Getting Through This Crunch

Here we are again. Of course it’s different. Each time is different. But enough is similar for us to know what’s coming. In light of the disruptions wrought by the pandemic, nobody is surprised. We’ve all just been waiting to see how the timeline unfolds. Some of us will be okay and some won’t. Let’s see what we can do about putting as many in the okay group as possible.

Everyone remembers when Lehman Brothers collapsed. But before that, Washington Mutual went sour. That’s when I told family and select friends to begin keeping more cash than usual on hand in case the financial system froze. A few years later, we all learned from the British press that at one point the global financial system came within about 12 hours of locking up.

In the past week or so, I’ve seen enough signs to say we’re getting to the kernel of it. In particular, I see access to credit evaporating for small businesses in the USA. I don’t have access to the data economists use to make such declarations on a broad basis and I don’t have an economist’s training. But for businesses into which I personally have a view, it doesn’t seem to matter how good the credit rating is, how well the business is performing in the pandemic, or whether the business has any outstanding debt. Access to credit is being withdrawn across the range.

This is echoed in a more dry, impersonal manner by Bloomberg, so if you want more financial expertise to tell you where we are, click here to read their view.

In the UK, the moment of reckoning is being postponed for many businesses (and people) by government programs. Many people (not all, I am among those who fall in the gaps) are getting their pay heavily subsidized, or the revenue they missed out on due to the pandemic partially replaced, by government. This goes orders of magnitude beyond the paltry one-time stimulus sent to people by the USA or the Payroll Protection Program loans provided to companies (mostly not small businesses).

In essence, much of Europe is striving to do something akin to what it did in the 1930s Depression, which kept that painful period from being a Great Depression in Europe. After a flirtation with doing something along those lines, the USA has fallen back to Hoover’s approach. Although the House keeps putting forward substantial programs, the Senate and President keep stonewalling.

So… how can you put yourself in the okay group that gets through this as intact as possible?

Neither country is doing what I see individuals and a few select businesses doing. Those select examples are using this period of turbulence to bolster their infrastructure and revamp the way they do things, or even entirely upend what they do. Look at your neighbors, friends and family. You’ll see a steady stream of DIY materials going in, hear a steady whine of power tools, and smell the aroma of fresh paint. Their homes will be worth more and will feel nicer to live in. They’re setting up a proper home office (sometimes in a shed if home is too small) instead of making do at the dining table if they are able to work from home. Some are switching jobs, if possible, to get safer working conditions. Their shops are supplemented by more focus on fulfilling orders placed online or phoned in ahead of curbside pickup. Most shops here in the UK appear to have stepped out of business models that rely on heavy footfall and getting customers to linger for more browsing. There’s more emphasis on understanding what the customer wants and providing it with as little fuss (and as little potential exposure to pathogens) as possible.

That’s what I see happening among those who are likely to get through these times okay.

Are they borrowing money to do all of this? In some cases, yes, but usually at low interest rates. British small businesses in particular have benefitted from remarkably affordable government-backed coronavirus recovery loans.

If you are not in a position to do such things, I suggest taking a serious look at your position and decide whether to change horses now, not later. The pandemic is not going to disappear anytime soon. Certain types of businesses simply cannot make enough profit to keep going unless and until we have an effective vaccine or treatment against COVID-19, or (heaven help us) develop herd immunity the hard way. Businesses that rely on mass gatherings or tightly packed table space are examples.

You may have a restaurant that is squeaking by now by adding tables outside so you can seat diners apart and still handle enough customers to make a profit. But that only works when the weather cooperates. If winter’s loss of outdoor seating will put you in the red, don’t wait to make a decision about what to do. Start your pivot now. You might shrink to a takeaway-only model to bring costs in line with revenues, or if winters are mild enough you might create outdoor dining pods similar to some used in Amsterdam, or sell to a larger chain that has deep enough pockets to ride this out (they may want your prime location), or shut down the restaurant and go into some other line of business that is faring better. Making such a decision and starting to act on it is much harder when the pressure of failing profits and sleepless nights begin to crowd your thoughts.

In case you believe that would mean you are defeated and will not be okay, I’d like to tell you about someone I met in the teeth of the collapse of the savings and loan industry in the USA. She had a small mail-order business. It struggled. She ended up shutting it and took temporary jobs to survive for a while. One day, the agency sent her to host an open house at a property being sold by the Resolution Trust Corporation. (RTC was tasked with selling huge numbers of properties in foreclosure due to that financial crisis.) She realized she could do a better job of handling those open houses than just sending in a temporary worker, so she set up a new business to run open house events for RTC. It was successful. It wasn’t in such overwhelming demand after RTC wound down, but it didn’t need to be. It got her through those bad times in good shape. She emerged on solid footing.

Even if your current business or your current job is not one that you can ride through these times, you can be like her. You can be okay.