Following the outbreak of COVID-19 in early 2020, Canada’s businesses have suffered their greatest economic shock in living memory. For exporters and non-exporters alike, the global pandemic has upended revenue forecasts, demolished growth projections and slowed cash flows to a trickle. How we respond to this extraordinary and evolving situation will affect Canada and Canadian companies for years to come.
- The worst is the sharp and unexpected drop in company revenues. Closed borders, government lockdowns and falling demand for goods and services have all contributed to this. For some firms, the revenue collapse happened in a week, while for others, it’s been more gradual, but equally damaging.
- The COVID-19-stimulated surge in online purchases has helped some e-commerce companies prosper. But for firms that have paid little attention to online selling, regaining lost cash flow by expanding their e-commerce capabilities can be a big challenge—especially when they try to do it almost overnight.
- Another problem, even for a company whose customers are still buying, is the disruption of supply chains. A damaged supply chain can make it impossible for the firm to produce enough goods to meet demand. Again, cash flow suffers.
- For service companies, the challenges can be especially acute. These sectors usually involve human-to-human contact, and it can be very difficult for these businesses to keep going when physical distancing has to be maintained. Demand dries up and so does revenue.
- While the pandemic has affected all businesses, women-owned companies have been hit especially hard. Women entrepreneurs tend to be concentrated in service sectors such as education, professional services, retail operations, food services and health care, and as mentioned earlier, these sectors have been particularly vulnerable. In addition, many women carry the heaviest responsibility for child care, and having children at home while managing a business can be extremely difficult.
The immediate task is to manage costs and revenues, so that your cash flow can keep you going until conditions improve. Here are some essentials for a successful strategy:
Understand where you are
Take a close and objective look at your situation:
- Understand clearly what your cash flow position really is and how long you can operate under these conditions.
- Identify possible courses of action if things get worse, for example, if sales continue to drop or a key supplier shuts down.
Conserve and stabilize cash resources
Identify strategies for managing the cash you have or expect to receive:
- Look at your cost structures: What are the key activities and resources you absolutely must keep, and which ones should you let go? If you have products that aren’t paying their way, for example, stop making them.
- Examine your accounts receivable and try to collect advance payments, or at least get a firm customer commitment about the payment date.
- See if your suppliers will defer payments on goods you’ve already ordered or received. Ask for longer payment terms on new purchases such as 90 days instead of 30.
Find more revenue
Here are some options to consider:
- If you have assets you don’t really need any more, sell them.
- Try to form strategic alliances with other businesses to bundle and create increased value for customers and increases sales for both firms.
- Ask existing clients for referrals to potential new buyers.
- Try selling your goods or services to governments.
- Use resources such as the federal government’s Business Credit Availability Program (BCAP) and EDC’s Business Credit Availability Program (BCAP) Guarantee to get the extra working capital you need.
It’s vital to keep the lines of communication open:
- Maintain a close relationship with your financial advisors, your financial institutions and your accountant.
- Networking is vital for surviving this crisis. Don’t neglect your business and customer networks in the turbulence of the moment—now is the time to strengthen these connections, not ignore them.
Being agile and creative can reveal opportunities you might not have noticed in pre-COVID-19 times. It can also help prepare you for the post-COVID-19 business environment.
Adjust your product or service
A quick pivot can put you back in business and help you stay relevant to your customers:
- Leverage your equipment to shift your offerings to what’s needed now. A laundry service for hotels and restaurants lost all its customers, but it still had its fleet of trucks and drivers and switched to delivering food.
- Change your product to adapt to the new business environment. A technology company modified its communications application to help large retail organizations stay in close touch with their furloughed staff.
- Use technology to stay afloat. This can range from setting up an e-commerce platform to offering online learning resources to your customers.
Look to the future
The pandemic will slowly fade over the coming months, but now is the time to think about the post-COVID-19 business world.
- In that world, you may be doing business differently, perhaps with a much stronger online presence.
- The characteristics of your customer base may have changed significantly. In your business planning, try to predict the nature of those changes.
- Potential and existing customers may have new needs that provide new opportunities. If you can anticipate these needs, you’ll be able to grow.
- Diversification will be a necessity. At the production end, you should start sourcing your inputs from multiple suppliers. At the sales end, you should do whatever you can to broaden your customer base.
- Risk management and financing will assume new importance. You may need instruments you’ve never used before such as EDC’s Credit Insurance and working capital solutions.
Whatever happens, though, we can all be sure of this: the world’s business and economic environment won’t return to the way it was. It’s hard to imagine exactly what that future will look like, but it’ll certainly offer new opportunities for nimble and creative companies.