COVID-19: Advice for Business Owners
by Gryphon Financial Partners, a Conway Center Service Provider member
Business owners are visionaries. They possess the ability to see a future they want, define a plan to get there, and gather the necessary resources. Currently, we are all in a time where this is being challenged. During this unprecedented COVID-19 pandemic time, we believe business owners will define themselves by how they respond to this adversity.
We believe stage one is play defense and protect what you can. Our thoughts and advice are:
Conserve Cash
- Accounts receivable management - You need to be on the phone with people who owe you money now. Collect as much as you can and as quickly as you can. If someone is in trouble, it’s probably better to make concessions now and get a piece of what you can rather than waiting until they file for bankruptcy and you are left with nothing.
- Accounts payable – For everybody you owe, you should be trying to defer. Call your vendors and ask for an extra 30 days, reduced amount or possibly try to get financing.
- Avoid discretionary expenses - Just think about any way you can increase your net cash.
Create Cash
- Personal portfolio – Most investors are trying to think opportunistically. Should I be keeping my equities? Should I be buying more? For the owner in trouble or just trying to weather this storm, they should be thinking about this in a different way. If you are going to need to inject cash into the business or loan the business money, you are not really thinking is this the right time to buy or sell stocks. You need to be thinking is my business non-correlated to my investments? If my business gets worse and my investment portfolio gets worse, it’s a double whammy. So, you need to delink how you think about it and think about your personal portfolio as a source of cash for your business, if you are going all in on trying to save the business. The more correlated your business is to what is driving these potentially bad economic times, the more conservative you need to be in your personal portfolio.
- Credit and Bank lines – Business owners need to be aggressive in getting to lenders and creating credit lines. It is very important to get access before you really need them. Once you really need the credit line, it’s probably too late. The banks aren’t going to loan you money when you are in dire straits. If business is ok today, but you are worried about the future, now is the time to get credit lines, home equity loans, or refinancing your mortgage. Think of all the ways you can get credit before you need it.
- State and Federal Stimulus Programs – You need to be an expert. Ask your Accountant, Attorney and Financial Advisor. There are a lot of things that are going to be available to business owners, and you need to be early and on top of it finding every dollar you can through these programs.
Protect
- Best customers – Lock down your best customers. Make sure you are in contact with them. Make sure you are informing them the business is healthy and how you are handling these unprecedented times.
- Best employees – If your employees are all mostly working remotely, it can be easy for people to get unhappy, scared, and uncomfortable with less resources. Make sure you have a strategy to keep your employees fulfilled and performing at a top level.
- Balance sheet – A lot of business owners look at it like I don’t want to talk to my lender until I must. If you have a credit line, make sure you are communicating with your banker now and let them know what actions you are taking. If this downturn continues and banks start to call loans or change terms, you want the best possible relationship with the lender, so you are getting the benefit of the doubt.
- Investors – If you believe you are going to need cash, start thinking who could inject cash into the business on favorable terms, before you are out negotiating from an incredible point of weakness. For example, look to a vendor who you have a great relationship with. Are they a good candidate to inject cash and take a non-voting share in the business?
Once that is accomplished, it is critical to go on the offensive and look for opportunities about how you can grow and take advantage of what our new normal is. Start thinking about how to best position your business.
Growth
- Current customers – Most businesses don’t have 100% of their customers’ business. Keep communicating to try and attain more. Possibly offer them better terms or pricing to get more of their business. Ask if they are getting as much communication from your competitors. It’s a great time to reach out to your customers and see if you can grow.
- Competitors’ best employees – If there is a top salesperson at one of your competitors that you have always had your eye on, now is a good time to approach them. A lot of people are feeling uneasy about their jobs and their company. Now is a good time to reach out and upgrade your team.
- Consolidate business with competitor – Explore the possibility of merging or buying a competitor at a discounted price.
- Acquire a customer or vendor – If you have a customer that you could vertically integrate, take advantage. If you have a supplier that you buy a majority of your materials from and they are in financial trouble, it may be a good time to acquire.
Other
- Buy equipment at discounts – This could be a great time to buy needed equipment at a much lower price.
- Refinance Business and Personal Loans – Obviously refinancing can save you money by lowering your interest rate and freeing up much needed cash.
- Gift now – As most business values are currently down, there are a lot of different estate planning tactics to take advantage of. If you are confident you are going to weather this, there are several strategies you can take huge advantage of where you are giving something that was worth say a dollar a month ago, that is now worth fifty five or sixty cents. If that recovers to a dollar in the future, this is a great way to pass wealth onto your children outside the estate tax.
We have a great respect and affinity for business owners, their abilities, and the risks they take. If you are a business owner and want to learn more about Gryphon Financial Partners, do not hesitate to reach us at jroseberry@gryphonfp.com and at (614) 929-2880.