It s mid-April, and without a doubt this has been the most shocking and surreal four to six weeks that only compares to the fallout from the September 11 tragedy.
The Caronavirus (Covid-19) has not only altered the way we conduct business, but also the way we live and interact with one another. In that same breath, information, data, infection rates and death tolls that stem from this pandemic comes to us rapidly and seem to change at an equally rapid pace. Often, we’re left with more questions than answers.
Because of that, it’s impossible to present an all-encompassing industry guide on this pandemic. Instead, here’s a sliver of hope as we flick on the switch to the light at the end of the tunnel. This cover package includes insights and perspectives from both snow industry professionals and business experts on the impact of the Caronavirus pandemic and how to manage through it – both culturally and financially.
So, take solace in the fact that this darkest night will ease into a new dawn. We will prevail, as we have in the past. Life will return to some semblance of normalcy. Business and the economy will bounce back. And to borrow a well-worn pop culture cliché – Winter is coming.
– Mike Zawacki, April 15, 2020
There are aspects about this current crisis where we find ourselves seeking answers and guidance to what may feel familiar to anyone who has been – and survived – in business for a while.
There was the economic crisis our nation endured in the 1970s, and again in the 80’s.
Remember the dot-com bubble burst of the early 2000s where a stock market meltdown ushered in a recession, which was bookended by the global economic aftershocks of 9/11.Many of us are survivors of the more recent Great Recession of 2009 that took years to dig out from and return to a semblance of economic normalcy. All in all, in one fell swoop it seems the entire world changed. The “rules of the game” were altered overnight, long-standing customer relationships turned into price wars and companies were sent reeling from the sudden change. In some instances, companies in all industries were financially crippled, went out of business or simply gone extinct – deader than disco.
The current Coronavirus pandemic (Covid-19) reminds me of this time frame, however, in other ways it’s very different. If your state has deemed you an “essential service,” then you’ve been given the green light to continue on with snow removal and landscaping operations. Hopefully, we are back to some version of normal – operating without government guidance – by the time we are all performing snow removal services for Winter 2020-21.
However, does this mean we will be back to normal?
I don’t believe so. In the long run, if our economic structure is still sound and the predicted recession initiated by the Coronavirus pandemic has taken hold, coupled with the stimulus that will bring additional boosts to individuals, we should see a post-pandemic economy that rumbles from second gear quickly into fifth gear like a souped-up hotrod.
According to a friend who runs an investment firm, the economy will be so strong the danger in 2022-2023 will be inflation. This is an important scenario to keep in mind, so the recovery does not create a level of comfortability and a “fat cat” approach to managing overhead and expenses.
With inflation, it is very challenging for most companies to downsize and control costs, as expenses increase faster than pricing can keep up. We need to be ready for this long-term reality, if my friend is indeed correct.
In the meantime, what I see happening are snow price wars, especially in any industry or for any client that has had to shut down or see a loss of revenues. It only stands to reason that these clients and industries are adjusting budgets and strategies to cut costs until revenues increase. This may take longer for some industries than for others as businesses come back online. I would anticipate highly social businesses like bars, concerts, sporting events, mass-social happenings like weddings or reunions or any business that puts people into close proximity with one another to be the last to go online.
Given the reality of this situation, I would hold out the general guiding principle. In the same way that we could have arguably taken too long to react to the reality of the virus, we must be careful to not take too long to reacting to the current and coming economic reality we will face throughout 2020.
Here are strategies I’m putting into place.
Budget For Every Scenario
Be sure you are running budgeting models based on best-, medium- and worst-case scenarios. Don’t get too fancy with these to not follow through. You can project that prices may go down to by 10-15 percent or more. Be prepared for those changes and know how you will deal with each and every client.
Live To Fight Another Day
My general perspective is to reduce expenses for a year with the customers you truly want and try to partner with them to help weather the storm. If customers are under performing, it may be time to part ways with some.
Now is the time to initiate conversations with customers about where they are at, what changes they see coming and asking what you can do to get through this year. Don’t delay to the normal point you might try to renew, but initiate contact soon and be there to truly help as you can. Consider adding years to a service contract, or moving money from this year to next or any number of other creative options to be helpful. Show customers you have the ability and willingness to work with them to make it through this year.
Know Customer Budget Guidelines
It’s important if you can get the information from customers to discover their budgeting practices and what they expect to happen. Is their budget being cut this year? Will it likely stay normal or reduced next year? Do they anticipate this impacting the services you provide?
Don’t Be Afraid To Cut Overhead
It’s not time to mince words or hang onto overhead expenses you don’t truly need. Cut out optional expenses you may not need. Reduce management overhead that you can. Push overhead into the COG where you might be able to move, even temporarily, a manager into a part of your production expense. Overhead is a killer in these situations, and you must work from a need basis first.
No Such Thing As Over-communication.
Over communicate with your staff, especially your core people. Communication with your key staff should be double to triple what it is normally. Remember, your staff may be afraid for themselves, their families, their jobs, their industry, let alone the other myriad of threats to them both personally and professionally.
Communicate with service partners and seasonal employees who may have to have a reduction of pay this winter in line with the market. Don’t be afraid to bid out projects to create healthy competition or consider a pay system to reward based more on performance than maybe you were last year. Do you need that yard you rent every year? Is there a better way to produce the work than you have been doing? Maybe you need to outsource more or you need to self-perform more work. Lay everything on the table and take a fresh look at your approach and how you can save money.
Pursue SBA Funding
Even if you don’t think you need it today, better to pursue an SBA loan with your bank, if you are eligible, and have the money in reserve than to not have it. We have no idea how this will play out for certain so make sure you pursue that opportunity even if you believe that won’t be necessary. Consult your banker for direction.
Be Aggressive In Sales
Adjust your sales goals and closing ratios to be highly conservative and do all you can now to prepare for bidding more work than ever before. Don’t count on what worked last season to work this season. You will need to put more money into estimating than last year to maintain sales or hit your target growth.
Know Your Margins
Most of us have a sense of our markets and what contracts go for, but do you need that margin to operate? What if you reduced your pricing by 10 percent, but you increased your overall volume to maintain the profit you need for higher revenue? If you’re operating at a 50 percent gross margin and must adjust to a 40 percent margin and you need $1 million in gross margin to make ends meet, then consider adjusting pricing this year to perform a higher volume of contracts to achieve that profit number.
This is not the time to hunker down. Instead, communicate with your industry peers and your team to develop a plan that allows you to survive and thrive in the coming months.