Business life in the era of Covid has elements of both crisis management and an endurance trial. How can your business join the ranks of those that are succeeding in this environment? LJ Suzuki, founder and fractional CFO at CFOshare and I recently dissected this question together, with an eye toward the actionable steps you should be taking now–and the potholes you need to avoid.
Micah Solomon, Senior Contributor, Forbes; Customer Service Turnaround Expert and Consultant: It’s been several quarters since Covid began to make inroads into the economy; how are small businesses faring?
LJ Suzuki, Founder and Fractional CFO at CFOshare: The small businesses within my purview have seen everything from massive growth to complete collapse. The PPP program gave everyone a lifeline for about 2 months, but that was not enough for many companies, particularly restaurants and retail. Healthcare has seen negative effects as well, surprisingly, especially in the disruption of elective procedures. And, sad to say, most of these companies have or are planning layoffs.
Solomon: You mention layoffs, but some headlines have shown unemployment to be going down. Can you explain the apparent disconnect?
Suzuki: The thing is, the lockdowns in March and April created massive unemployment which recovered partially, and fairly quickly, once the economy began to reopen. However, although businesses began rehiring, their financial health has not been improving at the same rate, which is creating an unsustainable situation.
Assuming no additional stimulus from the government, I expect we will see an acceleration of layoffs and businesses folding in the next three months, though, of course, there are reasons to be more optimistic about stimulus now that the election is over.
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Solomon: Well, that’s grim. Tell me about the businesses you’ve seen actually achieve growth. Which businesses are those, and do you know their secret?
Suzuki: Tech has been doing very well because it often caters to, or at least aligns with, WFH. There have also been micro-booms in leisure activity that fits with being socially distant, such as gardening, bicycling, and pet care. There is no real secret to these successes, I’m afraid, most of them were lucky to be in the right niche at the right time; nobody, for example, had the foresight to start making bicycles just because they saw a Covid lockdown around the next corner. But there have also been companies that re-aligned themselves, making small but successful pivots to address the needs of the time; for example, some of our e-commerce clients adjusted their marketing to speak to WFH needs and found success. As with any downturn, the true long-term success of businesses will depend on a combination of long-term innovation and financial stamina.
Solomon: Certainly, the pundits out there have been delivering contradicting advice about marketing spend. Some say to cut costs; others say you need to increase ad spend.
Suzuki: The right marketing budget in a crisis will depend on your overall strategy. A classic–and generally legit–distress strategy is to cut ancillary products and services (R&D, staffing, etc.) to focus on your core product or service. If you choose this strategy, cut your marketing spend dramatically. The theory behind this is that your core customer already knows how to find you.
On the other hand, if your established market is now gone and you are striving for success as you pivot into a new offering, you need to let people know about it; you need to “market the change.” For example, some venues without events are now offering drive-in movies in their parking lots. These types of dramatic changes need to be marketed, whether through advertising or other channels, or your customer will never find out.
Solomon: What’s the most common mistake that business owners are making right now?
Suzuki: There are two particular mistakes that I’m seeing. First, executives are thinking, “Covid didn’t affect our business, so we’re going to be ok.” With PPP and stimulus funds running out now, we are barely starting the beginning of the recession. Keep attentive, humble, and prepared to cut costs or pivot; the downturn is just starting.
The second most common mistake is waiting too long to innovate. Your customer’s needs are changing rapidly and you need to keep up. Especially if you have competitors that are growing and stealing market share. Talk to your customers to find out what they need. Activate your team to brainstorm, strategize, and experiment. The sooner the better; every day that passes, you have fewer resources to make change happen.