Business Continuity and Re-launch During the COVID-19 Pandemic

How to stay open and re-open amidst the health crisis

Even though I witnessed it, the speed of the spread of the COVID-19 virus is still hard for me to believe. We went from the Wuhan lockdown in late January to the shutdowns in Northern Italy in late February to schools closing and Professional Sports in North America suspending play in mid-March. Three continents in about 50 days. The effects of the pandemic really hit home a couple days later when we closed the downtown office at Brass Dome Ventures (BDV). We would now be operating as a virtual office, working from home until further notice. Luckily, the business model at BDV allowed us to make the adjustment without too many hiccups and have now been working remotely for over 10 weeks.

As new restrictions or complete shutdown of various businesses continued to be announced every day, many small to medium sized businesses were caught completely unprepared for the changing environment. What was occurring had never been seen before. The new restrictions being placed on businesses were decreasing revenues and increasing costs. For small or medium sized businesses to survive, they had to be able to adapt. To make these changes, a business needed to establish its priorities such as safety, communication, cash flow and recovery.

Take care of your people first. COVID-19 is a health issue. Follow the guidelines that have been put in place by Health Canada and your local jurisdiction to prevent the spread of the virus. Work at a safe physical distance or allow employees to work from home if possible. Have a plan if one or more of your employees is forced to quarantine. If employees are laid-off, prepare all paperwork quickly to help reduce any financial stress they may be experiencing.

Determine what the “new” business as usual is. Adapt and innovate to change your business model to survive the new environment if necessary. Whether its employees working from home, launching your business on-line (retail, fitness classes), or a manufacturing business changing product lines to meet a demand caused by the pandemic (masks, ventilators), businesses must be prepared to change on the fly. Maximize any available supports such wage subsidies, low or interest free rate loans or rental assistance. Refer to government supports available on the provincial and federal levels.

Communicate with your employees what the plan is moving forward. There is nothing worse than being kept in the dark during a crisis. Contact customers, suppliers, and creditors to let them know if and how the new model affects them. Ask customers if they can pay outstanding amounts or work out a schedule for payment. Offer early payment terms to your customers to speed up your incoming cash. Ensure suppliers are still able to fill orders on a timely basis. Try and extend your vendor payment terms if possible. Find out if your creditors can adjust payment terms, interest rates, or extend additional credit.

Cash flow is the life blood of almost all businesses. You must determine if you have sufficient funds or access to additional funds to continue. Based on the new or adjusted business model and the information gathered from customers, suppliers, and creditors, you can now begin to create a cashflow plan. Focus on preserving cash. Determine if capital expenditures can be delayed or if discretionary spending can be reduced or eliminated. The cashflow plan is a moving target, you are trying to predict the future. For this reason, the cashflow must be updated daily during the crisis. The entrepreneur must understand the cashflow of the business, monitor the daily updates and constantly work to improve it. Below is a list of some useful tips on improving your cashflow:

• Contact your bank to see if your Line of Credit has a bubble (you could have an additional 10% of credit and not know it).
• Put employees on a temporary layoff to avoid severance and with the hopes of ramping back up within the 120 day temporary layoff period, to be able to recall employees.
• Ask if there are any employees willing to take a voluntary leave of absence.
• If you use a payroll provider, start remitting source deductions yourself. This gives you additional time to pay rather than the payroll company holding your money until remittances are due.
• Request to pay interest only on any loans or leases.
• Offer discounts to customers for early payment.
• Request extended terms with your suppliers to defer payments.

Prepare for the recovery. Will you return to the previous business model, keep the new updated model or will it be a hybrid of the pre-crisis and crisis business model? Continue to monitor the cashflow. Be patient, do not ramp up to full capacity too quickly as consumers will be cautious to jump back in due to COVID and financial hardships they have had to endure during the pandemic. Unfortunately, the economy is a lot like tobogganing, the ride to the bottom of the hill can be quick, but the climb back up always takes more time and effort.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.