And now comes the hard part. As the acute phase of the COVID-19 crisis slowly winds down across Canada and business begins to return to normal—albeit very slowly in provinces such as Ontario—leaders are finally able to take a deep breath, survey the financial damage and prepare for the post-pandemic recovery. Others may conduct the same review and be pleased that their organization’s story is one of pandemic-driven growth.
Across industries the impact of COVID-19 has often been contradictory: Some hospitality, retail and service businesses have been devastated by lockdowns. Some manufacturers, professional service providers and raw materials suppliers have thrived due to increased demand. The haves and the have nots are now facing very different business realities.
With a great deal of uncertainty ahead—especially because the temporary boom in some sectors may soon come to a close, just as others fully reopen and roar back to life—there are strategies that virtually every organization can apply as they work to bolster their balance sheet and position for future success.
Focus on financial flexibility
Federal and provincial COVID-19 relief programs have served as a lifeline to Canadian organizations, but most of these benefits have or will end this summer. If yours qualifies, now is the time to maximize any available assistance in order to help strengthen your finances.
At this point, many businesses will also need to focus on obtaining financing to purchase inventory, rehire workers and begin ramping up operations. Having a solid relationship with your bank manager can be critical. Given the low cost of borrowing, an operating line of credit can be a good solution to help shore up the liquidity needed to meet demand as the economy reopens. The catch is that financing eligibility for bank loans will be contingent upon your financial performance during the pandemic. That could be a problem for many businesses.
Work with your CFO and/or Chartered Professional Accountant to develop a forward-looking financial plan with a strategy to manage your organization’s new cash flow realities and a roadmap for managing any increase in debt. Doing so will help instill confidence in lenders that your organization is on the rebound and is working to resolve any potential capital challenges.
Part of that process should involve optimizing your product or service pricing strategy. The cost of labour and inputs to your company may have increased since the start of the pandemic; at the same time, customers may be putting downward pressure on your pricing or fee structure. Review everything from your operating costs and inventory levels to historical sales data and industry trends to determine how your prices and/or fees should change (if at all).
On the labour side, a limited supply of human capital could hinder the growth of some knowledge-economy businesses, just as a glut of workers could easily reduce wage inflation in others. As such, knowledge-economy businesses may need to budget more to attract and retain top performers. Rather than increasing wages, try to focus instead on keeping salaries at their current level and incentivize with bonuses. Doing so will not only help drive workplace performance (and your bottom line), but will also stabilize labour costs and provide additional flexibility to pivot or make key strategic investments—think new technology tools or important hires.
Take a close look at your workplace
It’s become a cliché to talk about just how much the coronavirus pandemic has transformed the Canadian economy as remote and hybrid work options shift from being a temporary solution to a permanent option for employers and managers alike. But what do those changes mean to your organization, specifically? Now is the time to find out.
A recent Business Development Bank of Canada survey found that 74 per cent of small to medium-sized business owners plan to allow their employees to continue working remotely at least part of the time, while 54 per cent of workers surveyed said that having that option would be a deciding factor in determining whether or not to work for an organization. Fifty-five per cent of employees said they want to continue working remotely at least as much as they do now—and maybe more.
But hybrid arrangements won’t be for every organization or industry. Conduct your own survey to determine what might work best for your workplace culture. Where does your team prefer to work? Do their preferences align with the realities and vision you have for the business (including employee onboarding and engagement goals)? How can you realign your total compensation package to better serve their needs? That could mean changing (and potentially saving on) group benefits or insurance costs. Some staffers may be willing to forego certain benefits altogether for greater work flexibility. A shift in how your team works could also present an opportunity to downsize your workspace footprint and lower overhead costs.
Diversify your client/partner base
Even in normal times, if 70 per cent of your revenue comes from 30 per cent of your accounts, that’s a potential problem. More so at a time when some of those clients may still succumb to pandemic-related financial pressures. The next several months will clarify the full scope of COVID-19’s economic impact as government relief programs close and businesses begin paying down debt. Some won’t survive.
Consider keeping the focus on servicing your larger clients, if possible. Smaller clients are the ones most likely to collapse under extreme financial pressure, so for the sake of your cash flow and receivables, it could make sense to strengthen relationships with well-capitalized customers that are better positioned to weather the rest of the COVID-19 storm.
The same is true of your supply chain, particularly if yours is a manufacturing or services business that relies on key suppliers or partners—some of which may have been hard-hit during the pandemic. The focus now will be ensuring that you have adequate supplies of necessary inputs to match client demand as the recovery gains momentum. Many large organizations are holding off on buying everything from raw materials to mechanical components, which is putting downward pressure on suppliers who are sitting on inventory as they await new orders. At the same time, raw material suppliers in industries such as lumber have seen prices skyrocket and are facing shortages with downstream implications.
Work with your financial team and communicate with those partners to get a sense of their financial status—and the likelihood of their survival. Then develop a strategy to ensure your supply chain can satisfy your customer orders in the months ahead.
Seek out new opportunities
Some of your competitors may be in financial distress. That could mean there’s a window to propose a buyout or merger—or even acquire valuable assets in the event of a bankruptcy—at a discount. Other business owners may be looking for an exit after a year-and-a-half of managing pandemic-related stresses. No matter the scenario, if you have the capital to pursue new acquisitions, the time may be ripe to shop around for growth opportunities. That could also mean exploring ways to poach top talent from competitors.
The COVID-19 crisis has tested entrepreneurs like never before—but the savviest are seizing on evolving market conditions to take their businesses to new heights.
The post-pandemic recovery, in other words, is your time to shine.
Jenny Lian, Partner
For assistance in developing a post-pandemic growth strategy for your organization, contact a member of the KRP team.