By Gary G. Wallace, Managing Partner
Talk of an economic downturn may have been in the air for a while but few saw the spread of Coronavirus (COVID-19) having such a quick and negative impact on the global economy. It’s too soon to know the total economic impact that our economy will be facing but strategy during these times will be imperative.
For businesses that worked through the 2008 recession, we learned that proactive planning can make a significant difference in handling a troubling situation. As your Opportunity Advisors, we are committed to providing you with timely and relevant information to help your business effectively plan and strategize through this unexpected and challenging time.
What can businesses and their owners do now to successfully navigate the economic challenges ahead?
Don’t Panic—Be Proactive
The Center for Disease Control and Prevention (CDC) has provided recommendations for businesses to plan, prepare, and respond to the health and safety risks related to the coronavirus. By being proactive in addressing health and safety concerns, business owners will be help protect employees, customers and reduce business risk.
To maintain customer or client relationships, keep frequent and open communication on how you are handling the situation and inform them of changes in how you will provide services. The CDC website is your best resource to stay current on the changing business guidelines.
Proactive communications can be an opportunity to build trusted relationships with those you serve during this time.
Plan for an Economic Downturn
“We now forecast a 1Q20 stall in global GDP growth, representing the first time global growth has stalled outside of a recession.”
Bruce Kasman, Chief Economist, J.P. Morgan.
Prior to the coronavirus outbreak, the U.S. economy continued to experience unparalleled economic growth and unemployment was the lowest it has been in 50 years. As we remain optimistic that coronavirus will be a short-term difficulty, businesses should have plans in place for a longer economic downturn as well as strategies for possible business opportunities.
To navigate changing economic times, business owners and management should be considering the following:
- What’s the historical economic downturn impact in my industry? Understanding your specific industry risk will help you plan more effectively
- Take a close look at your product or service offerings to determine which ones will be most needed by your customers at this time and focus on those
- Operating expenses will likely need to be reduced–and quickly
- Monitor inventory. Product demand is likely to be reduced—save your cash for more pressing business needs.
- Manage Capital expenditures wisely
- Manage your banking relationships, including potential additional or alternative financings.
On March 15, 2020, the Federal Reserve announced a massive stimulus to cushion the economy. The House has passed an aid package for workers and the Senate will be considering the package over the coming days.
On March 18, 2020, The Senate passed the Families First Coronavirus Response Act (H.R. 6201) that will provide small businesses with a tax credit for paid sick leave.
The Trump administration officials are drafting rescue packages for industries that have been hardest hit. With the Federal Reserve’s protective measures and possible federal government stimulus packages, there will be business and tax planning opportunities to consider including business tax credits and low to no-interest loans.
The U.S. Small Business Administration is providing coronavirus disaster relief financing for SBA declared disaster regions. Learn more about the locations and programs.
Identify Business Opportunities
Economic downturns also lend themselves to opportunities to grow your business. Some areas to consider during a downturn include:
- Maintaining financing sources can be a rescue net and a way to take advantage of business acquisition opportunities.
- Leverage the need to work remotely to improve business agility. With efficient equipment and technology for your employees, you may find the flexibility and independence of working remotely translates to more productive employees.
- Historically, economic downturns have supported new or changing business models. Recall the 2008 crash and gig economy businesses, like Uber and AirBnb. Identify new ways of approaching the way you do business.
The unpredictably of the coronavirus outbreak is a challenging and unnerving time for people and businesses across the globe. It is extremely important not to panic. Proactive steps to protect our employees, customers and businesses will help to successfully navigate this hopefully, short downturn. As a business owner, it is ever more important to rely on your trusted advisors to help you make sound decisions now and in the future.
- U.S. Chamber | Coronavirus: 8 Things Your Small Business Needs to Do
U.S. Chamber | Worried About a Recession? Do These 5 Things Now
- CDC | Interim Guidance for Businesses and Employers
- Forbes | How A Business Can Survive An Economic Crash
- Entrepreneur.com | For Savvy Entrepreneurs, an Economic Downturn Creates Opportunity
About the Author
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.