What’s a business owner to do? The most commonly used word in the business world today is “unprecedented.”
The street-smart translation of that word is that no one — absolutely no one – knows what is going to come to happen with the U.S. economy going forward because of corona virus impacts. The best thinkers in the country don’t know the what going to happen question, the when question or the how much question.
So, you’re sitting the front office trying to figure out what in the hell to do. You may be there by yourself because the rest of the staff is working from home. You may have received a federal government loan, but you know it’s only going to bail you out for a couple of months.
Assuming you haven’t been forced to close already, that you are still operating at some level, what are you going to do in July when the federal subsidy runs dry?
The jury is already in for many, many companies, and they have laid off or furloughed their work forces in unprecedented numbers. One-third of American businesses have shut down some operations and two-thirds have reduced staff or pay.The U.S. unemployed number is probably north of 25 million, close to 20% across the nation. That’s a staggering total and it could get worse.
Back to the front office of still operating companies. One tool being used is scenario planning with different outlooks for July and beyond. Four immediately surface, in the analysis of a consulting company called Trium:
• Gradual Recovery by mid-year.
• Fits and Starts — ups and downs, with lots of volatility.
• The Perfect Storm — one million deaths and many bankruptcies and foreclosures.
• The Great Correction — new models of living and working win out.
Each scenario draws different responses from customers, competitors, vendors and workers.
Your toughest call is how many people have to be let go in one form or another. If your volume runs off by 20% to 30% in scenarios 2 or 3, and your business is labor intensive, the decision will have to be made to cut 20% to 30% or your workforce. It’s that cruel and that simple.
No one wants that outcome. But if 20% have to go to save the jobs of the remaining 80%, what choice does you have? In bankruptcy, 100% lose their jobs.
The only way out is more federal support for businesses and workers – paid for by taxpayers of today and the taxpayers of the next generation, your kids and maybe grandkids. Even fiscal conservatives understand the need to revive companies and deepen the safety net. All political dogma gets buried in an extreme crisis.
Progressives, for instance, will have to stop demonizing corporations when they come to the realization that nothing works in an economy or society without good jobs. They are gaining an appreciation for the entrepreneurs who create all net new jobs in the country, even if they become billionaires along the way, as they bring new products and services to the market place.
Unfortunately, startup companies that could be the big employers of the future are the most vulnerable in those highly uncertain times. They need one or two good customers to get them going. But the decision makers with the purchase orders in hand are paralyzed when it comes to bring on innovations that have a risk factor.
Right now, in the present tense, with crystal balls that are beyond cloudy, decisions to purchase are on hold. Inventories are being run down. Hiring is non-existent for the most part. Consumers are reducing spending, some to zero. Still you have to be prepared to make tough decisions, geared to which of the four scenarios unfolds.
The one panacea that everyone is looking for is good news on the medical and health care fronts that could fuel a rebound. The earliest the experts see that happening is 2021.
A perceived lessening of risk levels is leading to some reopening of lesser-affected parts of the country. Those experiments will have to be measured closely. Meanwhile, business managers have to batten the hatches for a long storm.
It will be years before we see the likes of the good times of 2019 again.