For businesses that have temporarily closed or scaled back operations during 2020, the prospect of restoring full operation holds a great deal of uncertainty. Predictions and opinions abound, including whether and for how long the U.S. was officially in a recession, whether it’s over, and if a “double-dip” recession is likely. Any way you look at it, the business world looks different now than it did in January. Even as stocks rebounded, millions remained out of work, and consumer behavior has likely changed permanently.
There are many factors to keep in mind as you restart your business during a recession or immediately following one.
Restarting a Business vs. Starting from Scratch
Many companies have discovered that the key to survival, in this or any other widespread upheaval, is flexibility. Businesses have found ways to pivot or adapt, in order to meet the current needs and shopping habits of consumers. In a way, it may feel like you’re starting your business from scratch. That’s not a bad thing. A recession can actually be a good time to start a business, provided you do your research and seek trustworthy financial guidance. For some of the same reasons, restarting a business during a recession offers certain upsides, which we will address in a moment.
Keep in mind the unavoidable difference between you and someone starting a business for the first time; you have experience. Experienced entrepreneurs bring a higher likelihood of success to their business building. So, even if the future feels bleak, you’re already a step ahead of many.
The Upsides of Doing Business in a Recession
A recession or economic downturn often results in layoffs — which it most certainly has in 2020, especially in the industries hit hardest by COVID-19. For you, this means a wider pick of skilled workers. Hopefully, you have been able to retain your top talent, possibly through the Paycheck Protection Program. This program probably saved many businesses from failure, according to research from economists at the University of Illinois and Harvard.
It can also be a great time to find professional services providers you can partner with, such as website designers, digital marketing agencies, staffing firms, manufacturers and suppliers. Giving your business to local service providers can strengthen the local economy, while forming new connections that help your own business grow.
Another bright spot in a recession is that the Federal Reserve typically reduces interest rates. Low interest rates mean that it is often easier to borrow capital to fund new equipment or a pivot to your core business.
On the other hand, a large investment isn’t always required to restart a business in a recession. Harvard Business School interviewed business leaders to learn how they were approaching reopening. A common theme in their findings was “a vast majority of the initiatives that companies … are implementing do not require large capital investments or radical innovation.” Instead, they draw on their own strengths and adapt how they do business.
The pandemic and its implications have brought out the adaptability and creativity of many companies. If you’re among them, it may be possible to emerge stronger than you were.
Restarting in Different Industries
The impact your business took as a result of COVID-19 and, in turn, your prospects for recovery, depend largely on your industry. In the Tampa Bay area, hospitality, travel and tourism, and manufacturing all play a large part in our economy and job market. Each of these has taken a sizable hit, and companies in these industries will likely struggle for some time. That doesn’t mean you can’t weather the storm, but you will need financial guidance. Ask yourself and your team these key questions:
Questions to Consider When Restarting
- Did you start the year with clear financial projections and have you reviewed where you now stand relative to those?
- Have you proactively adjusted those projections and calculated the changes you need to make going forward?
- Are you clear about your current cash and liquidity?
- Have you optimized your operations for all available efficiencies?
- Do you understand your production capacity going forward?
- Are you working on a plan for predicting your 2020 tax bill?
Predicting Your Financial Future
While no one can predict the future, the closest you will get is the guidance of a business advisor who has seen recessions come and go. They can help you answer the questions above, and plan for contingencies. With the input of a business advisor, look at where you can cut costs — or if cutting costs is even the right strategy. Consider where you can save without hampering your ability to earn revenue.
A business advisor can take you through proper cost strategies that align with your goals and run your financial projections to figure out the right path.
Financial Resources for Your Small Business
Take the time to understand the different financial resources that may be available to you and their implications on your company’s profit and loss.
You may also be eligible for disaster relief programs. Disaster relief could include programs related to flooding, drought, fires, storms, earthquakes — and yes — pandemics. It’s important to keep in mind that these are based on a finite amount of funding.
- SBA Economic Injury Disaster Loan (EIDL): a loan for small businesses and nonprofits that are experiencing temporary loss of revenue.
- SBA Express Disaster Bridge Loan: allows small businesses that already have a relationship with an SBA lender to quickly access up to $25,000 while waiting for a decision on an EIDL application.
- SBA Debt Relief: SBA will pay six months of principal, interest, and any fees borrowers owe for current 7(a), 504, and microloans, and all those disbursed before 9/27/2020. PPP and EIDL borrowers are not eligible.
- Rapid Response Recovery Assistance Program (R3): Three programs from Hillsborough County, Florida, are available to kickstart small businesses, get employees back to work, and workplace improvements.
To get a full picture of the resources available to your company, as well as the financial planning you need to reopen your business wisely, connect with a business advisor today. The experienced team at FMA, C.P.A. helps thousands of businesses find the road to success every year, and we’re ready to help you restart.