The CoronaVirus is NOT a blip on the radar. Whether your personal opinion is that this is an overhyped flu strain or a doomsday pandemic is irrelevant;
US businesses have already been seriously affected and some are even on the verge of closing as a result. Regardless of how your business is faring today, you need to consider how you might be impacted by a global pandemic that is almost certain to send shockwaves through the world economy.
It seems unfathomable, but this week our clients suddenly began approaching Abraham + Martin one-by-one to develop contingency plans, sell their businesses, secure working capital loans or help identify adjacent verticals for a fast pivot. We know what you’re thinking- this is an overreaction, right? Unfortunately, they’re not panicking…things got very bad, very quickly for many companies exposed to CoronaVirus, particularly in the events and tradeshow industry. We feel this industry is on track for major revenue interruption, and may be the “canary in the coal mine” for the broader economy.
If you want to understand how this will impact your businesses, start by examining trade shows and events. In showbiz, the saying goes “the show must go on”, but at the moment…
THE SHOW MUST NOT GO ON
When news broke that the
Geneva Auto Show was cancelled due to the Swiss government ban on all gatherings of more than 1,000 people, our event business clients started sending us concerned emails. This wasn’t a small trade show that would subsequently be rescheduled; this was one of the largest trade shows in the automotive industry, and for that very reason organizers claimed that rescheduling was simply not feasible. GAW quickly pivoted to a “virtual trade show” livestreaming the announcements and working with exhibitors to maximize visibility. Not only did the physical show effectively disappear this year, but the success of the virtual show begs the question: “can the expense of in-person trade shows be rationalized anymore, especially when cancellation squanders all the work and time dedicated to producing, participating or attending events?” This may have long-term repercussions for the events industry beyond the CoronaVirus crisis, and we are working with our clients to develop long-term operational and financial preparedness plans to prevent future business interruption.
We’ve helped many clients in the event industry diversify their revenue stream, but those who haven’t are sadly paying a high price for an over-concentrated sales mix that relies on arguably the sector most economically vulnerable to the CoronaVirus. Today, we’re quickly mobilizing to find ways to repurpose our clients business assets, talent and relationships to generate revenue immediately from other industries. Unfortunately, a pivot of this magnitude is unlikely to be realized fast enough to meet short term liabilities. Moreover, these pivots themselves require cash that is needed NOW.
STEP ONE: FIND MONEY…RIGHT NOW
In the last 60 days events businesses began shedding jobs, laying off staff that just 2 months ago was busy building displays for trade shows, project managing events, trucking materials to venues and designing display booths. Those salaries simply can not be funded when clients are defaulting or triggering force majeure clauses. Consequently, layoffs are now happening at an alarming rate. In fact,
we expect to hear Wall Street chatter regarding massive layoffs in the events industry when March jobs numbers come out on April 3rd. It’s unclear if this will spread throughout the US economy at large, but it seems likely, and the events industry is certainly going to be among the worse hit.
If you’re a business owner in this position, cutting variable expenses is certainly a priority, but a capital injection should be your
absolute first priority. Typically, it takes longer to secure capital than cut costs, so you must begin the longer lead items first. Get your current financials in presentable form so lenders can quickly review the data and engage an advisor to negotiate traditional and non-traditional loans for your business.
We’re sourcing commercial loans from 7% with as little as 3-day turnaround times. There’s a lot of different flavors of lending, and there are a lot of different variables surrounding your business. Abraham + Martin excels at identifying the best capital plan for your current situation and negotiating terms with lenders on behalf of your business. In a world of algorithms and digital marketplaces, this service is invaluable, and lenders routinely provide our clients their best rates based on our relationship with them and ability to negotiate on our client’s behalf. Once your business is able to meet short term liabilities, it’s time to prevent this pain from impacting your business again.
STEP TWO: DIVERSIFY
Modern businesses rely heavily on specialization to woo customers and clients. That’s fine, but if specialization also means industry concentration, your business can be wiped out if there is isolated pain in one industry or sector. Instead, find adjacent verticals that rely on your organization’s resources, equipment and combined wisdom. In particular, focus on the services your organization can provide that are the least capital intensive. Long term, these services will be most profitable and in the short term will require less working capital to realize. This is particularly important because so much of the working capital you’re going to source today will be servicing your existing overhead, with scant room to fund a pivot. Start thinking about all the years of accumulated experience your business has amassed: is there an opportunity to offer consulting, design, engineering, planning and logistics or similar services to your existing clients, or grow these service lines? Can you offer these services to similar businesses outside of your core industry? If you have a fleet of trucks, is there a nearby last mile company that you can contract with to lease your trucks short term or assist in deliveries to keep your current staff employed?
STEP THREE: REVIEW
Once you’ve sourced capital, trimmed the fat, and identified new revenue opportunities, immediately test the results. Is your cash flow sufficient to provide a 30,60,90, or 180 day runway for your business? Have the new service lines been well received by customers, and are they profitable? Could the profit from the new service lines be increased if you tweaked your salaries and wages or real estate expenses? Could you grow these service lines more quickly with a focused sales strategy? Pull your Key Performance Indicators from last year and see how the pivot stacks up, and examine how your new capital structure is impacting your bottom line within this new paradigm. Once you have a handle on how your business has changed, begin a concerted effort with your key staff and managers to develop a 90-day business plan to stabilize income, increase sales, maximize operational efficiency and grow your business.
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