How Businesses Can Best Play the Hand They’ve Been Dealt in the Pandemic

Business leaders must assess three key areas when facing a changed environment. Their impact on cash is critical.

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Many businesses have been treading water through the pandemic. The Paycheck Protection Program (PPP) or other government relief helped a lot of companies, but even among PPP recipients, many are still struggling. Companies commonly exhausted the initial relief provided by the PPP and other government programs and squandered lender forbearances. They were unwilling or unable to undertake fundamental business process improvement to weather a longer storm. Now months later, these businesses are in the same, or worse, position as before receiving the governmental assistance. A new, smaller round of PPP funds is coming that may benefit some of those businesses, but the basic question remains—“What should business owners and executives do next?”

The answer may lie, at least in part, with proven strategies from the world of turnaround consulting. The first step in any turnaround is taking a hard, candid look at the hand the business has been dealt. What has the pandemic done to its customer base and supply chain? Are observed changes temporary or part of a fundamental shift in the industry? Depending on the answers, businesses may find available steps to return to profitability. 

3 key areas to assess

Business leaders must assess three key areas when facing a changed environment. Their impact on cash is critical.

1.    Is the customer base still intact?

Are customers creditworthy? Are they meeting terms or is the business having to continually extend credit to them? For businesses that have experienced a reduction in revenues, this customer-focused analysis is critical in determining whether they will have the cash to restore revenues to sustainable levels.

A common question among business owners concerns the difficulty of projecting revenues. Owners should work through several revenue scenarios and model what cash looks like under each. Associated with this are (1) the impact of PPP money on the balance sheet, (2) the impact of PPP covenants and (3) determining whether the business must repay some or all of the PPP funds. With the complexity caused by the changing nature of PPP regulations, forgiveness application windows and the impact on existing bank agreements, it can be especially valuable to partner with attorneys to ensure bank loan and program compliance.

2.     Diagnose how the pandemic has impacted the supply chain.

Some manufacturers of wood products, for example, have seen the price of their supplies double. Does the business have the cash to handle that type of increase? Is the business able to pass on the higher prices of raw materials to customers? Can the company make changes to the customer base or vendor relationships to help improve cash flow?  Can the business develop accommodations with key suppliers, update operating strategies, or right-size its overhead? These are examples of the short- and medium-term options businesses can consider in adjusting to the supply chain issues the pandemic has created. 

3.     Consider whether the industry has experienced a fundamental, structural change that will outlast the pandemic and threaten the overall business model.

In the previous paragraph, notice the use of “short- and medium-term” options. Some options may only succeed if the business is able to adjust to changes in its industry.

When a business is impacted by structural changes, it is imperative to immediately step back and think strategically about its industry position and future value proposition. Can management redefine the core business (pivot) or diversify into other industries? Can owners sell the non-core or under-performing parts of an otherwise sound business? These are hard questions for business owners to answer, so this is an area where turnaround consultants can help map a course to profitability and preserve value.

Turning to financial services

After assessing the above three key areas, the next step is to consider what options the business may have with its bank or other lenders. Banks are going to look at businesses post-coronavirus the same as they looked at them pre-coronavirus, focusing on collateral position, performance and covenants. The traditional bank environment may no longer work for some businesses, especially if the company or industry has fundamentally changed.

In that case, it is worth exploring the risks of staying with the current bank versus refinancing with a non-bank lender. A non-bank lender might be more expensive, but often offers more flexible structures with lower requirements for pristine historical financial results. A move to a non-bank lender may reduce a business’s risk! With either bank or non-banks lenders, businesses are wise to continue shoring up access to capital as rates remain low and the market continues to experience good liquidity.

Business owners and executives could also consider securing capital from an equity partner for a minority or majority stake in the business. A good equity partner can provide capital, industry expertise and enable management to execute a plan. 

Across the board, attorneys or consultants can help with managing lender relationships and negotiating or renegotiating agreements. Of course, any recapitalization steps should only be part of a strategic plan to improve the business, with a clear-eyed view of that plan’s probability of success. 

Additional tips

Another step that business owners and executives can take is to look through all of the business’s contracts and leases to identify areas of flexibility and/or improvement. It may be time to renegotiate and even to consider the consequences of breaking agreements. While contract review can be time-intensive, many consultants and attorneys offer options to automate and streamline that process. That type of investment can pay dividends short- and long-term. 

If the business has large amounts of debt piling up, no timeline to restore revenues, and is in an industry undergoing structural changes, bankruptcy court may be the best solution. Bankruptcy is designed to relieve fundamentally sound businesses to preserve jobs and supply chain and minimize the negative domino effect of one business failure on others in an interrelated economic ecosystem. Several options exist, including a relatively new route for small businesses that can help business owners take the steps necessary to restructure while also reaching consensus among creditors.


As Congress delivers more relief to businesses impacted by the pandemic, it is critical that future funding be used to support a well-defined path to profitability. Business owners and executives are wise to take a hard look at their customer base, supply chain, and industry’s outlook and develop a strategy to make the most of the hand they have been dealt.

Even for those with bleak outlooks, there are tools and professionals available to help.



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