Business Lessons Learned From This Year’s Health Crisis
2020-07-23 | by Gene Reynolds
Small businesses that operate in the Greater Houston area and the surrounding regions of the Gulf Coast know how quickly an interruption can happen. Typically, this occurs during hurricane season when a sudden disruption could affect your ability to run a business.
This year’s global pandemic and the associated economic crisis certainly fits the category of a disaster event. Unfortunately, it was not a one or two-day weather event followed by an immediate transition and recovery period.
The COVID-19 health crisis has lasted for weeks and months, has included a complete workforce transition both in terms of people and remote work scenarios, and has followed with a bumpy transition and recovery period as the health crisis continues to affect business activity.
Throughout this unprecedented event, our CPA firm has worked closely with small business owners in Houston to support disaster recovery and evaluate emergency response options. We would like to share the lessons learned from the health crisis. We believe these lessons will help your business:
- Take inventory of what happened.
- Evaluate changes that need to be made.
- Position your business to be prepared for the next event.
Key Takeaways on What Happened During the Health Crisis
Whether dealing with a major weather-related event that we are accustomed to in Houston or a global pandemic that we are not accustomed to, the takeaway for business owners is that things can quickly become unscripted.
Small business owners would prefer to have predictability and certainty to make informed business decisions and know where the business is going. But, there is no script for when a business loses a significant portion of revenue or even all of your existing revenue streams.
From our support of business owners during this event, we found a few common lessons learned from what happened during the health crisis.
1. The health crisis exposed gaps in business insurance. Many businesses thought this type of event would be covered by business shutdown insurance or business continuity insurance, but they discovered too late that their policies did not cover this type of situation.
2. The health crisis exposed inefficiencies in how the business is run. Some owners found out how they could operate with fewer employees, fewer assets, and less capital. While it’s unfortunate to find this out during a very difficult situation for people and businesses, sometimes it’s best for inefficiencies to be exposed and laid bare.
3. The health crisis created an unfortunate result of needing to make staff changes. Some companies needed to lay off or furlough a significant percentage of their staff. Others had to completely shut down their business until they felt they could re-open in a safe environment (e.g. restaurants and retailers).
In many cases, business owners had to find additional revenue streams, act very quickly to move inventory or perform new services (e.g. making hand sanitizer), and transition some remaining employees to a contract basis just to survive.
4. The health crisis exposed that many business owners did not have plans in place for a complete workforce transition.
In Houston, weather-related events have caused employees to work from home before. However, it may have been for a few days or a few weeks at most, not requiring a wholesale transition. In this pandemic event, many businesses did not have plans in place to support this dramatic of a workforce shift. Perhaps they lacked equipment, infrastructure, or resources to support employees to work from home for a prolonged period of time.
Another constraint that many businesses experienced was a lack of a reliable communication method to support work-from-home scenarios. When away from the office, shop, or site, how would employees communicate with each other? In a lot of cases, businesses had to set up a new communication system to support productivity and collaboration. This presented many challenges achieving universal buy-in for all employees to engage with each other.
Key Takeaways for Supporting Business Continuity
Now that business owners have taken inventory of the challenges they experienced, the next step should be finding solutions to support business continuity.
1. For businesses that experienced insurance issues, now the goal should be to ensure that your insurance policy covers these types of situations moving forward. While it’s virtually impossible to predict an event of this magnitude again, it should be a wake-up call to evaluate what your insurance actually will cover to be better insulated during the next disruptive event.
Or, business owners should consider self-insurance. While you are assuming more risk when self-insured, you can lower your monthly insurance premiums. It’s a delicate balance, but it will force you to review business processes in an effort to support risk management.
2. For businesses that had their inefficiencies exposed, now business owners can respond by taking steps to run a more efficient enterprise. Businesses should be focused on being more nimble and agile to respond to micro challenges that occur on a day-to-day basis and macro challenges that can affect the entire viability of the business.
3. For businesses that experienced significant staffing changes, the situation allowed business owners to identify core talent and core teams that are vital to support the business on a day-by-day basis. While it would be preferable that all talent is vital to the business, these types of situations can strip a business down to the absolute essentials to run a business.
Business owners should use the information gathered about essential employees to support core services that will help you progressively re-open the business. Being smarter about hiring and using available talent can better position the business to withstand future headwinds.
4. For businesses that experienced challenges during the workforce transition, the health crisis allowed owners to evaluate the capabilities of your team to work away from the office, work with others when not in the same environment, and identify employees that could continue to work remotely.
Perhaps not every employee needs to return to the office. Perhaps you can downsize your office space, reducing rental expenses. Owners now have the opportunity to evaluate each employee and team on a case-by-case basis to find the right mix that will support productivity and business continuity.
Key Takeaways to Prepare For the Next Event
As businesses look ahead to the “new normal,” small business owners can take these lessons learned and apply them to their future operating reality to better safeguard the company.
– Be careful about the size of the employee base. Monitor it more closely moving forward, particularly if your business goes through business cycles. Don’t be afraid to make adjustments quickly.
– Carefully review the cost of employee benefits. While employee benefits can be very helpful to attract and retain talent, they could also become burdensome to the overall health of the business during these types of events.
– Diversify the business. In addition to shoring up the core business post-pandemic, find other ways to create revenue. Find new markets, customer bases, or other opportunities to grow. Now is the time to think bigger and broader when everything is on the table following the disruption.
– Work more on budgeting. Identify the best infrastructure on a cost basis that fits your revenue model.
– Focus on tax planning. You may need to restructure employee benefits or shift to other types of interim compensation and benefits (e.g. one-off bonus) that doesn’t require a monthly commitment.
– Use software to do a better job maintaining and monitoring inventory levels in real-time (e.g. retail, restaurant, and manufacturing).
Our CPA Firm Can Help Houston Small Business Owners
Now is a good time to be “creatively intelligent” in how your business responds to the disruption and prepares for the next chapter.
- Creative: Find new opportunities to make your business more accessible to customers.
- Intelligent: Use the lessons learned and supporting data to make informed business decisions.
Our team can work with your business to recognize methods to adapt to new market conditions and use the full capabilities of your business. We can also work through accounting and tax situations as you identify solutions to support business continuity.
Contact our small business CPA firm in Houston to discuss solutions for your business. We can be reached through our website contact form, by calling 713-316-4560, or via email at info@ReynoldsCPAFirm.com.
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