These are challenging times, and business owners in the midst of a transition have a distinct set of worries. After years of hard work, just as they are poised to hand over the reins to new leaders, will they have a business left to transition? And will their successors still want it?
What business owners are going through today was very different from 2008 and 2009 when we had a gradual progression to recession. COVID-19, for many businesses, has caused a drastic and immediate impact.
Traditionally, when we examine the health and transferability of a business, we’re asking four big questions. Is this business: Viable? Stable? Sustainable? Profitable?
Now, as we deal with the realities of COVID-19, businesses that have long answered “yes” to those questions are having to rethink. Today’s questions:
- Is my business stable in times of disruption?
- Can I generate enough cash flow to stay operational?
- Coming out of this, will my business be sustainable?
Business owners in succession may need to reset expectations. To reduce the long-term impact, alter your succession planning now and get help from your advisors to make educated decisions.
Business owners have a tendency to skip the strategic plan, running by gut and emotion instead. But emotions run high in uncertain times. One of your most important roles as a leader right now is to establish a sense of calm. That starts with guarding against your own emotional reactions.
Begin to do contingency planning. Create scenarios of what this business will look like in the coming months and coming out the other side. Some thoughts:
- CEO incapacitation: What will happen if the CEO contracts COVID-19 and is no longer able to manage the business? You need plans in place that give direction, guidance and wherewithal to operate the business in their absence. Think financial authorizations, access to information, contact lists for your banker and other advisors, and a script for what you’re going to say to customers.
- Critical staff: If you are a critical industry with critical staff, do they have sufficient documentation if strict shelter-in-place orders go into effect?
- Contagion: How will you respond if an employee gets sick? What are your plans for communication, sanitation, coverage and employee well-being?
These do not need to be full-blown plans right now. They simply have to work. Later, you can take what you learned and build more comprehensive continuity and succession plans that account for emergency events.
Create a plan that minimizes rash decision-making — for yourself and for your key people. Give your leaders a descriptive playbook. Let them know where they need to stay informed so they’re ready to make decisions.
For yourself, reach out to your network. In times like this, everything starts with a conversation. Be in communication with your banks, your lawyer and your accounting firm. Your professional advisors are probably getting information faster than you are in the current environment.
Have conversations with your peers. They’re making the same decisions you are right now. Connect with other business owners you can have open and honest discussions with.
Talk to your advisors about stress testing your business under the current situation. That might mean: What’s the lowest number of orders/business we need to stay open? Where can I make adjustments? What’s my access to cash, how quickly, and for what period of time?
Stress test employees, too. Ask, am I putting too much on one person? Where are our “key man” vulnerabilities? How should we balance layoffs and staff retention, weighing current conditions against the need to retain skilled staff for the future?
You don’t need to answer these questions in a vacuum. Make focused time to think. Consider the short- and long-term impact of your choices. And brainstorm all the possible options. Advisors and peers can help you spot alternatives and compromises you might not have seen initially.
Making decisions you won’t regret
We cannot be ad hoc in our thinking right now. Now is the time to analyze and plan — even though those plans need to be agile, changing as circumstances dictate.
Surround yourself with people you trust, be transparent with them about what’s really happening in your business and ask for options so you can make the best decision with the situation you have in hand.
If you have questions about how else COVID-19 may impact you, or if you are looking for additional information, visit our COVID-19 resource center. We’ve put together a variety of information to help businesses and individuals weather the coronavirus.