As the country begins to reopen, there has been no shortage of projections on what the new normal for business may look like in a post-pandemic world. Research has shown that small business owners are optimistic about future business conditions and expect the recession to be short-lived as the country re-opens. For example, the NFIB Small Business Optimism Index showed significant improvement in May, but despite the improvement and reports on businesses reopening, there is no question that a great deal of work must be done in order for our economy and especially small businesses to fully rebound from the impact of COVID-19.
Businesses should be looking to their banker as a partner and counsel to help navigate the long road ahead. As businesses adapt to the new normal, they should also prepare for what banks like ours will be looking for.
Businesses must reevaluate their current business model and prepare detailed action plans on what success will look like in the future. These action plans must include information on pre-COVID sales and volume, how the business was impacted, and determine a new plan of action that accounts for risk, but also underlines how the business projects transformation and profitability going forward. Businesses currently can be broken down into three categories:
Financial institutions are an important tool and resource to help businesses assess which category they fall into, and what actions they can take to persevere.
For instance, some industries, like construction, fall into the first category and are expected to recover quickly to their pre-COVID profitability. While some restaurants may fall into the first category, many will still have to adjust their plans and operations going forward and fall into the second category where they will likely need to have conversations with their banking partners to determine what financing is needed to digitize processes if they are not yet in place.
The third category includes the physical brick-and-mortar retail market, an industry struggling even before the pandemic hit. According to the findings of a PYMNTS consumer survey, 42% of consumers are engaging in even the most routine activities online, and as much as $158 billion in brick-and-mortar sales are moving to digital channels. Market research outfit Forrester predicts that the US retail sector can expect to see $321 billion in losses this year when compared to gross sales from 2019. Forrester is also predicting that it will take four years for retailers to get back to and eventually overtake pre-pandemic sales figures. The same may apply for businesses that involve large group gatherings, like movie theaters, performing arts centers, and sporting arenas that may require major adjustments to their pre-COVID models based on how efficiently communities are able to minimize spikes and spreading after enacting initial reopening phases.
It is important for all business owners to be able to describe what category they fit into and why – while also demonstrating how their business may have changed for the positive. There are a number of real live examples of previously unimagined change such as the walk-up drink counter at a restaurant. In the end, banks can play a critical role in helping business during this challenging time. After all, the new normal is nothing like the normal we have ever known. Fresh thinking and guidance are needed, and banks are here to help you succeed.