There's Light at the End of the Tunnel for Pandemic-Stricken Businesses

At the height of the COVID-19 outbreak in Canada, Parliamentary Budget Officer Yves Giroux estimated the country’s GDP would fall by 12 percent this year, four times more than the sharpest decline on record. He also predicted it would take two years for the economy to return to where it was in the first quarter of 2020.

The pandemic has caused a lot of disruption. In many instances, small- and medium-sized businesses lack access to financial relief, either because they don’t meet government requirements or because banks are looking to mitigate their risk and will therefore be lending less and asking for stricter adherence to covenants. Many businesses will resultingly have to move toward running their operations with less cash and more inventory as supply chains move from just in time to just in case.

How should businesses react in general?

A lot of owners are worried about being resilient in the short term — they’re focused on gross margins, but they would be better served by focusing on other issues. I advise clients to get scrappy and come up with interesting and creative solutions. This is a great time for them to ask how we can do things differently — and better.

The businesses that will weather this storm are looking at other indicators, such as return on investment in terms of cost and time commitment. I helped one company find ways to make beneficial adjustments such as better managing staff. Together, we figured out how to improve productivity by 30 percent. They said they wished they had taken the step a long time ago.

Overall, this is the time for businesses to take a long hard look at their operations and to find ways to regain lost productivity. They need to move from surviving to thriving.

What are a few of the specific steps a small business should take to adapt?

To start, companies should get employees back to work. In some instances, employees don’t want to return to the workplace because they don’t feel safe or because they’re collecting Canada Emergency Response Benefits (CERB). Human Resources and other departments can collaborate to address that problem.

Considering how you can adjust your sales channels is another important step. Some customers who were historically uncomfortable operating in a digital world may be changing their preferences. This is creating new business dynamics going forward. For example, consider personal trainers: some are still helping their clients get fit but are doing it online rather than in person. You may be able to deliver the same services but in a different way. 

Another step is to manage your payables carefully. You can do this by prioritizing important vendors when timing payments strategically. For other vendors, discuss flexible or extended payment options.

Also, building many relationships and partnerships is a key aspect of resilience. If you’re a business owner who’s been relying on one supplier, change that. You can no longer count on that supplier being able to meet your needs in the future. You also want to coordinate with key suppliers to ensure you can meet the needs of your critical accounts. Communication and collaboration are essential, so initiate discussions regarding your supply needs and vendor commitments. Then create specific procedures to engage and retain strategic partners.

What lies ahead?

We have yet to see the full economic impact of the pandemic. It will affect every aspect of industry, including supply chains. Companies will have to invest in risk management planning to identify the challenges and employ solutions to meet them. All this can prove costly, so smaller companies will go out of business unless their value propositions aren’t based on price.

However, this disruption is also creating new opportunities. New niches have emerged and some established niches, like health and wellness, are booming. For the most part, people are consuming the same products but in new ways. Successful companies will adapt to the change.

To learn more, contact Yohaan Thommy, PMP, CMC, Partner, at 905.247.3254 or [email protected]