In our recent Manufacturing & Distribution Pulse Survey Report, 44% of respondents said changing their business model (also referred to as a business pivot) to adapt to COVID-19 is the biggest challenge that they are facing. Indeed, a business pivot is complex and risky, but in this new environment, few have a choice. The next 6-18 months will be a critical time for small and medium-size enterprises (SMEs). Soon the benefits offered over the past 6 months, including PPP loans, will be consumed and the ability of SMEs to operate in the post-COVID environment will be put to the test. The success of SMEs will have a significant impact on our country, since they account for roughly 48% of the US economy and provide employment to about 60 million people in the United States1. What’s interesting, is that revenues for many SMEs, as well as larger companies, have remained relatively consistent with pre-COVID levels, and some have seen significant increases. Couple this with the cost-cutting measures companies have instituted, along with the suspension of travel, meals, and entertainment, the result for many is a profitable 2020. Of course, this is not the case for all. Business sectors which rely on communal activities (hospitality, entertainment, travel, etc.) have experienced severe revenue loss or worse.
Whether companies have done well or struggled, the future has more questions than ever before. Uncertainty is now the biggest problem. Managing through the COVID-19 pandemic may have been the least complex part of our new world. Determining how your business, market, and industry will evolve over the next 1 to 5 years is going to be difficult and chances are business owners will make many more mistakes now than a pre-COVID world. SMEs usually do not have the cash reserves or access to capital of their larger competitors, therefore mistakes can be unforgiving.
While manufacturing, wholesale, and retail trade may fair better than most, COVID-19 has introduced conditions which will make the road to recovery more complicated than during the Great Recession. The effects of disintermediation - the process of cutting out one or more players in the supply chain - and the power of e-commerce have been accelerated by COVID-19. In fact, respondents in our Manufacturing & Distribution Pulse Survey Report indicated technology and e-commerce were the top two biggest keys to future growth. Technology can be a “four letter word” for many SMEs, because mistakes when selecting and implementing technology changes are often very expensive, coupled with a COVID-weakened balance sheet, can put an SME out of business. Another change brought on by COVID-19 is the remote workplace, and more importantly the skills (both technical and emotional) needed to operate successfully in such an environment.
As mentioned, managing through the initial crisis may have been the easy part. Here are 5 tips to consider when pivoting your business and making decisions for the future:
While a business pivot may seem like a treacherous task, with proper planning, analysis, and support – internal and external – business leaders can execute a plan to assist their company to withstand the future economy.
Citrin Cooperman’s Manufacturing and Distribution Practice recently launched our inaugural industry survey. The survey provides a pulse of the industry nationally in the moment – amid the COVID-19 pandemic – to measure the current health of their business and to take stock of future priorities, concerns, and challenges. For more on the current state of the industry, check out our Manufacturing and Distribution Pulse Survey Report.
1McKinsey & Company “Tracking US small and medium size business sentiment during COVID-19” May 29, 2020