How long is this going to last? The impact of coronavirus on your business and what to do next
As the world grapples with the implications of the spread of the Coronavirus, business owners are understandably worried about the future. As well as our concerns about vulnerable loved ones, the tragedy of increasing deaths around the world, we have to think about the challenges Covid-19 brings to our livelihoods, our customers and our staff.
I’ve been working with small businesses to rethink their strategic plans and picking my way through some of the heavyweight thinking that’s coming out for corporates to find a useful road map for smaller companies. This article shares that thinking with you, with an assessment of some likely scenarios for the next few months, and some ideas for you to put into action in your business.
Some businesses, like my client who works in the live entertainment industry, will be feeling the effect of the virus right now. If you work in travel, hospitality or conferences, you will have been hit right away. I have some thoughts for you about how long and how deep you’ll continue to be affected.
For many of us, the main concern has been the uncertainty of what will happen next. The nightmare headlines in the media don’t help us to get clarity about what’s going on with the spread of the virus, or what’s going to happen to the economy.
What we do know
We can be sure that day by day there will be more restrictions brought in. Across the world, there are varying levels of “lockdown” enforced by law. Ahead of this, people are self-isolating voluntarily because they’re fearful of catching or spreading the virus, regardless of whether they’re in a vulnerable group. As the virus spreads, this is likely to increase.
Levels of confidence in medical advice, governments and the ability of society to withstand disruption are already low. As the reported cases increase, this is likely to dip even further. Decisions on entirely unrelated issues will be put off, from what to have for breakfast through to whether to use your company’s services.
All this means that regular businesses will start to see a slowdown in the next few weeks, even if the only effect on you so far is that you’ve started to work remotely. And this is likely to continue for the next few months.
You will probably notice your potential customers taking longer to decide if they’re going to buy from you. No one wants to make a decision when everything is looking dangerous. You might have some existing customers put your services on hold or pull out altogether. And over time, watch out for slow payers and potential bad debts.
Some ideas on how this might play out over the next few weeks and months
Professional futurists use the idea of multiple possible futures to look ahead and get your head around what might happen. It’s a very useful technique when trying to plan your business in a time of high fluidity and uncertainty. Which is definitely where we are right now.
One possible future, probably our best-case scenario
The number of cases continues to rise in the UK, Europe and the US until mid-April, with the number of new cases reducing in China and South Korea. The slower start in Africa and South America gives those countries time to reduce the spread of the virus. People isolating themselves voluntarily, especially at the first suspicion of becoming ill, helps to reduce the spread of the virus. Coronavirus turns out to be seasonal in the same way as its cousins, regular flu’s. Other countries start to use the same testing as South Korea, so we get a clearer picture of what’s going on and can combat the spread using contact tracing.
If governments and regular people can bring this mix together, and if Covid-19 is less infectious as spring starts, we could be looking at a recovery for businesses within 2020. McKinsey thinks that this possible future could include a reduction of business and consumer spending until the end of Q2. The economy would start to recover in the autumn.
Prepare yourself for a short global recession, and all kinds of challenges in running your business, but the economy recovers back to a very changed landscape in late 2020. Sorry, that’s the best-case scenario. But I do have some ideas later in this article for how to protect your business from the worst of this.
Another possible future, not looking so good
In this version of the next few months, we might see a much wider spread of the virus across the world. And if it doesn’t turn out to be seasonal, that will fuel a higher infection rate and maybe increase the number of people who are severely affected.
If a large number of people refuse to isolate or to take sensible precautions like hand washing or coughing into their elbow, this will prolong the length of the crisis. There is a serious risk that people isolate at the beginning, but quickly get bored and start going out and mingling a few weeks in, just as infections are coming to a peak anyway.
If this happens at the same time as an inadequate response from health services, such as only limited testing, so we have no idea of who has the virus and who they’ve been in touch with, or if health services become overwhelmed, we’re in trouble.
In this possible future, spending will drop severely and for a long time. We will see a large number of businesses going into liquidation, mostly because they will run out of cash, or because of bad debts. Smaller companies are usually more vulnerable in this kind of recession, as we don’t tend to have the same cash reserves or borrowing power, and we would be affected more.
This scenario would push us into a deeper global recession similar to the one caused by the banking crisis in 2007. The economy as a whole would not recover until 2021, possibly 2022.
What about the other effects of the virus?
I’ve kept my analysis to the effect on small businesses and the economy as that’s the area I know. I think you can work out for yourself the concomitant price we would all pay in terms of sadness, fear and grief under these possible futures.
What you need to do now
Human beings are amazing creatures. We all have cognitive biases, which blind us to what’s going on. One of these biases is the tendency towards optimism in the face of a situation that is not good. Optimism bias leads us to believe, erroneously, that we are somehow less likely to be at risk of something terrible happening than other people. We somehow kid ourselves that it could never happen to us.
Optimism bias is great for maintaining your mental health when faced with something terrifying like a global pandemic of a new disease. But not so useful for proactively planning the changes you need to make to protect your business.
This is your wake up call — don’t be blind to the risks brought about by the impact of Coronavirus on your little patch of the global economy.
Here are some actions you should be thinking about taking right now before things get bad.
Increase your liquidity
Make sure you have some cash in the bank. Reduce your personal spending and your business outgoings ahead of any possible fall in sales. And if you can borrow money for a contingency to see you through, this is probably a good time to do just that, even if you don’t feel you’ll need it, or if you’re one of the sensible people who feel uncomfortable borrowing money.
Watch out for bad debt
In the 2007/8 recession, I saw healthy businesses forced into liquidation because they had one or two clients who went bankrupt owing money. If you have clients who owe you now, make sure you’re assertive about getting paid when you should be. The people who get paid first are the ones who ask to be paid. If you feel squeamish about it, and don’t want to damage your relationship with a client, you can use a freelance credit control person to make some polite calls on your behalf.
Increase your marketing activity
Many companies do okay with little or no marketing. They don’t have a marketing plan they just get a decent amount of work in from their regular clients and through their reputation. This “business as usual” approach might not be enough to counter the effects of the Coronavirus on sales. Start thinking about how you can actively bring in more customers. Even if you’re suffering from optimism bias, and you’ve read this article thinking “I’ll be fine, I’ve got lots of work on” it wouldn’t hurt to get a bit more organised with your marketing.
If you’re already on the case with your marketing, do more of it. Do not cut back on your time or your budget, continue to invest. But there’s a caveat with this — I’ve seen a few people blindly pushing out sales messages in the UK this week as we went into lockdown. Think about your timing — will people be receptive right now to your message, or is it better to wait a few days while they process the shocks.
The pandemic is going to be here for a while. If you usually work face to face with clients, or travel to be onsite, this is going to change. Probably permanently. Work out how you can deliver your services online but make it better than the face to face version. I did this with my training a few years ago, just because I wanted to be free to travel (haha!) With a little experimentation, I’m now offering programmes which are way better than anything I ever did in the flesh.
Take some time to for new thinking
You might not be feeling like being innovative or inventive right now, but when you feel okay, take some deep breaths and start coming up with some new products and services. Or think about working in a different sector with the same product, if your current customers are likely to be severely affected. Later in this article, I look at some of the areas I think might see growth in a post Covid world.
Take a day off. Go for a walk, if you can. Work on your strategic plan for the next year, with the knowledge that the world is going to be a different place and you will need a different plan. If the time isn’t right to do this, because you’re full of fear, that’s okay. Take a day off, clear your head and do not think about the business at all. Just take some time for yourself.
By clearing some space for not thinking, your mind will probably come up with the beginnings of your new plan for you.
Look after yourself and your staff
Obviously, make sure that you minimise the risk of anyone contracting Coronavirus. But washing your hands more often or working from home are not the only things you need to do to protect yourself and your team. In a crisis, we can be tempted to overwork, or run around quickly, fuelled by all that crisis adrenaline. That reaction works for a very temporary emergency, like a big new customer order or the office setting on fire. You know that the adrenaline response is counterproductive, even dangerous over a long period of time. The pandemic is not temporary — the virus and its effects on your business are going to be around for a good while.
Be flexible and agile
The reason I love small businesses is that we can react to a situation almost instantly. I’ve sometimes had a conversation with a business owner about a new idea at 10am on a Tuesday and by 5pm on Wednesday she’s got it going. These swift reactions are a massive advantage for you — I bet the CEO of British Airways can’t work that way. Make the most of that advantage.
Remember that this is not the apocalypse
Apparently in the US some people are buying more guns and stocking up on ammunition because they think that bullets will be the new currency. Methinks they’ve watched one too many end-of-the-world movies. Remember that the restrictions on travel and social gatherings have been brought in not because we’re all going to die of Coronavirus. They’re there because the scientists want to slow down the spread of the virus so that the small number of vulnerable people who are in real danger don’t all get it at once and need to go to intensive care at the same time. Stay away from doom-mongering media.
Some ideas on how to change how you operate
Transferring very quickly to online supply and getting your customers used to buying from you online will be key to survival.
If you’re a retailer, own a coffee van or a pub, your passing trade and regular pop-in customers are fading fast. Or are completely gone, if your country is in a lockdown right now. You could sit at home and watch Netflix and go broke, or you could come up with a new business model which doesn’t involve people coming to you. Think fast, because your competitors might already be taking this space.
Run a bar? Your customers come to you, not for the beer, but for hanging out with other people. Organise a Facebook live meet up for when the pub shuts and deliver the beer to people’s door. Leave it in their garden so they don’t have to have any physical contact with you. You’re still trading. And you’ll still have those customers for when you can open again.
Market trader with no customers because no one’s coming to the market? Take the market to them — get 5 of your trader friends, identify a part of town where the demographic is likely to buy your goods, and have a pop-up market. Leaflet all the houses, tell people to stay 2m away from one another and sell your stock. Or if you’re on lockdown, shift your stock on Ebay to keep the cash flowing and learn how some new online selling tricks. You might never have to get up at 5am to open your stall ever again, even when this is all over.
Restaurants you’ll already be using Deliveroo or other home delivery service, right? Make sure that your customers pick you, not your competitors who are on the same Deliveroo menu as you, by increasing your marketing. And make sure people know that they can get a “no-contact” delivery from a hygienically wiped driver.
Run a catering business for events, and all events are cancelled? Start making delicious healthy food for people who are self-isolating, or for parents who are home with the kids because the schools have closed, and assure people about your hygiene and delivery service.
Salsa classes — but no one wants to dance with strangers right now? Get your classes online right now. Don’t worry about making a complicated course, just get people joining in the moves in their living rooms, with you playing some cheerful tunes and giving tips over Zoom.
Where will the growth areas be in a post Covid world?
Right now, we’re thinking about retreating into our shells and protecting ourselves. The Coronavirus crisis will change the world forever, and one of the ways to protect your business is to be agile in making those changes to a post-Covid world.
Which areas of business will grow?
Counselling and support services will be a huge growth area. This is already an in-demand sector, but as grief, shock and fear grow, your services will be needed. Ensure your online offering is out there immediately, and that you’re helping as many people as you can.
Homeschooling resources. Parents are receiving home learning packs, which just tell you what you’re supposed to cover, not how to teach your children. We will see a massive rise in homeschooling, and parents need help with this. Some parts of the world have already cancelled school until September, so parents will be investing in support for something they thought the schools would do for them. These might be education resources, or they might be activities for children to do online to give parents a break. Online painting parties for six-year-olds? Go for it.
Reusables. As consumers become conscious of possible break downs in the supply chain for disposable items like nappies and dare I say it, toilet roll, they are already shifting to reusables. The Nappy Lady, which already sells cloth nappies (diapers) in the UK, is seeing a considerable increase in business from people who hadn’t even thought of using reusables before.
Anyone who is already set up to work entirely online will be ahead of the game. Others will be catching up quickly and trying to learn how to work from home and how to use Zoom. Accelerating your learning curve in this area will help you to be able to run your business online if you can.
The stages of moving to a post Covid world
This article was written at the end of March 2020. At the moment, everything is uncertain and fluid, and people are still at the disbelief stage of coming to terms with a terrible change in their lives. Hence all the jokes about toilet paper and people renting out their dogs as a lockdown avoidance measure. We will be coming to the anger, bargaining, depression stages quickly. And it will be quite a while before we get to acceptance.
Even if you are finding the potential scale of the virus scary, worried for your family, or the human race, act now to protect your business rather than watching events unfold. You can’t change world events, but you can change how you respond to what’s happening.
A note on Dr Li Wenliang
This article is dedicated to the memory of Dr Li Wenliang, a brave man who was one of the first doctors to warn of the dangers of Covid-19. He was arrested by Chinese police but later returned to work. He worked with early patients and then caught the virus himself. He died on 7 February 2020. His parents, wife, son, and soon to be born second child can be very proud of him.