the people on ‘Main Street.’

In 2001/02 there were 3 factors. The dotcom bubble burst and the Nasdaq stock market collapsed which affected other stock markets. In Canada, Nortel Networks’ share price fell from $124.50 t0 $0.67. By the end of 2002 US stocks had lost $5 trillion USD in value. Accounting scandals also plagued the times featuring companies like Enron, Waste Management, and Worldcom. To top it off the 911 Attacks virtually stopped the North American Economy in its tracks.

What’s different this time is it appears the structure and engine of the economy were/are in decent shape. The accelerated decline of the economy is generating the problem. Don’t get me wrong this regime of social distancing has to happen.

While we can measure the length of the 911 stoppage of the economy by days (I remember those days) the COVID-19 stoppage will be measured in weeks. Stoppage may be a strong word, but for a huge part of the small business sector that is exactly what it is.

What it all Means

to Small Business in Canada

We are looking at weeks of this. How many weeks depends on the spread of the virus. It will take a few weeks of good social distancing to really start seeing the flattening of the curve.

That’s when the growth in the number of new cases tapers off. Initially when the curve flattens the spread of the virus is still happening.  Next. the number of new cases has to decline substantially to the point where the virus can be contained.

The government has to effectively deal with the remaining positives. Even one unchecked and uncontrolled case can start the pandemic all over again.

Apparently, self-tests are on the way which will make containment much easier. The earliest we will see a vaccine is 18 months. Until then it’s: identify, isolate and treat.

There may be a seasonality to the COVID-19 outbreak, – like flu season – but this is unknown at this time. If there is then we are looking into June for hot dry weather.

The Uncertain Path Forward

Think about the recovery. That’s where the opportunities are. It’s been said that “The way the economy goes into a downturn is the way it will come out.” The 2020 downturn happened fast and it seems likely that it will recover fairly soon after the COVID-19 crisis reaches the containment phase. My reason for reaching that conclusion is that – unlike other recessions – the economic engine wasn’t broken going into it and didn’t cause the downturn.

My best guess is that the deemed essential services are about 25% of the economy. In April governments are will be rolling stimulus packages and incentives to stimulate the economy. This should bring the economy back from the brink and there will be some opportunities available for companies that happen to be in the right place at the right time.

2020 Second Quarter Reality

People will have more money, but spending habits are changing. Store traffic is down by approximately 90%. In-home services are being drastically curtailed. Even internet search marketing patterns have shifted significantly. Simply put, what worked in February doesn’t work anymore. But it might begin to work again by the third Quarter of 2020. The 4th quarter would be the earliest we see a close to full recovery.

Small business people are going

to have to make their own luck

In the short term, there are necessary actions small business owners need to take to ensure their companies can boot up along with the economy. That’s the time to compete and win. It could set the stage for a solid run of profitability.

Finances are critical. Going through your expenses line by line should be on the top of your todo list. Ask your landlord for a break on the rent – they are getting breaks on their property taxes, defer your sales taxes, defer your hydro bills, take advantage of the 75% subsidy on wages, layoff staff if you can’t afford your 25% – EI is more generous than ever, talk to your bank about deferring loans and perhaps even extending your line of credit – they have been given additional resources by the government, and talk to your suppliers.

Every expense line is critical, go through them all one by one, if you find this difficult have someone else make the calls. It’s can be easier for someone who is not emotionally connected.

Next, be creative about the type of business you do. As the economy changes new opportunities arise. A finishing carpenter is making frames with plexiglass screens for workers who need to interact with the public. Training companies are moving online as fast as they can. People are being told to stay at home – how can you help them make productive use of their time there? I think there will be some demand for residential exterior products & services. Soon homeowners will be putting more focus on their yards.

Talk to your contacts and your team and get their ideas about expense efficiency and potential new areas of business. Getting input and acting on it is a sign of good leadership.

Basically is there a way to put your company’s equipment, people, and abilities to work in new and innovative ways. Especially considering the 75% wage subsidy the government is offering.

It is a good idea to do a 6-month cashflow forecast.  If you come up short apply to the Business Development Bank of Canada for a loan. The government has given the 6 billion for this reason.

Whether it is to slow the losses or perhaps earn a few dollars the goal is to have cash ready when the reboot arrives. Not everyone will be able to do this. Several of your competitors are likely to disappear. Your company could actually be stronger than ever at this time next year.

If you have Cash Resources or

if this is a Slowdown for you 

Instead of a Complete Shutdown

This would still be a good time to go through your expenses line by line. It’s also a good time to prepare a cashflow forecast for the entire year. Cash is king in these times.

Use the 75% wage subsidy to retain employees and improve your Standard Operating Procedures. Perhaps prepare for new lines of business. The key here is your customers won’t pay for YOUR inefficiency for long and in times like this, their patience is thin.

You can view that last sentence either way – as an opportunity or a threat – but when the economy comes back in a surge efficiency and effectiveness will be golden.

Marketing is another key. Are you ready to go after the business you want to get? This is another area where the 75% employee subsidy can be deployed for future results.

Summary

A Rule of Thumb – “The way the economy goes into a downturn is the way it will come out.” If this holds true and it should the economy will surge back to life somewhere around the third quarter of 2020.

I expect there will be a bit of a wild west atmosphere when it happens. Even before it begins there will be winners and losers. But in the first quarter of 2020, the winners are only about 5% of the total population of businesses. The vast majority of businesses took heavy losses in the second quarter.

We should start to see the percentage of winners rise in the second quarter and the losses ease for others.

The third quarter will see some companies record significant wins. The economy will start to settle down into a more normal rhythm in the fourth quarter.

There are some caveats to this: 

It all depends on the containment of the Coronavirus.

The USA path to containment has to follow roughly the same timelines as Canada.

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