No one expected the situation we now face with the coronavirus (COVID-19), which is a true global pandemic. Right now, companies around the world are going out of business. They’re laying off employees and closing their doors. While in some cases this might have been inevitable, many could have survived if only they had been proactive. To be sure, it is difficult to wrap our heads around the profound effects the microscopic coronavirus is having on our world.
For some managers of small to middle-market businesses, it may be even more difficult to understand the necessary steps they must take immediately to ensure the survival of their organizations. Some businesses whose supply chain or end users will be materially affected by the pandemic may be sadly watching the slow death of their enterprises on the Evening News. For other companies, this will ripple through to their lenders and trade creditors. It is an ugly and unprecedented scenario.
It is critical that business owners not react like a deer caught in headlights and freeze, uncertain of what to do. It can be exceptionally challenging for people to act when faced with the potential downfall of an organization they struggled over the years to build. Certainly, as the coronavirus begins to overshadow a great deal of the world around us, “overwhelming” is not too strong of a term. On the contrary, now is the time for decisive action.
While we all hope this will pass shortly, it is likely to last at least for the next several months. It is critical that business owners get out in front of any ripple effects of the pandemic on their organizations. Third party professionals can provide effective assistance in this effort and should be considered as a short-term resource. CEOs need to start taking decisive actions immediately. Which actions to take can vary significantly depending on their product offerings, supply chains and anticipated effect an economic slowdown and how compliance with new government recommendations is going to affect them. Some of the steps they need to consider immediately include:
• Schedule reductions in workforce.
• Make plans and technology arrangements to allow employees to work from home.
• Cut non-essential expenses.
• Reduce inventories and slow down supply chains if companies anticipate a downturn of demand for their product(s).
• Ensure the integrity of the supply chain, identify alternate suppliers and ensure adequate inventory for those companies that anticipate continued or increased demand for their product.
• Increase cash on hand to help get through the tribulations of the next few months, in the same way. individuals have been advised by the CDC to have two to three weeks of essential supplies in our homes.
• Convert non-earning and non-essential assets into cash.
• Accurately project out future cash inflows to 13 weeks, and manage cash outflows to stay within that envelope.
The best thing that management can do right now is to ensure they have a comprehensive plan and that they are aggressively managing in accordance with that plan. If bad things do happen, management will be out in front of it and well-prepared.
Now is a good time for management to seek the services of an outside professional management consultant. Certified Turnaround Professionals are quite helpful in quickly preparing borrowers to weather the storm and should be considered as one of the best tools available to business owners.
Burke Advisory Services
March 18, 2020
Kevin Burke is a member of the Turnaround Management Association and a Certified Turnaround Professional. A graduate of the Villanova School of Business, he has over 35 years of experience in banking and executive management. His management consulting practice is located in Troy, Michigan.