Can You Turn Lemons Into Lemonade?
This article is part of Rea & Associates’ Small Business Corner series, which is designed to address challenges and considerations regularly faced by owners of small- to mid-sized businesses. Check out past Small Business Corner articles at http://jw71cav7.dektinary.com/small-business-corner.
As economic conditions change and businesses start to reopen, we encourage business leaders to take this time to reassess their existing business strategies and relationships. This doesn’t mean scrapping your entire plan and writing a new one but, rather, focusing on a few key factors that all small- to mid-sized businesses, in particular, should consider.
Industries are feeling the weight of the world right now and some are feeling it more than others. Historically, nothing compares to the demand shocks of COVID-19. Business loans, stimulus checks, record-breaking unemployment numbers, and a public health crisis are among the many things the nation is facing. But as we work towards “normalcy” – which has no timeline – preparing for the unexpected is more important than ever before. Reevaluating your supply chain, advisory relationships, and your
succession plan (or lack thereof) is a few things to consider
Supply Chains
China, Europe, and the U.S. have had major setbacks in terms of international trading as COVID-19 appeared to take aim at key supply chain regions. Now that businesses are looking to ramp up production, it’s possible that the supply chain you had in place before the pandemic is no longer readily available, or that it has become cost-prohibitive.
Whether you like it or not, it’s never been more important for the long-term continuity of your business to reconsider your company’s supply chains to ensure that they are working for you and not against you. Start by taking a closer look at your business and how susceptible you might be to economic hiccups and their impact on your supply chain. Then, consider whether you are paying too great a cost for a not so great relationship. If both of these scenarios caused you to pause, perhaps COVID-19 can be seen as an opportunity to address these issues and strengthen your position in the marketplace, increase your company’s value, and ensure ongoing business continuity.
It’s never been more important for the long-term continuity of your business to reconsider your company’s supply chains to ensure that they are working for you and not against you.
Advisory Relationships
The current state of the world has dusted off the many business strategies and best practices we may have shelved over the years. COVID-19 has highlighted the importance of advisory relationships, particularly with regard to the relationship you have with your banker. As the pandemic took hold and the battle for funds and resources began, guidance for business owners (particularly in the beginning stages of the crisis) was scarce. Not only because this is uncharted territory, but ever-changing legislation and countless approaches across branches and regions caused some banks and bankers to be more equipped than others. Because of this, if you already had a relationship with a banker who simply had a greater understanding the loan programs and what their clients needed to apply for assistance, you were likely at a greater advantage when it came to securing funds. This will continue to be the case post-COVID-19. The truth is that you do need to secure and nurture strong advisory relationships now because you never know when the merits of such a relationship will reveal themselves.
Additionally, seeking out a banker who understands the challenges you face in your marketplace and within your industry is just as important. It’s also important for your advisors to be well-connected so they can refer you to others who can assist you in other aspects of your business.
A banker’s job is to sell two ways. First, they have to sell externally and make sure that they can provide the right products and services to you, their client. But a large part of their job is to build their own internal networks. In doing so, they are better able to navigate their clients through those organizational layers. This is the time to reconsider these basic fundamentals with regard to your banking relationship (and all other advisory relationships) because they matter now more than ever.
Listen to episode 207, “How To Sell Your Business For Top Dollar,” on unsuitable on Rea Radio, Rea & Associates’ award-winning weekly business advisory podcast.
Succession Planning
COVID-19 has possibly exposed some inherent weaknesses in your business that may have existed pre-pandemic – effectively impacting your long- and short-term strategy. As a result, you, like so many others, may have had to put your succession plans on hold in an effort to develop new strategies that will not only ensure that you will weather this storm, but that you can maintain the value of your organization, preserve your legacy, and retire on your terms.
How do you really become strategic and hone in on those weaknesses and what actions are necessary to preserve the long-term viability of the company? Start by asking what you can do to maximize the value of your business and communicate these thoughts with your advisors, banker, and legal teams. Let these informed discussions reveal opportunities rather than losses.
And for those who are not only surviving but thriving during this time, consider looking at this time as an opportunity for growth and expansion of your products or services, or your company as a whole through M&A activity. Or, maybe, if you are looking to gift your business to the next generation, current favorable tax rates could be the jumpstart you’ve been looking for to get the ball rolling. There has never been a better time to put “succession planning” at the top of your agenda.
As everybody continues to navigate through these tough times, it’s also important to consider that things may never return to “normal.” This pandemic has permanently reshaped the way we live, work, and play and these changes will continue to impact your long-term financial goals. But, we don’t have to sit around and do nothing. Instead, we can take this time to utilize the wealth of resources that are available to make informed decisions.
Ensuring continuity with your supply chains, working toward stronger advisory relationships, and recognizing opportunities for growth can have a positive impact on your business and will help you grow as a leader. Yes, COVID-19 has taken a bite out of our lives, businesses, relationships, and future plans, but it’s also provided us with a chance to step back and reassess vital business considerations. If your advisors aren’t discussing these best practices with you, give us a call.
By Doug Houser, CPA, MBA, CEPA, principal & director of construction and real estate services (Dublin office)