I suppose I am old because, at 56, I have been through way too many natural disasters, financial crises, and now a pandemic. What we are navigating now is different, but similar, to any unsettling time, and there are three key strategies to coming out ahead through this:
We will get through this, but we must have a steady hand on the wheel, always keep an eye on the gauges and avoid reacting to temporary noise. Are fundamentals driving our current affairs driven by fraud or panic? Are days, months, or years standing in the way of resolution?
My opinion: This pandemic is challenging and will affect us in the months ahead, but it isn’t like 2008 when fraud and malfeasance brought financial markets to their knees, for years.
Understand Your Assets and Liquidity
“Keep your powder dry” is the one great mantra a sage business mentor shared with me when a financial storm was upon us. Every asset has a value, the most important one being cash in disruptive times.
Protect it with a vengeance, because it will fuel your success when the storm has passed. Protect your leverage—floorplan, lines of credit, etc.
It is hard to replace leverage when everyone is running for the door, BUT you must ensure that the cost of keeping it isn’t so burdensome that it risks your survival: Keep your belt tight but make sure you can still eat.
Which assets are most/least impacted by the swoon—inventory, loan portfolio, etc.? The asset least affected is the one you look to sell if cash is needed. I remember when gas prices went through the roof in the summer of 2007. Everyone was dumping trucks and SUVs, but within 90 days, gas prices returned to normal—too many sold low and had to buy back in at a high point. There is no difference between a loan and inventory, as everything has a price if you understand the value in the market.
Don’t Panic If Your Customers Are
You have built your success on your BHPH customers, benefitting from their repeat, and referral loyalty. Times like these turn the tables: If there was ever a time to talk with your customers and help them through job transition or financial hardship, it is now. You don’t want the iron, so having structured plans to work through the temporary challenge and showing your loyalty is critical.
Remember, they might have a big check from the government about to arrive in their mailbox.
Jobs will come and go but making the right decisions in-between is the difference between creating losses or preserving long term business opportunities.
Crisis Always Drives Bristling Activity As We Come Out Of It
A few years back, the manager of my biggest finance company office had just weathered a horrible hurricane.
He called me and was despondent:
How can we collect; business is dead; and, I don’t know where to start dealing with it. The priority of my response was: 1) take care of your family and team, 2) do everything you can to help your customers soldier through, 3) hurricanes don’t happen every month. The insurance cavalry is about to fix everything for everyone we discussed. When bad things happen, things will get fixed, jobs and money flow back in, and pent up buying gets unleashed. We only need to ride out this pandemic storm.
We Will Survive
First and foremost, protect your family and team. They are why you do this. To protect them, keep your powder dry (cash is king), make smart liquidity decisions, and help your customers soldier through. The light at the end of the tunnel are opportunities, not a train.