Pandemic or not, America’s businesses clearly need a plan to survive an economic downturn. If the owner of a small business has not delegated authority, a health issue affecting the owner could derail that business. The closing of a town’s major employer can drive customers of small businesses out of town to work elsewhere. Damage lawsuits stemming from the danger-based recall of a manufacturer’s key product can reverberate around town and hurt business.
Or, it could a global pandemic of a virus, which many initially thought was no worse than the seasonal flu, hurts an operation. The point is, every business needs one or more contingency plans to stay afloat when times get tough. Whether you are a business owner or an individual who recognizes the need for a strong retirement income plan, we may be able to suggest insurance products to help meet your needs. Please give us a call to learn more.
Companies may want to explore alternative revenue-building channels to diversify their opportunities. For example, if a business only sells one type of product or serves one industry, how can that business model be expanded—if only as a back-up plan? If brick-and-mortar traffic is shut down, what can be achieved via mobile and internet avenues? In 2019, U.S. companies spent more than a trillion dollars on digital technologies. And yet, 87 percent of business leaders believe they can’t compete in this arena.1 With giants like Amazon dominating the online marketplace, perhaps there are ways retailers or service industries can combine efforts as a consortium rather than compete on an individual basis.
If one thing has become evident during the 2020 COVID-19 pandemic, it’s that all types of people and businesses are interconnected. A Fortune 500 CEO still needs to buy groceries from the high school check-out clerk. The wealthy depend on the working classes to coif their hair, maintain their yards and clean their houses; and those independent workers need that income. Small- and mid-sized business owners can’t get by without their employees—and vice versa. One labor expert touts the importance of diversity in company workforces up and down the corporate ladder. When a crisis emerges, it’s important to understand how the needs of every demographic can be met, from customers to workers to shareholders. Communication and outreach are important, but you have to be able to talk the talk in a way that relates to each segment of the population.2
While some businesses may be able—and prefer—to remain relatively debt-free, they may want to consider having ancillary pre-approved loans and lines of credit available for emergency situations.3 After all, when life returns to normal, many businesses that laid off staff will have to re-hire and train. Some employees who formerly played key roles may have no appetite to return to a company that eliminated their jobs or laid them off when they needed a paycheck the most. For firms that must resurrect their operations from ground zero, it may not be the pandemic that closes their doors, but the cost of their recovery.
Financial professionals generally advise clients to have three to six months’ worth of liquid savings available for an emergency. In recent months, people who heeded that advice likely landed in a better place than those without that “safety net.” By the same token, business leaders may want to consider using excess capital to pay operating expenses like payroll and benefits, even when the company is shut down temporarily. What the company loses in capital it gains in loyalty and appreciation. In some situations, business owners may not be able to put a price tag on those qualities, but when they compare the expense with the cost of re-hiring and starting over, there may well be cost advantages.
Finally, business leaders may want to consider how their organizations can be part of the solution to a crisis, rather than waiting for time or the government to fix the problem. This is particularly true if the company provides a product or service that could be advantageous to the situation. In this case, it may be advisable to stick to what the company does best and partner with the nonprofit sector to deliver or manage the process. During disasters and humanitarian crises, non-profits generally have greater experience in how to get things done.4
Content prepared by Kara Stefan Communications.
1 Knowledge@Wharton. March 27, 2020. “Being a Digital Leader Has Never Been More Urgent.” https://knowledge.wharton.upenn.edu/article/theres-never-important-time-digital-leader/. Accessed April 6, 2020.
2 Knowledge@Wharton. March 23, 2020. “Why Leadership Diversity Matters in Handling Crises Like COVID-19.” https://knowledge.wharton.upenn.edu/article/why-leadership-diversity-matters-in-handling-crises-like-covid-19/. Accessed April 6, 2020.
3 Knowledge@Wharton. March 31, 2020. “Will the $2.2 Trillion Coronavirus Aid Package Be Enough?.” https://knowledge.wharton.upenn.edu/article/will-the-2-trillion-coronavirus-relief-package-be-enough/. Accessed April 6, 2020.
4 Knowledge@Wharton. March 19, 2020. “Confronting COVID-19: Why Firms Need to Tap Nonprofit Partnerships.” https://knowledge.wharton.upenn.edu/article/confronting-covid-19-firms-need-tap-nonprofit-partnerships/. Accessed April 6, 2020.
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