Home News & Insights COVID-19: Disruption to Business as We Know It
April 15, 2020
COVID-19: Disruption to Business as We Know It
By Gregory S. Milligan, CTP , Erik White, CIRA , Bill Patterson, CTP, CIRA, CPA

COVID-19 is significantly changing the way we conduct our daily lives, and thus how we conduct business. The immediate impacts are being felt in all geographies, across all industries, and are affecting businesses of all sizes – and regardless of those surface differences, the key elements of any successful turnaround remain the same.

To mitigate these challenges, Harney Partners has established a special response team of seasoned, experienced professionals who are helping existing and new clients deal with the evolving impacts of the pandemic. Our professionals are using video conferencing and other technologies to provide the best solutions available while still abiding by the governmental restrictions around social distancing.

What Should Businesses Be Doing in These Uncertain Times?

After establishing a plan to protect the health and safety of your employees, several immediate steps should be undertaken. Each activity below should be designed with both a sense of urgency and a plan for honest and transparent communications.

Proper Planning for Cash Preservation

First and foremost, operate with a plan. This involves creating a detailed and integrated 13-week cash flow model to aggregate the inputs and assumptions from various departments to provide leadership with the best information possible.

The 13-week cash flow model will be the dashboard you use to make decisions and drive the business in the near term. It will be used to test “what if” scenarios as your situation evolves over time. Without this fully-functional tool, you’re flying blind and less likely to achieve success.

Liquidity is critical as you create as much runway as possible to work through the available options. Delay cash payments when possible and protect cash receipts. Draw down on your line of credit before your availability is gone and build the largest war chest of cash possible. Then create an innovative plan to best use that available cash.

Forecast for the Future

After stabilizing your cash position following the initial shock to the system, an integrated profit and loss model for scenario testing is necessary for longer-term planning. It is currently impossible to know the depth and duration of the COVID-19 impact on the economy. Developing various scenarios can help you understand and estimate the impacts on your business and develop contingency plans around those scenarios.

Anticipate viable adjustments to make as you settle into the “new normal,” post-COVID world. In addition, consider these business scenarios: What does business continuity look like? Is business hibernation a better strategic option to conserve cash and position your business for a return to the market when macroeconomic conditions allow?

Timely and Thoughtful Communications

During any time of crisis, clear communication on a predictable schedule is essential to a successful outcome. Your stakeholders deserve and appreciate straightforward and timely information about your business, even if the news isn’t good. Hiding the ball doesn’t advance your cause.

  • Employees: Your employees are the lifeblood of your business and they are also experiencing significant disruption in their lives. Express your appreciation for their continued work and dedication to the business. Be as flexible and innovative as possible to find ways for your employees to accomplish their duties within the business, while also caring for their families, and safely navigating the social distancing requirements of COVID-19. Frequent touch points and two-way communication will be worth the time and effort.
  • Customers: Fully consider the impact you have on your customer’s business. Think about your relationship from their perspective to find potential new ways to serve their needs and enhance your value to them as a business partner. Your existing customers are your best source of business, in both good and challenging times.
  • Lenders: Communicate with your lenders about your current ability to service debt and any required debt compliance. Do you have quarterly debt covenants or weekly/monthly borrowing base calculations? Are you in compliance now? Will you be in compliance a quarter or two from now? Preview your financial forecasts and anticipate any issues with your lenders before you approach a default.
Explore Government Assistance Programs

There are various government assistance programs available or in the planning stages, each of which could be the subject of standalone articles, but the most-popular early program has been the Paycheck Protection Program which was enacted as part of the CARES Act to provide increased loan amounts for eligible small businesses for payroll obligations, emergency grants to cover immediate operating costs and a mechanism for loan forgiveness where the small business can demonstrate that the loan proceeds were used for payroll and related costs. The program provides $349 billion for relief during the covered period from February 15, 2020 to June 30, 2020 and administered by the Small Business Administration.

Other currently available options include Section 7(a) SBA loans, Economic Injury Disaster Loans, as well as an increase in the debt limit for Chapter 11 debtor electing the Small Business Reorganization Action of 2019 from $2,725,625 to $7,500,000.

More support programs are being considered and guidance for existing programs is constantly being updated, so the SBA “Coronavirus Relief Options” website is a good resource for the most current information.

Brainstorm Opportunities

In disruptive times, there are always opportunities. Brainstorm with your team on ways you can find unique opportunities that may not have been available or evident before the current market interruptions. Many changes made to navigate current challenges will remain as best practices long after the current crisis fades away.

We’re All in This Together

Plain and simple, everyone is in this together. Everyone impacted by COVID-19 is anxious about their personal safety and fearful of what this pandemic will mean for their livelihoods. This common circumstance can create unexpected camaraderie. Look for those instances in your interactions because that will provide an environment for mutual success whenever possible.

If you’re looking for assistance to help you navigate through these unprecedented times, Harney Partners can help. We are a national, corporate-advisory firm that provides independent, multi-disciplinary solutions for middle-market companies and their stakeholders to overcome financial and operational challenges, serving a wide array of industries including those that may be most affected by this pandemic: travel and leisure, food service, retail and consumer goods and non-profit organizations. Email us at info@harneypartners.com.

Gregory S. Milligan, CTP
Executive Vice President

For more than 25 years, and with engagements involving onsite advisory to clients in more than 25 states and multiple foreign countries, Greg has maintained a practice surrounding troubled situations or situations that require fiduciary oversight. He joined Harney Partners in 1998 and opened the Austin office in 2001. Since that time, he has both led and collaborated on engagements with highly successful outcomes, meriting multiple peer-review awards from the Turnaround Management Association and the M&A Advisor.

Erik White, CIRA
Managing Director

Erik has amassed more than 14 years of experience in corporate finance, business restructuring, forensic consulting and asset management. He provides strategic advisory services, both financial and operational, to companies experiencing a complex transition.  From Fortune 500 to lower middle-market companies, Erik has the depth and breadth of knowledge and experience to support clients in distressed situations.

Bill Patterson, CTP, CIRA, CPA
Executive Vice President

Bill has 35 years of experience providing financial advisory services to business stakeholders of organizations – including ten years with Big Four firms, plus experience as the CFO of both early-stage and middle-market companies. He has extensive experience navigating the complexities of recapitalization, bankruptcy, reorganization, and litigation issues. Additionally, Bill has broad experience in organizational and corporate governance and risk in the U.S and abroad. His industry expertise includes manufacturing; construction; consumer products; distribution and transportation; services; E&P; oil field services; retail; renewable energy; medical devices and equipment; and financial services.

At Harney Partners, Bill is an advisor to corporate stakeholders and companies experiencing a complex transition that are seeking financial and operational stabilization.