As the business owner or CEO, what do you do when it all hits the fan, and you have to make hard decisions in the wake of the corona effect? Do you close up? Layoff everyone? Layoff some, half, most? Who? In 2009, the financial sector had vaporized, and the ripple effect was similar to what we’re seeing now, though it appears today might be worse, if you can imagine that. So what do you do? As the leader, you have some options, but first you need to ask questions.
You can temporarily close the doors, and hunker down until the storm passes. If you have cash reserves, you might be able to make it through, but for how long? Call all your creditors & vendors, and simply talk to them. They know what’s going on. Ask them questions about what they can and cannot do.
In 2009, we had an outstanding business line of credit for nearly $200k when everything went south. I drove to that banker’s office and laid it all out. I was just this side of begging, but I ended up putting my house on the line. We worked out a payment plan with the bank, and we never missed a payment. He was very clear that, if we had not built that relationship of trust, they would have simply called the balance due. Think about it: they were a small bank during a time when most small banks just vanished!
There’s a wise saying for this one:
don’t make a permanent decision based on a temporary situation.
This #coronavirus stuff will pass. We don’t know how, when, or what the world will look like when it does, but it will be over at some point. If you permanently close, you then have to ask the question, “what next”? Then consider that it will be difficult for anyone to hire anyone until the social distancing experiment is complete. Yes, you can do remote interviews, but would you make a hire without ever meeting the candidate in person? Remote solutions like Zoom, Google Hangouts, FaceTime and all are great, but there is no substitute for meeting someone in person.
But it is an option to completely shut down a business in an atmosphere like this. There would be no shame in it, and it is going to happen to many, many businesses. I hope it doesn’t happen to yours.
Cut All Costs
In that same scenario of 2009-ish, that’s what we had to do. Our business was not retail or location dependent. In other words, we could do then what everyone is doing to day: work remotely/virtually. We cut everything, but first, I asked this question of every employee:
Who can take a pay cut?
Have you asked that question of your employees? Have you been honest and open enough with them to the point that such a question isn’t insulting? The answers surprised even me. One said simply, “No, I can’t. If you can’t pay me, I’ll have to look for another job.” Another said they could take up to a 20% pay cut. Another answered, “No, so I will resign.”
We went from 13 people to 4 in the span of a few weeks. I took a 100% pay cut for several months. We didn’t spend a dime that we didn’t absolutely have to spend.
It was not fun, but another wise saying summed up that chapter of our business:
Creativity loves constraints.
When you are constrained by time, money, resources, or anything else, but yet you MUST solve the problem, you will get very creative, because you will have to. The corona effect is many constraints applied all at once. We will have to get creative.
Questions Are Your Friend
A good friend of mine uses this phrase often when he’s coaching executives:
Questions are your friend
You can learn more by asking questions than making decisions.
Before you make any hard decision, ask some questions pertaining to your business, your suppliers, your vendors, your landlord, your employees, and your and their families.
- Can you take a pay cut?
- Will you let us skip a month of rent and make it up later?
- Will you work out a payment plan?
- How long can we survive on ZERO revenue?
- What can we stop or cut or decrease? What else?
- Finally, talk to your customers! That’s your source of revenue, right? What are they saying? If your customers are in the supply chain of basic needs, right now they are thriving, in fact over worked! There are other parts of the economy that are in high demand. Is that where your customers are?
Here’s a great, current, account of a commercial real estate holding company who has told their restaurant and retail tenants to skip a month of rent. I think the message here is, you never know until you ask.
NOBODY has been through this before. Nobody. Keep that in mind. If there were ever a time to negotiate, now is it.