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.
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.
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.
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:
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.
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.
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 BAAP C.P.A. helps thousands of businesses find the road to success every year, and we’re ready to help you restart.