Business challenges as the economy recovers from the COVID pandemic
The Covid-19 vaccine rollout is great news, but every change in the economy brings challenges to businesses. The economy should get better in the second half of 2021, with some sectors earlier and some later. But growth of sales will challenge business leaders to find additional employees, secure goods and services from suppliers, and manage increased need for working capital.
The recession spread far beyond restaurants, hotels and air travel, affecting the overwhelming majority of sectors of the economy. Out of more than 800 categories of employers tracked by government statisticians, all but a few dozen have declines in employment since the pandemic began. Most every company now must consider what bottlenecks will limit growth and what action plans can be developed to ensure the ability to gain in the economic recovery.
Staffing is not easy in most sectors of the economy, despite our elevated unemployment rate. Business leaders can begin by evaluating the problem. What kinds of people will need to be hired? Are folks who were laid off last spring ready to come back to work? Are random people stopping by asking if the company is hiring?
Some cheap and easy steps can help a business both get ready to hire and evaluate how tight the job market is. Those managers who had to lay off workers can get in touch with them, asking if they would be willing and able to return. The communication should not wait until the business is ready to re-hire. If everyone is ready to come back to work, then the staffing task will be straightforward. But if many former employees say that they have found other jobs, then the challenge will be greater.
Another easy way to gauge the market and lay the groundwork for more hiring is to take applications, both online and from anyone who walks in. A business need not have an opening to accept applications. The manager can chat with applicants, explaining that the company is not yet ready to hire but wants to know who might be available when the time comes.
Other businesses frequently use staffing companies, in which case they should be contacted about the timeline for filling positions.
Suppliers constitute the second category of common challenges. Sometimes they cannot handle a surge of orders when the economy starts to boom. Early conversations help. Suppliers are not only those who provide physical goods, but also those firms that provide necessary services. In past booms, the goods side has been more problematic than the services side of suppliers, but conversations can validate the situation for the current recovery.
Supply chains have been more stressed in 2020, partly from Covid-related closures of plants and warehouses. The shift to online retailing also necessitated changes in logistics, which is taking some time to work out. Some truck drivers left the labor force, and many trucking schools had to close because of the pandemic. These caused delays in delivery of many products.
Working capital is the next short-term limit to business growth for many companies in booms. The increase in orders is good, but often workers and suppliers have to be paid before money is received from customers. A boom can be great on an accrual basis but terrible for cash flow. The most successful companies first run cash flow projections to determine how great their challenge will be. Then they talk to their bankers or other sources of finance about options. Credit is easier to obtain by companies that have been talking to their banks for some time before the need arises.
Other strategies for working capital management in a boom are to press customers for more timely payments, ask suppliers for more time to pay them, as well as factoring and leasing capital equipment rather than purchasing.
Longer-term growth often brings the needs for more capital equipment, ranging from computers to equipment to real estate. Most business managers have been so preoccupied with 2020 that they gave little attention to long term strategy. That was appropriate in a fight for survival, but now it’s time to look to the future.
Trying to take advantage of a boom is a better problem to have than dwindling sales. But it is a problem nonetheless, and is best considered early. Not only does a business have more options early on, but decisions are more likely to level-headed than panicked.
This article was written by Bill Conerly from Forbes and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.
