3 Ways to Safeguard Your Business as Coronavirus Spreads
Many have speculated about whether the current coronavirus outbreak will spark an economic recession. Renowned venture capital firm Sequoia Capital recently shared their experience of best practice, advising that, “Having weathered every business downturn for nearly 50 years, we’ve learned an important lesson: Nobody ever regrets making fast and decisive adjustments to changing circumstances.”
Whether or not the novel coronoavirus and the disease it causes, COVID-19, end up inciting an all-out recession, the prudent entrepreneur ought to make sure they are prepared and properly positioned for any impact the contagion might have on your business. This includes taking care of and preparing for impacts upstream and downstream, as well as for potential impacts within the organization. Here are three steps to keep top of mind.
1. Safeguarding the upstream
It is already widely recognized that the outbreak has affected global supply chains, especially since such a large part of manufacturing takes place in China. With products being transported on cargo ships, this means it might take months before the real impact is known, but your suppliers (and their suppliers in turn) should have an idea how, if at all, this might affect you. Your best bet is to pick up the phone and talk directly to your suppliers about how you can work together to mitigate the disruptions.
They are probably already busy trying to find solutions, but they do not automatically know what's most important for you. Is it better for you to delay all deliveries then pick up full pace, or would you rather have a trickle of inputs delivered for months? Or do you depend on specific parts of your order but can wait for the rest of it? Let them know your priorities and suggest solutions. Be frank and forthright. Most businesses will welcome your call and appreciate your offer to work with them to find the best solutions.
2. Assisting the downstream
Sadly, your customers might be affected as well, and this could place you in the position of your suppliers. Depending on your supply situation, you may not be able to fulfill orders, or your customers may not be able to buy the quantities contracted or expected. It is your job to inform them and figure out how best to solve the problems at hand, both existing and expected.
To the degree you are able to produce and deliver, it might be wise to offer temporary discounts or more generous terms to make sure your customers do not pump the brakes. But make sure you have your cashflow situation under control. Offer discounts as a means to manage the situation and perhaps improve cash inflow, but not the other way around. Cashflow problems are a major startup killer.
3. Protecting your organization
Finally, when you know what to expect in terms of both supply and demand, it's easier to figure out what to do in your organization. If you expect production to slow significantly, it might be a good idea to let employees stay home or work part-time, or you might temporarily close your office. This lessens the risk that those exposed to the virus bring it to your offices and make other employees sick.
But make sure you don’t send people home without pay and without a choice. Many do not have a buffer they can fall back on, so you want to make them an offer and let them choose. You should also consider the option of letting them work from home more than you did previously, at least temporarily. Think of it as an experiment. If it works out well, why not make remote work an optional benefit? With modern technology, it is rather easy to work from hom and set up video conferencing when needed. This might even save you rent if you can downscale the office.
Whether or not a recession happens, it is likely that the virus will affect your business or that it has already, whether directly or indirectly. The best way to handle the potential impact is to prepare for it, both within your business and beyond. If you haven’t already, you should pick up the phone and talk with your suppliers and customers, and then discuss the impact on your business with your employees. This is not a time to panic, but rather to prepare for the possibility that others do.