Coronavirus and the new American economy (part 2)

April 30, 2020

By Solomon Ali
CEO of NDR Energy Group and Revolutionary Concepts

Part 2: How we brace for financial impact and minimize the fallout

Solomon Ali

• Communicate with your creditors and debtors

Explain where your company is at, discuss options and re-negotiate terms if you can. Inquire about extensions on payment terms, request waivers of late fees and penalties. The good news is that you are not alone. Tens of millions of people are currently in the same boat and your creditors know that. In many ways, this puts you in the driver’s seat to renegotiate payment terms and obtain some forgiveness on penalties that would normally be imposed. At the same time, communicate with your company’s debtors and diligently collect monies owed to you. Be prepared to negotiate with customers and accounts who owe you money.

Reach out to the current customers you do business with to gauge where they are at. Offer discounts and other payment incentives to get whatever liquid money you can upfront. For example, if a customer owes an outstanding balance of $1,000, make them an offer to pay you $700 now to settle the account. This will give you much needed cash in hand. Regarding new sales, companies should be all about solving customers’ pain points right now.

• Identify pain points and solve them

Identify your customer or client “pain points” during this time and strategize ways to solve them in a way that could potentially make you indispensable during a time when most products and services will be cut from the equation. Whether that is free delivery, discount packages, future incentive packages, extra services or penalty-free rescheduling; the old playbook no longer applies. Become flexible in your approach. If you are able, extend more favorable payment terms to gain more market share within your industry.

• Form strategic alliances

Companies should also look to industries that are thriving and communicate their desire to align and/or partner with other companies to leverage profitability, innovation and market share. Seek out companies that offer complimentary products or services and reach out to see how you can help one another. We are living through times where people are more emotionally receptive, because no matter what industry you are currently in, we are all feeling vulnerable right now. Entering into a strategic partnership with another company could mean selling a part of your company or even acquiring part of another company. A partner may have the ability to loan you capital in exchange for equity in your company. It could mean extending a sweetheart deal on something that you usually don’t offer such favorable terms on. These ideas should be discussed with a mutual respect and understanding of your respective industries, needs and goals, and the current marketplace in which you are operating.

• A few types of partnerships

Joint venture – If you decide to merge with another business in your industry to combine assets and resources, you are going to need to consolidate and cut costs. For example, Company A may have a stronger sales team, but Company B has a better administrative team. You would consolidate those resources, keeping Company A’s sales force and Company B’s administrative team. We cut costs down because we are working together and trimmed the fat, one of the most strategic partnerships that need to take place right now.

Equity investment – A private equity investor comes in and either loans you capital or invests capital into your company. This means that you are loaned money in exchange for equity in your company. A private equity investor may extend you a line of credit to help you survive this climate. You don’t pay back an equity investment in traditional terms, but you will find your ownership stake shrinking, perhaps considerably. The good news is that the equity investment would likely outweigh the loss. One thing to consider during economic downturns is that private equity investors will look for terms that favor their investment. This is because the higher the risk for the investor, the more that investor is exposed financially, the more the terms will be slanted to cover that risk.

Acquisition – Getting acquired by a larger business that has the financial wherewithal to support your business and keep operations afloat during this period of time places a strong bandage on the current uncertain marketplace. This means you will not be in such dire need of immediate profits to stay alive or to plan the future trajectory of your business. You can also maintain your marketing and advertising efforts and continue to grow your market share without immediate profits, but with the future projection of profits.

Streamline efforts with technology and outsourcing

Can I have my workforce work remotely? Can I outsource my marketing and advertising team? Can I streamline my administrative with technology or keep my workforce intact but teach them how to be more efficient with the use of technology? These are some of the questions to ask yourself during this time. You may find out through an efficiency audit of your business that 20 percent of your workforce is doing 80 percent of the work. With that information, you can pivot your efforts and infrastructure accordingly. This is an opportunity to become more efficient and more profitable in the long run.

Keep your eye on fall 2020

Companies can use the spring and summer months to position themselves for an autumn boom, if they take the right strategic steps.

The financial effects of coronavirus will be felt long after the pandemic is under control. We will feel ripples and aftershocks well into 2021 and perhaps throughout this decade. This means that business as usual is a losing proposition. Our economy will recover, albeit with a different spin than before. We will see a rise in consciousness about the way humans treat and consume animals, and we will begin to shift towards more of a cause-and-effect mentality. This means that industries that exploit animals for profit will begin to recede. Virtual networking and virtual meetings will become more and more commonplace, and the traditional sales meeting or boardroom meeting will happen less. We will also come back together and socialize in slightly different yet distinctive ways, with a return to more community- based activities. Local parks, places of worship, board games and general fellowship with one another will be newly discovered and offer a newfound charm.

Employers will also become more accommodating of remote workers and flexible schedules, and will be more accommodating to sick leave and other dispensations that support employees’ health and well-being.

People will continue to seek out financing, but banks will be less inclined to offer loans for things like payroll, and more eager to finance investments in robotics, A.I. and other technology-related ventures. New industries will be born and created, and we will see a massive acceleration of A.I. and automation across most industries.

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