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All In Or Out? How Business Owners Can Deal with COVID’S Cloudy Future.

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Archives, Commentary, Global Trade Daily

All In Or Out? How Business Owners Can Deal with COVID’S Cloudy Future.

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As the coronavirus pandemic continues, small businesses have reopened across the nation but certainty and optimism are a long way from being restored.

Spikes in infections in many states, double-digit unemployment, consumer and lender concerns, and steep economic challenges in the wake of a long shutdown make it difficult to forecast if and when many companies will fully recover. Small business owners – many of them baby boomers and in the retirement age range – are in a difficult position trying to decide whether to risk staying in business or sell and cut their losses, says Michael Sipe, author of The AVADA Principle and founder of the consulting firm 10x Catalyst Groups (www.10xgroups.com).

“We are in the early stages of a depression that’s going to go on quite a while,” Sipe says. “Many small business owners are in their 60s and 70s, and they’re tired and beat up. Some recovered from the financial collapse of 2008, but now they’re getting hammered again.”

“Customers and employees are scared or nervous. The supply chain is a big problem, and there’s this crazy situation where prices are going up because of the shortages, but meanwhile we have a depression because there aren’t enough transactions.”

Sipe offers the following suggestions to small business owners as they try to sort out their future amidst so much uncertainty:

Quit. “A lot of people are going to do that,” Sipe says. “And if that’s the decision, they should quit fast. Don’t drag this out. One of the things that happened in the recession of 2008 was people refused to face reality, and it cost them everything, their savings and retirement. If you’re 60 to 70 years old right now and don’t know if you can gut this out another 10 or 15 years, then cut your losses. You’ll have a little nest egg now as opposed to spending all of it trying to bail the business out.”

Reinvent. “If you’re not going to quit,” Sipe says, “then you’ve got to change. Just slugging it out and hoping it’s going to get better or that it will get back to normal – that kind of thinking is ridiculous. We have huge structural problems as a country. So if you’re going to reinvent, you have to come back to the fundamentals of business. The owner has to back up and say, ‘What are the fundamental concerns of customers we are actually trying to address here?’ And focus energy on those prime areas that are going to move people to pay a good margin for your product. Don’t ask why it’s not easier; ask how you can get better.”

Be flexible. Given the fluid state of our world, Sipe says changing some of your business model and processes may have to become a habit. “The next thing business owners have to do is realize what they changed today may need to change tomorrow,” he says. “The innovation has to happen every day. That has a lot to do with listening to customers and anticipating what they would respond to. Engagement with customers and engagement in the innovation process for owners is absolutely critical. If an owner is not willing to try and get that figured out with and for their customers, they’re going to fail.”

“The business has to be infused with a fresh energy and a fresh passion,” Sipe says. “If you’re not going to quit during these extremely difficult times, that means you’ve got to get back in the game. And you’ve got to play hard because this is going to be tough.”

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Michael Sipe, author of The AVADA Principle, is the founder of 10x Catalyst Groups (www.10xgroups.com), which helps entrepreneurs grow profitable and thriving businesses organized on a foundation of Biblical principles. Sipe has also enjoyed a successful 30-plus year career in mergers, acquisitions, and business development as the founder of CrossPointe Capital, a middle market investment-banking firm. In that capacity, he consulted with and evaluated over 5,000 companies and has provided advisory services for approximately a half-billion dollars in business sales involving hundreds of companies. He remains active in transactional work and has been a key advisor in mergers and acquisitions projects covering a multitude of industry sectors.

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Archives, Global Trade Daily, Special Reports

As Consumer Habits Change, How Can Businesses Keep Up?

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American consumers don’t act and buy the way they did just a few short months ago – at least most of them don’t.

The pandemic and the need for social distancing led to an upsurge in online buying. Takeout and delivery replaced, at least temporarily, dining out. Many consumers, worried about the health risks of spending time in grocery stores, turned to services that would do their shopping for them.

Now, as the country tries to reopen and seek the next normal, businesses across the nation must figure out which of those consumer behaviors will become permanent, which were temporary, and whether any new ones yet unthought of might emerge.

“We live in a time when information can become outdated pretty quickly, and that’s become even more true because of COVID-19,” says Janét Aizenstros (www.janetaizenstros.com), a serial entrepreneur and the chairwoman and CEO of Ahava Digital, a company that ethically sources data on American consumers.

“The businesses that are going to succeed moving forward are those that grasp what consumers want and understand their changing habits.”

In contrast, those businesses that fail to understand what the latest consumer data is telling them, and are slow to adapt to the changes in consumer behavior, are going to be at risk, Aizenstros says.

She says going forward, businesses need to:

-Be prepared to pivot. Business leaders must be flexible. Many restaurants figured that out when the pandemic began, Aizenstros points out. Patrons could no longer dine-in, so the restaurants put an emphasis on takeout and delivery services. In the same way, each business will need to figure out how it can adapt and adjust its services or products to meet what customers want and need, she says.

-Gather reliable consumer data. With the internet, social media and numerous other sources, there is plenty of information available today about consumers, but not all of it is reliable. Make sure data comes from a quality source and that it reflects as much as possible the current thinking and behavior among consumers, Aizenstros says. “Businesses that fail to use reliable data and stay on top of the consumer trends,” she says, “will have a difficult time thriving as we go forward.”

-Take steps to make consumers feel comfortable. Even as people venture out more to dine in restaurants or shop in person, a Gallup survey shows they still plan to exercise caution. Businesses can help themselves by letting consumers know what steps they are taking to keep their stores, restaurants, and offices as safe as possible. “This is just another example of understanding and keeping up with what consumers want,” Aizenstros says.

Businesses have always had their plans and operations disrupted by both technological advancements and changing consumer habits. But rarely does consumer behavior evolve as quickly as it did in the early months of 2020 – and the changes didn’t always happen in easily predictable ways.

“Some areas such as home decor and fashion have done well recently,” Aizenstros says. “At the same time, we are seeing trends with businesses like J.C. Penney, Hertz and others struggling and filing for bankruptcy. It’s hard to keep up with consumer thinking unless your data is consistent, relevant and accurate. But if you understand what your customers want and work to give it to them, your business will have the opportunity to prosper.”

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Janét Aizenstros (www.janetaizenstros.com) is a serial entrepreneur and the chairwoman and CEO of Ahava Digital, which provides businesses and investors with ethically-sourced verified data about American consumers. Her background includes roles in finance at TD Canada Trust, Canon, and Brookfield LePage Johnson Controls, along with management consulting in a broad range of functions, such as supply chain operations, data analysis, and strategic thinking. She has a doctorate in metaphysical sciences with a specialization in conscious business ethics.

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The Importance of Supply Chain Resilience

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Acknowledging potential weaknesses in your supply chain before they are exposed by elements beyond your control is of critical value. With current events in mind, managing future supply chain disruptions will be an integral component of corporate strategy. Calling it Supply Chain Resilience, Supply Chain Disruption, or Business Continuity Management (from the ISO 22301 standard) does not affect the necessity of having strategies in place that may make the difference between following or leading in a disrupted economy, and even between surviving or folding.

To identify potential soft spots, a review should not be limited to a single product flow or single supply chain element. For any company, the next big disruption does not have to be a pandemic; it can be something minuscule on a global scale, yet have the same devastating effect on the ill-prepared in particular trade lanes or in a particular industry. Unpredictable is not a reason to be unprepared. Creating supply chain resilience is a holistic exercise that involves more than just a few savvy logistics people. HR, finance, compliance/legal (to name a few) are all stakeholders in a healthy case of business continuity management.

How then to build a strategy? Like any other strategy, the process seems logical: review, assess, and mitigate. In this particular case: 1) review your tradelanes, products, and materials flow by matching them against risk categories (i.e., labor, business risk, global trade, nature, and materials), 2) assess risks for each combination, and 3) mitigate risks by either changing behavior now or planning for alternate (sourcing) options should the anticipated risks become reality.

Trade Lanes and Risk Categories

The relevant components to review within the supply chain include the importing and exporting country or countries, the manufacturing locations, the finished goods, and the (raw) materials. Ideally, for finished goods and materials, the associated Harmonized System (HS) codes are made available. Scratch what does not apply and move to the following step where each of the ‘inputs’ is categorically reviewed.

As mentioned, this should not be an exercise limited to supply chain professionals. For example, labor risks can be associated with the likelihood of strikes, wage volatility, and the availability of appropriate labor resources—not necessarily areas that keep the supply chain brain occupied every day.

In a similar fashion, other resilience elements expand across different areas of expertise. Business risks relate to cybersecurity, corruption, counterfeit products, and the chance of entering into business with bad actors that are on (any of the) denied party lists.

Global trade accounts for the compliance requirements related to the shipment of goods (i.e., licenses, documentation, permits, etc.), associates the products with the various duties and taxes, and identifies if Free Trade Agreements(FTA) apply and how to qualify for preferential treatment.

Arguably the most unpredictable, but not the least expected risk to account for, is nature. It’s important to identify the various kinds of disasters that may hit: natural hazards, pandemics or epidemics, flooding, earthquakes, hurricanes, volcanic eruptions, landslides, or drought can all play parts.

Lastly, consider materials. Understanding the market comes with insights into scarcity, sourcing locations, and price fluctuations.

Risk Assessment

Risk assessments match the input with the risk categories. For example, how vulnerable is the manufacturing location when it comes to labor regulations, corruption, or flooding? Is there an FTA in place that could potentially lower the import duty burden? Where in the supply chain can a cyberattack be most expected? In short, some homework is in order to create a thorough risk profile.

For many components, the sources are readily available, such as the Corruption Index at transparency.org, labor statistics on Statista or NationMaster, or duty rate information from the various global trade content providers (or the WTO).

Building Resilience

As with cyber-security risks (PEN tests) or a regular laptop virus scan, supply chain risk assessments will point out the components that need immediate attention or, in this case, are a high priority for alternate sourcing or routing options. It’s then time to build that resilience.

Look for options by analyzing the market and tradelanes. Mine import and export data to identify alternative sources for goods and materials, even manufacturing locations. Map out alternative routes for products to get where they need to go. Document the reasonable options and share with as many people as possible—preparedness is, of course, an all-inclusive strategy.

Next and where possible: test run! Re-route shipments temporarily or source occasionally from a new supplier; in other words, make sure the alternative options are viable. In addition, communicate with external sources that would be part of continuity plans. Make them aware they are part of these plans; put people or suppliers on a retainer and try to agree on terms before disaster strikes so the projected costs can be anticipated better.

Lastly, keep those alternate plans up to date; otherwise, it may be too late to create and execute on alternate alternative plans.