Recessions are awful. Add a pandemic , and this has been one of the most challenging times in modern history. If you’re a small business owner or a high-level executive, the responsibility of doing your job well enough to maintain your footing in the marketplace and retain your employees can be a heavy weight.
There’s no doubt the current environment is a challenging one but there is much opportunity for those who prevail. The headwinds of the last twenty years – from the “dot com bubble” in 2000, to the Great Financial Crisis in 2008 – had the potential to devastate businesses. But savvy business owners have learned that adversity can help sharpen the skill sets of the business owner and help them thrive once the economy returns.
Lessons learned in trying times lay the foundation for a stronger vision and more thoughtful execution. For example, in 2000, we came out of it with a deeper commitment to asset allocation. In 2008, we used financial planning to educate our clients on cash flow, asset allocation, and market drawdowns. Since then we’ve built out our financial planning team to help investors have not just the appropriate asset allocation, but a plan to what is the right amount of money in the markets.
Now with the COVID-19 pandemic and the ensuing recession, as fellow business owners, we face similar challenges. The unemployment rate skyrocketed, and job losses touched nearly every sector. The stock market has crumbled and rallied, and investor portfolios experienced volatility akin to a year’s worth of losses or returns in a week. And though the Federal Reserve is doing unprecedented work to prop up the economy in addition to the government stimulus, small business has been hit unbelievably hard even if you were able to get a PPP loan in time.
We believe business owners can prosper in the face of such challenges. Here are the four keys to navigating this recession and beyond.
Harness the chaos and turn it into focus.
Let the fierce urgency of the now hone your focus on your customers. Your customers are also going through this pandemic driven recession. Many have switched to working from home. Some have to help homeschool their kids. They may be one of the millions of people out of a job, or they may see more income available because they’ve reduced their personal spending. They may have more time on their hands, or they may be scrambling. Some may be caregiving for a family member--which would be incredibly trying during these times. Some may be bored or lonely or missing family. Whatever this context is, it can help you better understand what value they find in your business right now. For us, with all the policy changes this year to tax and estate regulations, we’ve seen an increased value in our tax preparation services as well as the need to update estate plans quickly using our estate attorney partnership. Meet your customer where they are and take note on how to evolve your offering to best meet the demand.
Technology investment is paramount.
A dedication to your tech skills and tech stack will make all the difference in today’s world. Being able to fluently use videoconferencing, screen sharing, intranet for employee communication - and having training support materials so your team can effectively use it - can help lessen the need for face to face contact now, and the benefits beyond are equally interesting. There is a new opportunity arising for business owners to employ nationally even if they have a local product. Sure, not everything can be “domestically” outsourced, but a lot of high skill, non-customer facing labor can be done by a person in Wyoming even if the employer is in LA.
Shore up your business continuity plan.
How does your business handle a crisis? What do you need to accomplish to keep the lights on? Answering these questions can help you make a process around business continuity now and develop a more critical understanding of how to succeed in upcoming difficult circumstances or even creating an exit strategy that maximizes the value of the business.
Cash (flow) is king.
Does your business have a rainy day fund? Did you need to use the PPP loans? Did you get a line of credit? We think there will be a trend for more businesses to have rainy day funds in the future, because if you’re spending now, there’s tons of talent and opportunity to pick up against your competitors. This can even include the way your business’ retirement plan is set up.
We still have a ways to go to get out of this situation. But the skills developed through this crisis may help us rebound even faster. Imagine if your company were to add more value to clients, have a more tech skilled workforce, a better business continuity plan, and a rainy day fund… that’s how we come back from this even better.
Brian Parker, CFP, is Managing Director and Co-Founder of EP Wealth Advisors. Derek Holman, CFP, AIF, is Managing Director of EP Wealth Advisors. Learn more at epwealth.com.
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