October 21, 2020
The COVID-19 pandemic has brought on one of the greatest economic struggles in Unites States history. As unemployment reached a 50-year low, GDP also plummeted by 31.4%–numbers we haven’t seen since the great depression. While conditions are improving, thousands of businesses across the state are still dealing with the economic fallout. Nonetheless, given these challenging times, there are things businesses can and should be doing to help mitigate the circumstances.
1. Learn to pivot
Think outside of the box. Does your business offer something unique that you can adjust to grow with the changes we are facing in the economy? Where can you pivot to continue adding value to your customers? What can you do to ensure employees feel safe and secure at work?
Advantage Capital portfolio company, JSI–a market-leading designer and manufacturer of high-quality merchandising displays–in the last six months, shifted to producing transparent hygiene shields to stem the spread of COVID-19 in grocery stores. Other companies within our portfolio found additional ways to add value, leaning into alternative sources of revenue, or finding ways to market remotely. Still others have found creative ways to keep staffing levels up by helping with employees’ childcare needs, for example.
2. Clean up your payables and receivables
While this may seem basic, make sure your balance sheet is in order. Review the terms of your payables and take advantage of the time you have available to meet commitments. If feasible, see where you can pay early to receive discounts. If absolutely necessary, consider working with non-mission critical vendors to determine where you might delay payment without impacting your core operations. This will free up working capital and help drive growth. On the other side, review existing accounts receivable and ensure collections efforts are underway to maintain consistent receipt of revenue earned.
Cleaning up your balance sheet will make your business a more appealing borrower and help you avoid undercapitalization. This will help better allow you to take advantage of growth opportunities, or provide the runway to switch gears, adapt and boost performance.
3. Figure out the type of financing you need
Finding the right funding model is essential. Whether it’s debt, equity or a lender that can provide patient, subordinate capital, make sure it comes with the flexible terms that are right for your business. It’s important to understand your company’s current profitability in today’s environment. Evaluate the options you have and consider how much capital you may need to achieve success along the way.
4. Keep your eye on results, together
While positive performance may be difficult to achieve, the more you can think about desired results, and who can help obtain them, the better. Think about taking a team approach to arriving at desired outcomes—perhaps implementing cross training or consolidating business functions so that employees have even more opportunity to offer up new ideas and fresh thinking can emerge. You, your stakeholders and your team are all in this together and employees want to help where they can. Celebrate each and every win and work toward the shared goal of getting back to normal.
A Las Vegas-based aviation services company, for instance, has continued to keep its eyes on post-pandemic results, boosting up training and fleet management programs to keep employees working. Management teams and boards should be meeting regularly to review plans and make adjustments in real time. Additionally, plan for both the best and the worst-case scenario.
5. Make sure you have the right financial partner
Your financial partner should take into consideration your particular needs and offer viable solutions and advice to help get your business back on track. Whether it’s a new or existing capital partner, you’ll want to be proactive and provide updates on your possible funding needs. In volatile economic periods, many traditional lending institutions restrict availability of lines of credit or are unable to renew them. Take a step back and consider augmenting your current relationships or seeking out a new financial partner.
In March, when COVID-19 and the related shutdowns first hit, Advantage Capital reached out to each of our 200+ portfolio companies and offered sound advice on how to deal with the crisis—touching on everything from safety precautions to liquidity issues. We encouraged each business leader, if they could, to pull down any availability on their lines of credit in anticipation of a prolonged economic downturn.
Unfortunately, for many small business owners, there is no crystal ball to indicate when an economic upturn will take place, but taking a smart, agile approach to adopt new business strategies, pivot your business lines and adapt to the current climate could help you weather the storm.
Come work with us. Together we can get your business the resources it needs.
The investments, portfolio companies and recommendations listed on this website represent only a sample of companies that have received investment capital from Advantage Capital-related entities. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities highlighted herein or contained in any other information provided by Advantage Capital. Past performance is no guarantee of future results. For a full list of companies, please click here.
