What Factors will influence my business post-COVID-19 shutdown?
Regardless of when Donald Trump decides to officially declare American “open for business”, it is abundantly clear that the ripple effect will permeate 2021 and beyond. The coronavirus has knocked a booming economy to its proverbial knees, and small businesses owners are being left to fend for themselves.
I was listening to Tim Ferris’ podcast the other day and he was interviewing Nick Kokonos, the owner of the Aviary, Aliena, etc. in Chicago. His spots gross over 50 million dollars a year collectively. They were discussing post-COVID businesses. He wasn’t concerned about the summer.
He was stressing about Q4 2020, and beyond. He’s running his restaurant business based on February 2020 rent prices/occupancy allowances/etc. However, by the end of this year, the government support will inevitably cease. Occupancy rates could be slashed. Beyond that, fear of economic uncertainty and viral infections could cause his 100% occupancy down to what? 25%? 35%?
The stock market is pricing in a positive/swift upswing from the shutdown. What happens if that is not the case? We will definitely see an effect in consumer confidence and spending habits. Imagine what that could do to holiday sales for thousands and thousands of retailers who depend on those busy months to turn a profit each year?
If this is how a restaurateur icon is processing things, imagine how our micro/small business owners are fairing out there? As a digital marketing agency that prides itself on working with the smallest of businesses, we want to delve into this topic a bit.
I wanted to spend some time discussing the various perspectives and angles a small business owner will need to consider when:
- Reopening/evolving current business model
- Making any future investment decisions
- Opening a new business
Will we use Cash Anymore?
I think cash will become less desirable moving forward. How businesses adapt to this could be a big deal. For example, I live in North Carolina and we have some fantastic Mom n Pop places that do not accept credit cards. They certainly haven’t heard of Apple Pay or Venmo.
One could argue that, hey, they’ll never adapt. That’s all fine, but what happens when one of these establishments becomes the epicenter of a massive outbreak? Will some of their customers think twice about going back to their favorite spot that hasn’t modernized?
What about a high-volume bar? Will social distancing and needed space reduce the viability of cold, hard cash? One of my favorite spots in Charleston, SC; Charleston Pour House, has decided to limit the bar to one person per party. I think you’ll continue to see the evolutions made.
# 2 Occupancy
This one is potentially HUGE for the food and beverage industry. Like I mentioned in my introduction; going from 100% to 33% or 50% of that volume, will not sustain most businesses. Unfortunately, many of the higher end experiences would be forced to close up as the numbers just wouldn’t make sense.
If you’re opening a new business I would really take some time to investigate your local authorities current plan for occupancy laws. This is especially true if you’re a brick and mortar business that derives its value from customers visiting the location.
Can you make any adjustments to your design to accommodate open air environments? Are you able to provide some form of sectioning within your business?
#3 How much runway do you have?
At this point, I would imagine you’ve cut non-essential items, maybe cut payroll, etc. However, looking forward to reopening or just starting, have an honest conversation with yourself about how much capital runway you have upon reopening.
The 2nd half of 2020, and its fiscal success, is probably THE question right now in the stock market/business world. Will the global economy rebound? If so, with what type of trajectory?
The # 1 cause of any business failure is undercapitalization. If you’re looking at a shorter runway, say 3-6 months, really use some low-end projections of expected revenue when making your forecasts. It would be much wiser to prove yourself wrong, than be stuck, closing in on the 2020 holidays, with no plan to make it into 2021 and having to hit the reset button.
# 4 Do I Need my office anymore?
This is one that commercial realtors out there do not want to see! However, the question is becoming real for many smaller companies; do we need another fixed cost? Especially one that is developing a strongly negative connotation to it?
Working from home was shunned by many, for so long. Let’s forget the wasted time and energy/fuel cost to travel to an office for a min. Does it make sense to cram people into spaces that can no longer accommodate social distancing? Does it make fiscal sense? What’s the true ROI of an office?
I hate to say it, but my own personal experiences in an office have demonstrated that people love to socialize. No matter where I’ve been, I see time and energy wasted. If we really distill our days down to deliverables, are there aspects a business owner can cut?