The overriding question on the minds of small and midsize businesses this year is a fairly obvious one following such a chaotic 2020: What do we need to do to emerge from the dire conditions caused by the COVID-19 pandemic?
It’s a good question that has tangible answers, but first, it’s important to quickly examine the uniqueness of this most recent economic downturn. Unlike most major financial crises of recent history, most notably the Great Recession of 2009, this one came on suddenly as a result of the pandemic, and prior to the shutdown last March, the economy had been quite healthy.
This is important — economic downturns of the previous 25 to 30 years were not immediate drops like this one, but rather long, slow and very much demoralizing slogs. Economic crises rarely catch us off-guard, and instead tend to have a steady runway of discouraging signs leading up to them. But obviously, the economic crisis of 2020 came almost literally overnight.
Why does this matter? Because considering where we were prior to the pandemic and what we learned during it, the path back could be somewhat easier.
After all, businesses learned on the fly that they were able to adapt to brand new models at least as a stopgap measure, from remote work to virtual meetings and more, and that resilience bodes well for further recovery.
In the meantime, there are clear, detailed steps small and midsize businesses can immediately take to get on that road back to prosperity.
Check your balance sheet — Now is the right time to not only inventory assets, but examine existing debt and determine your ability to service it right now.
Additionally, this is also the time to ask whether you have the capacity to take on more debt in the short term. This is essential to the recovery process.
Determine cash flow — Step two is to figure out how much free cash flow the business has, and then project five years out. This will give you a good picture of what a healthy business should look like five years down the line — if things look bad right now, make some adjustments early on, rather than waiting for problems to arise later.
Look for new opportunities — In your industry, are there opportunities to currently take advantage of? Perhaps there are people willing to sell their businesses, or merge with others? With interest rates still so low, some inexpensive bank financing could be an option as well.
Additionally, there is plenty of talent available right now, considering the number of people who lost their jobs in 2020; this is an ideal time to seek new and upcoming talent.
Think about the work ethic of younger generations such as Millennials and Generation Z and the tremendous talent that exists. These are workers driven more by purpose than money; they want to work somewhere where they truly think they are making a difference, rather than just the place that pays them the most.
This offers a potential advantage to smaller companies.
Share financials with employees — Finally, there is a current trend in which businesses are increasingly sharing their financials with employees, to provide a look at how things are going.
This can be a bit risky and it is not recommended for everyone, but for certain companies it’s something to think about. It can be very empowering for employees to be brought into the fold — it helps them think more like owners, and in turn can be beneficial to both management and staff.
The truth is we are already seeing signs of recovery and these fairly simple but very meaningful steps can help a business return to where they were a year ago before the crisis ensued.
Joel Johnson the managing partner of Johnson Brunetti, a Connecticut-based retirement and investment firm.
