How to survive the Covid-19 crisis
By Mike Draper
I held off writing this piece until the very last minute before the deadline as things have been changing so fast that I didn’t want the article out of date before anyone had the chance to read it. Hope that is still true.
COVID-19 has changed the operating environment of contractors overnight. So have rules and regulations. Instead of speaking to the changes, this article will discuss how to survive the crisis.
All of our businesses are going to be affected by this event and none of us know what the ultimate outcome will be but there are some things that we can do until the future becomes clearer.
Cash is always king but at no other time has this been truer. Cash flow is the most important thing right now, so you need to know what your company’s looks like. Do up a three-month cash flow projection so you have an understanding as to how deep this will affect your company and how long you have until you run out of money. If you are not okay with what the numbers are telling you, which I doubt you will be, then you have to make changes to your company immediately.
Here are three things you can do: First, avoid all capital expenditures and unnecessary expenses immediately. Second, postpone all new hiring unless it is a critical role you must fill. You can expect that projects will slow down or stop as sales slow because of economic conditions. In the spirit of Hope for the Best and Plan for the Worst: plan on a lack of new short-term sales, base your business on projects that are already booked and cut expenses so that you make money at that level. The worst that could happen with a plan like that is you would have to turn down some business. Far better to miss some opportunities than to bet the business on an aggressive strategy.
Third, this is also an opportunity. If we experience only a few weeks of shutdown it is a very good time to reduce expenses and to focus your efforts on an internal project or two that there never seems time to get completed during the normal business environment.
As we come out of this pandemic and your business is back in operation, continue to conserve cash and build up a three-month contingency fund instead of draining the company of cash every month. Every business needs this contingency so that should there be another round or two of this virus, or some other major event, your business will be in a better position to survive.