June 1, 2020
Every business in the world right now is having its mettle tested with the economic shutdown caused by COVID-19. Companies that did not have sufficient capital or savings; a knowledgeable, experienced management team; a secure infrastructure; and were not committed to proven business practices are not going to survive the pandemic.
In the case of smaller businesses, even companies doing everything right, may find they do not have enough cash to weather months of no income and a slowed-down economy once they open their doors again.
Some hard lessons are being learned by owners and managers of companies of all sizes, and it only makes sense to attempt to not only learn from personal mistakes, but also those of other businesses. What decisions paid off and which ones did not? And what should we be doing to better prepare for a possible next time?
For myself, I own a company that specializes in making emblems and patches for the industrial laundry market, work uniform industry, promotional products, and a range of niches within the decorated apparel umbrella. I also have some incubator companies I’ve started during the past few years to diversify my business. Those include name badges, pens, and stickers.
Within a two-week period in March, I saw my sales, which had been on an upward trajectory through February, suddenly take a downward plunge to the tune of about 30%. It was dramatic and abrupt. Because we are a just-in-time custom business, we don’t have a backlog of orders.
Since this all started happening about a month ago, I now know that we are going to make it. We’re going to look a little different; we’re going to be a bit beat up, but at least we’ll still be here.
Here are some things we did that have made a difference:
I have a great leadership team, and we immediately focused on making a plan. I won’t say we weren’t nervous, because we were. But we put together worse-case scenarios and came up with a course of action that was deliberate and based on good data. By having a good plan, it allowed us to get the entire company to rally around the cause.
We had some advantages vs. other types of business. The restaurant and hospitality industries were down as much as 85%. They were just decimated so in that sense, we were “lucky.”
I also attribute our company’s position to the fact that I have 30 years’ experience, a good infrastructure, solid data, and great customers. We have been deliberately diversifying our customer bases and making sure we have clients in a variety of markets. They are at different profit margins, some are harder to serve than others, but it gives us insulation against economic swings.
As a team, we crunched the numbers and discussed what it would take to keep our doors open if business dropped from 30% down to as far down as 70% of sales. In other words, what steps would we need to take to cut expenses enough to pay our bills? At the time we had to make these decisions, there was no Paycheck Protection Program (PPP).
Some of the questions we discussed as a team were: At what point do we start closing plants? At what point does leadership go without paychecks? At what point do shareholders have to put more equity into the business?
At the end of that meeting, we literally had a plan for every 10% drop in sales. I have to say that my team is really good, and they were on the ball with this. We switched gears and got aligned within 48 hours. One circumstance that helped was we had just gone through our budgeting and year-end planning and run through this same process at that time.
Other actions we took were to draw down on all our credit lines, and I talked to a lot of my peers in different chapters of the Young President’s Organization, to which I belong. Those discussions proved invaluable in providing a lot more information and gaining a perspective on how others were handling the crisis.
So as the pandemic progressed, this information allowed us to figure out how to best use the PPP, leverage the company, and communicate with our customers and creditors.
There are some clients who are paying a little slower, but I don’t think we cut off a single person. When I spoke to customers, I treated them the same way we want to be treated. The conversation was something like “We understand this situation is difficult for everyone. Just tell us where you are and even if it takes you 10 years to pay, we want to make sure that our customers remain in business.” Yes, we need the money now, but I’m not going to worry if they pay me now or pay me later.
And in turn, some of our own creditors were just amazing. We called a few to say, “We need an extra 60 days on every bill.” And their response was “no problem.” The important thing is to communicate with your customers and your creditors during this time when the entire economic cycle has been thrown on its head.
One of the best decisions we made was to switch out production in our sewing facilities from robot covers and direct embroidery to making face masks, plastic face shields, gloves, protective gowns and hazmat suits. Because we were ahead of the curve, this allowed us to hire more than 50 additional people to keep up with production with plans to hire as many as 200 more.
In the first three days we started selling the face masks, we broke our highest sales goal by 10 fold. We had to temporarily shut the website down. At the time we made the decision, I didn’t know if we were going to make money on the masks, but we decided to throw it out there as a test. When we did, by the second day we broke every company sales record.
We also made the decision to donate a portion of the proceeds from COVID-related protective gear to The CDC CoronaVirus Response Fund. This money will be used for fast-emerging needs related to the virus.
We did receive the PPP, which we have reinvested in the business. As of today we had no need to enforce any of the layoff plans we had put into play. We haven’t reduced pay, or furloughed anyone. As a matter of fact, we ended up adding almost 200 jobs to the overall company.
At a time when the business landscape was completely unpredictable and looked bleak, being honest with our situation, having the tough discussions early on, and making a solid pivot has kept us relevant.
We went into this not knowing whether we would get any extra financial aid. We didn’t know if our customers were going to go broke; we didn’t know if we were going to get paid by anyone. From the beginning of this crisis, I knew the ticket was to stick to our core, focus on what we’re good at, and get through to the other side.
Randy Carr is the CEO of World Emblem, Hollywood, Fla., a global supplier of a wide range of emblems and patches with three manufacturing facilities in the United States as well as one in Mexico and one in Canada. You can reach Carr at email@example.com or visit the website at www.worldemblem.com.
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