The Second Wave Of The COVID-19 Crisis' Impact On Businesses (And Here's What You Can Do About It)
The second wave may be even more difficult than the first, because we haven't all yet found our feet after being knocked over.
Over the second quarter of the year, local and global economies faced an onslaught of challenges. The immediate response to the COVID-19 pandemic, for many businesses across the world, and in the UAE in particular, was to batten down the hatches, and cut any extras costs. This manifested in job cuts, salary cuts, suppliers unpaid, rents and assets unpaid, and more; all of which, while conserving short-term cashflow, may also have set one’s business up for later problems.
The knock-on impact on the market was not positive, and the rapidity with which everything happened left most people scrambling to catch up. Nobody could have foreseen the entire lockdown, the abrupt loss of cashflow, or the contraction of business early enough to have prepared adequately for it.
I’d now like to highlight a potential second wave of challenges to local businesses. It’s not a definite, and it is avoidable. But -armed with foresight- we need to actively do something to steer clear. The second wave may be even more difficult than the first, because we haven’t all yet found our feet after being knocked over. Before I suggest some actions we can take to avoid it, here’s why I feel it may happen:
1. The full impact of first wave hasn’t yet washed over There is still a lot to do -just think of outstanding receivables, liquidity, resourcing- to get back to some kind of business normalcy. Not life normalcy, that isn’t going to happen soon. We will need to adjust to a new world, which will be -hopefully, in many cases- for the better. Business normalcy is having work, billing, reliable cashflow, working on new opportunities, and jobs. We have yet to get back to normal. Imagine someone slipping on ice- arms flailing wildly, feet scrambling to get a grip, dropping whatever may have been in the hands. That’s kind of like what businesses are looking like right now. And, until we find a stable footing, we are one short slip away from a potentially painful fall.
2. Inverse relationships between fear and cashflow There’s a higher level of uncertainty and fear right now. And it’s only natural. But, when fear levels go up, there tends to be an inverse relationship on cash flow. The only certainty I have is how much cash I have in the bank, and how long I can stretch it- and I’m not keen on trading that certain cash for uncertain business opportunities. As a result, businesses will keep cash locked away as long as possible- and that is the problem. If the river stops flowing at any point, the lack of water will be felt at many places downstream. When businesses restrict cashflow, all of their immediate, plus second and third level, suppliers, their team members, their shareholders, their secondary market will take a hit. And, in the current uncertain times, fear levels are extremely high.
3. Activity, but no forward movement One good thing that is being noticed is the increased level of activity, as compared to the second quarter of 2020. That is great, but the not-so-great part is the lack of conversions, meaning a number of businesses which have put out more proposals and have had more meetings over the last two months than ever before, but have had no new clients, no contracts being signed off, and no work beginning.
This is a problem. If I feel like I’m going to land a project any day now, I’m more likely to keep my team, my warehouse, and my inventory, but when it’s been several weeks, and I’m still not mobilizing anything, then it gets frustrating and expensive. After all, I’ve been burning cash reserves to keep capacity while the client, who may have verbally confirmed the work, isn’t giving me the green light. It may be because of internal issues they are facing, and nobody wants to blame anyone for intentionally not keeping their word, but such is the reality. And it’s become more and more commonplace.
The above are being noticed in a number of businesses, across industries and across cities. All of the above, and many more reasons, may contribute to a second wave of impact on businesses.
Is it inevitable? I don’t think so.
Is it avoidable? Yes, I believe it is.
How? Here are some ideas.
1. Buy local You can’t succeed in a vacuum. If the tide rises, we all rise. Keep the tide rising by buying local as much as you can. This country has some excellent suppliers and vendors for pretty much any need, and you can find someone to fulfill your requirements. It will support the local economy, the money will flow in the markets you’re in, and the tide will rise.
2. Take action The projects aren’t getting started, because it’s a big commitment, no one is sure of what is going to happen in the next week or month, and so, nothing gets initiated. My humble suggestion: start something. Kick off its first phase. Begin the due diligence. Restart the marketing. Don’t keep waiting and seeing, because the impact of the current non-movement is suffocating. Make sure the contracts allow you to pause or stop if things go downhill again- but take some action. Someone has to be the first to move, we can’t all wait for someone else to act.
3. Settle your dues There are few things less pleasant in business than having to chase up overdue invoices. The work has been done, the product delivered, the process all signed off- and no payment. Now the long, painful, time-wasting dance of follow-ups, promises, follow-ups, excuses, follow-ups, negotiations. In good times, it’s frustrating. In tough times, it’s fatal. Your suppliers are out-of-pocket for the products/services you purchased, and by not settling the outstanding, you’re pushing them to breaking point. True, times are tough and money isn’t available, but please don’t use that as a reason to not pay, to insist on unreasonable discounts, and to take advantage.
We’re in this together. As the saying goes, “If you want to go fast, go alone. If you want to go far, go together.” Therefore, no one of us can change the economy, but all of us together can impact it positively.
There is no doubt that the end of the tunnel is coming closer, but there may be some more dips along the way. Maintain the standards and expectations you have for yourself and your business partners, support where you can, even a small amount, and let’s reignite the fire. The UAE is a beautiful country, and we have benefitted tremendously from it over the years. Now is the time to give back.
Let’s do this.