Business owners and CEOs commonly view business transition as a planned succession or exit. Many deliberately arrive at this stage of a business cycle—and welcome it. But as economic uncertainty from the COVID-19 pandemic lingers, many owners suddenly face the challenge of transition planning in a time of crisis.
In any comprehensive planning process, the key to success is a thorough evaluation of the strategic, operational and financial impacts the crisis has brought about. Business owners and management must apply a rigorous process to identify and assess all scenarios facing the company and its people.
As the pandemic continues to evolve and affect the economy, your organization will need to focus on the factors and decisions that keep the doors open in the short term and eventually allow for business to resume once people are safely back in the plant or office. Some of the items that require your focus are:
- Liquidity planning — Running out of cash can disrupt your workforce and erode your customer base. Although most businesses do not keep a 13-week rolling forecast of receipts and disbursements, doing so is important now. Several government programs, such as such as the Paycheck Protection Program and Main Street Lending Program, have been designed to help businesses with liquidity. For more insights on liquidity planning, click here.
- Scenario planning — This process needs to expand beyond looking at a financial forecast. It should also gauge capital expenditure, workforce, marketing, information technology spend and debt-equity financing options. Focus immediately on cash flow needed internally in various scenarios. Also, use a waterfall of quarterly estimates through 2022 to calculate how your company would be affected. Remember that this planning doesn’t just take into account numbers, but it also considers the way an organization will operate. For example, if you have to scale back to 50% of your workforce, how would operations survive?
- Communication — Make sure your employees are safe and protected as well as they can be. This is about keeping them out of harm’s way and facilitating their ability to navigate workforce disruptions. This is especially true for employees who cannot work remotely. Devising ways to keep them informed and engaged will facilitate their return to work. Communication about the situation at the office and with the business in general, as well as information about employee benefit packages, is essential.
- Protect your assets — This is not just physical assets but also intangible assets, such as the company’s relationships with employees, vendors, customers and bankers. Transparency will be your friend. Before making decisions about layoffs and other items, keep the long term in mind. Remember how hard it was to find qualified talent before COVID-19 disrupted industries so thoroughly.
Focusing on those four items will help ensure your business has employees, money and customers when the pandemic is over. As an example, consider a company specializing in online exercise classes that recently suspended all live sessions after an instructor fell ill. It would be very easy during this period of disruption for the instructors to lose their following, as they aren’t able to engage with their audience. To avoid this outcome, many of the instructors are participating along with customers in their recorded classes. This allows them to continue mixing with the community and keep their audience happy until they can return. The continued communication with the community should help enable the company to reopen its doors when it is safe for their employees and customers.
Applying lessons of growth
After you have done what you can to protect your company, people and customers, start assessing where you will be after the pandemic and economic turmoil have subsided. Many things about your business and its employees’ interaction with your customers probably will have changed. Consider these three elements:
- Delivery channels — Assess how this crisis will change how you interact with your customers and clients or how you deliver your products and services. For example, most restaurants that have been forced to provide only takeout or to-go service. Will their business ever be the same as it was before social distancing guidelines? Or will their customers still gravitate toward placing delivery and to-go orders? This requires reassessment of the business model and space needs in the industry.
- Human resource “upsizing” — Instead of rightsizing to retrench, provide more opportunities to cross-train and invest in talent if the needs arise. The pandemic likely caused your staff to fill roles they either were not trained for or had not historically performed. Some likely rose to the occasion while others did not. Those that did may find new opportunities elsewhere if you aren’t ready to train, develop and assist in expanding their skills. This is also a great opportunity to identify talent that could not be found prior to the pandemic to meet short- to mid-term demands.
- Transition planning — Some business owners will look back upon the pandemic and believe they don’t have another economic cycle in them. This will compel many to consider transitioning ownership and leadership of their business to the next generation or a third party. Assessing your goals and needs will be important because the correct time to transition could be as soon as the pandemic eases, or well into the economic recovery.
Companies that formulate a multi-pronged strategy to endure initial disruptions and apply lessons to long-term potential growth areas will likely be positioned to thrive in the next economic cycle.
