With the announcement of an early spring, most people were looking forward to taking walks outside and getting some fresh air. In a few of Citrin Cooperman’s coastal communities, particularly on Long Island, we looked forward to watching the waves come in and go out, the tide continuing to rise and fall with the passage of time. This, in many ways, can be the same for business as well, even if we don’t always notice it. Through each of our lives we have seen peaks and valleys, highs and lows, bears and bulls. To this, I would often say, “A rising tide, hides a lot of the rocks.” When times are good, you don’t necessarily see the dangers lurking underneath, but it is important to remember, just because the tide runs out, doesn’t mean you are guaranteed to crash into an iceberg. It just means there is a lot more to navigate, and that is why I wanted to share a few thoughts to consider as we use our compass to guide us through.
Work with your lenders, customers, vendors, and other essential service providers to free up cash flow. Many banks are working with customers to defer payments, assisting in the preservation of short-term cash flow. Those with asset-based lending arrangements, can try to free up liquidity through (a) increased availability percentages (i.e. going from 80% of receivables to 85%); (b) including other operating assets such as inventory; or (c) other means such as real property as part of the collateral.
Think out of the box – how can your company adapt to navigate the storm? Can you deliver your products directly to customers? Arrange for delivery or pick-up from your warehouse? Offer services remotely? Or more importantly, can you make your products more adaptable to other businesses in need, such as hospitals and other services during this time of crisis.
Breakeven pricing, with a sense of community: reducing overhead costs associated with the carrying of inventory should always be a consideration for your business. Now, more than ever, it is important to make sure products are moving and are being turned into cas. Increasing your inventory turnover can help cover necessary fixed costs such as rent and payroll, even at the sacrifice of normal margins. Pricing reductions also have the potential to benefit those in need of these products; giving back to the community.
No one likes to lay off employees, but unfortunately, many businesses are finding the need to make tough decisions. Once the pandemic hit, companies began to lean down immediately, with a lot of the discussion on essential versus nonessential personnel. One potential solution to those uncomfortable with laying off their workforce is to consider a “shift rotation,” with all employees taking a rollback in pay but dedicating less time to work. As COVID-19 forces a significant amount of the workforce to stay home, many are struggling to develop a work/home balance, especially with a full household. Having two or more teams rotating shifts, and focusing solely on the essentials, will allow them to care for the needs at home as well. Shift rotations can increase efficiencies, leaving a lot of the fat and redundancies by the wayside and lessening the need to permanently reduce your workforce. When the tide rises again, you don’t want to be left without a crew.
One thing we can all agree on, is that we have never seen the tide run out like this. For many, the ideas shared in this article may be a reaffirmation of plans you have already been working on putting into place. For others, the hope is that it helps get those conversations started. If you’d like to discuss how to navigate your business through these uncertain times, please reach out to your Citrin Cooperman advisor. Togetherness may be the most important thing to get us through this. Here’s to hoping the next wave is far greater.