COVID-19 is upon us, and the worst may still be to come. Many states, like California and New York, have issued broad shelter-in-place orders closing all but “essential” businesses. What can businesses due to survive? Is bankruptcy an option? Here are some things every business owner should be doing now.
- Start Planning Now. Those who know me know that I have one key principle: control the process or the process will control you. The time to make a contingency plan – or plans – is now. When faced with uncertain times, it is natural for people to maintain the status quo as long as they can and delay making hard choices. Recognize that this is an anti-strategy that eliminates your options and may lead to disaster. The longer you delay making a contingency plan the less likely you are to implement it.
- Preserve Your Options and Your Cash. This point is closely tied to the first one. Oftentimes business owners don't consider bankruptcy or some other form of restructuring until they run out of cash and have no other options. The problem with this approach is that it fails to take into account the fact that bankruptcy costs time and money. If you wait until all your cash is gone to consider bankruptcy the only choice you face is a liquidation. The only businesses that survive bankruptcy are those that start exploring the process when they still have cash on hand and a viable business to run. When times are tough cash is king, primarily because it preserves your ability to pursue strategic options.
- Keep Communications Open. Every business has key constituents – from employees to landlords to vendors. Conversations with these groups about financial struggles can be difficult. But the one thing your constituents will hate more than a difficult conversation is radio silence. No sane person will be shocked if your business suffers because of COVID-19. Maintaining communication with your key business constituents may help build a level of trust that you will need if you need to seek concessions from them later to keep the doors open. Institute a regular time for meetings via telephone or video conferencing.
- Take a Deep Breath. Remember what is inscribed on the cover to the Hitchhiker's Guide to the Galaxy: DON'T PANIC. Times are difficult now, but this too shall pass. Panicking will only make things worse and will impair your ability to make and implement a plan to see your business through this.
- Consult a Professional. Running a business is difficult in the best of times. If you think your business is in jeopardy, contact a bankruptcy attorney as soon as possible to discuss your options.