Whether you live for the track, or live for the flamboyant hats and mint juleps, for millions of Americans, May means horses. Even in a year where the actual Kentucky Derby has been postponed until September due to COVD-19 fears, there will be a virtual race on May 2 between 13 past Triple Crown winners. The goal is to raise $2 million in emergency relief funds in combating the virus. For Churchill Downs, it seems, things are looking up.
But they’re looking up for small and medium-sized businesses elsewhere, too. Just as trainers spend months preparing their prized steeds for the big race – proper diet, grooming, the right shoes, massages, you name it – businesses are at the starting gate in the race to restart the global economy. With the lifting of stay-at-home restrictions beginning to take shape, companies are jockeying for position in their efforts to adapt to the new normal. The statement is especially true in manufacturing and for companies with distributed (i.e., international) supply chains.
So, how will the new world look?
“Chomping at the Bit”
(The Smart Reopening For Global Businesses)
Social distancing will reign supreme – It’s hard to believe that only a few weeks ago, most Americans had never heard the term “social distancing.” Now it’s the way we live. And according to some Harvard scientists, it’s the way we may live (at least intermittently) until 2022. Social distancing will be enforced between employees on the sales floor, with businesses at 25 percent to 50 percent capacity, and customers will likewise be funneled inside brick-and-mortar locations based on the Centers for Disease Control and Prevention guidelines. Factories, too, will enforce strict spacing guidelines that may impact production capacity.
Demand will remain depressed, but not diminished – While early economic talk consisted of a V-shaped curve, that is, a steep rebound following a steep decline, it’s increasingly likely a U-shaped curve will be what takes hold. Business will come back, but it will do so slowly. Luxury purchase goods will take the longest to recover, as will recreational spending on travel for vacation. Smart businesses will be the one that factor in this reduced demand and plan accordingly. That means bulk purchasing to match expected demand, or partial conversion to another industry altogether.
Supply chains will stabilize – Little by little China, the “world’s factory,” is getting back to business, as evidenced by a sharp uptick in the March purchasing managers’ index, which rose to 52.0. Any reading above 50 indicates improving conditions. The numbers offer good news for small and medium-sized US businesses whose production plants are overseas. While earlier blogs have advised diversity in this new normal, investing in traditional supply chain sources is also wise.
Financial flexibility will be key – In the post-COVID economy, having cash on hand will be more critical than ever. Not just the 23-27 days most businesses have, but several months’ worth and maybe even a year. The next step in this belt-tightening process is to review all expenses and determine precisely what is essential and what is not. If there’s been any positive news from this global crisis, it’s that companies of all sizes have discovered the value of virtual capitalism.
Perhaps your sales team can do more work from home, and you can reduce your overhead costs by moving to a smaller physical location?
Diversification means success – Whether it’s determining a new location for production closer to home, say, in North America, or it’s investing in a new product line that serves this critical moment (like distilleries who have switched from making spirits to hand sanitizer or 3D printing companies now making testing swabs to produce 4 million a week) thinking within the COVID-19 box may pay handsome dividends in the months ahead.
Employees Win, “Hands Down”
Perhaps the most salient advice for small and medium-sized businesses right now comes down to how employers treat employees. Just like horse trainers, the focus must be on the horses themselves. The venue, the track, the jockey, even the other horses in competition, is secondary concerns.
Yes, there will be difficult times ahead. And yes, some staff may be let go. But now is the time to focus on the employees you do have. How can you reward or incentivize their hard work – hard work that, in many cases, has taken them out of their comfort zones? Throw around money may not be available right now. Even so, it’s essential to plan when coffers are again flush. Is a company getaway in the offing? Are gift cards possible at restaurants once the COVID-19 pandemic passes? And while you’re at it, investing in the mobile technologies necessary to help manage cash flows of all types isn’t a bad idea either.
So as May begins and SMBs reach full gallop to reopen, don’t get disqualified from the most crucial horse race yet – the competition to restart the economy as fast and as safely and as profitably as possible.
The Kentucky Derby (real or virtual), the Preakness Stakes, and the Belmont Stakes notwithstanding.