Learning from the Covid Crisis: Operating your Small Business for Foundational Security

Our current COVID-19 Crisis and subsequent quarantine has taught small business owners quite a few lessons. Unfortunately, a lot of those things we had to learn the hard way. The only mistakes we make in returning to normal after a crisis is not carrying over the benefits we may have gained and moving forward without keeping those lessons firmly in mind. 

When life returns to business as usual, the desire is to go back to the way it was, but before we do that, we need to examine what the status quo was, understand what we need to improve and implement those changes as we start up again.

Before the 2008 Housing Crisis, in Houston specifically, the events industry was operating at a breakneck pace, businesses were on course to break income records, and we were hiring. Companies were ramping up, investing in inventory, and operating as usual. We weren't looking at what was happening to the rest of the country because we were safe in our oil and gas bubble. Our false security disappeared in 2009, 18 months behind the rest of the nation.

As the bottom dropped out of our market, corporate event shaming had begun, conferences were canceled, and layoffs began. Small businesses closed or operated on skeleton crews, and money was tight. Businesses were left scrambling to pay on loans for the equipment they took on to keep up with demand, but it was no longer needed.

To stay in business, we were forced to reduce our operational budgets, eliminate waste, and reduce payroll. But as soon as the country began to recover, we gradually became busy again; we forgot the lessons we had learned, hired back all of our staff, and carried on as nothing happened. When the next crisis hit, we were in the same position.

After this set of unprecedented circumstances, we were forced to cease all operations. Taking stock of our situation, we are going back to square one. It will almost be a brand new business. We will have inventory, little to no business, and debt. Let's look at all the things we didn't like about our operations and make decisions about how we will proceed.

Fresh from the fire, we should remember the steps we took in shutting off the flow of cash as quarantine hit and reverse the order as we ramp back up and eliminate any unnecessary spending. Things to consider:

·      Eliminate unnecessary expenses: Take stock of what subscriptions, memberships and office expenses you were able to cut during this time. Is it something you can operate without? Have you found more affordable options to help fill the void? 

·      Reprioritize previously planned capital expenditures

·      Identify key personnel to bring back immediately, only bring back additional staff as needed, and keep payroll expenses at manageable levels.

Next, we need to examine the reasons we suffered both personally and as an owner. As the social distancing order turned into a stay at home order for non-essential businesses, many owners began to look at their insurance policies and contracts for the first time since they were originally written.

 Terms like business interruption, force majeure, event cancellation insurance exclusions rose to the top of the questions that owners were asking each other:

·      Does business interruption kick-in without an emergency declaration?

·      Is a pandemic considered a national emergency?

·      Does a possible epidemic trigger the event cancellation insurance?

·      Can we apply for unemployment if we don't take an actual w-2 paycheck?

·      If we pay our employees by 1099 can we qualify for forgiveness on a PPP loan?

·      If we weren't profitable before the crisis, will we qualify for a loan even when the SBA backs it?

With a second chance to start our business, it will be essential to rewrite our business plan and restate our goals. We will need to structure our companies to operate as a separate entity and not use our personal finances to run our business. We will need to proceed with a clean set of books and keep our credit score good so we can qualify for loans in the wake of another crisis. We will need to manage our costs and expenses to maintain the recommended six months of operating expenses in the bank, knowing that there is another crisis in the future.

As the world changes in the face of online sales and meetings along with increased competition, a lack of skilled labor and higher labor costs, this is the time to reevaluate our goals and the direction we are heading. This is the time we are free to make changes to the way we operate, to decide if we want to continue or if this is the time to package ourselves to sell.

Every setback is an opportunity in the making. It is up to us to take the chance and make the most out of it.

Lisa Krumm Anhaiser, is the founder and President of LBL Event Rentals based in Houston, Texas that has been providing quality linen and event rentals to the area for over 20 years. Lisa is also a graduate of the prestigious Goldman Sachs 10,000 Small Businesses and she enjoys sharing her knowledge with other business owners through educating via one on one consultations and speaking engagements.