Navigating the COVID-19 Disruption: an Interview with Ben Armenta
Recently we sat down with our CEO, Ben Armenta, to discuss his views on navigating the current #COVID-19 business climate.
Q: What should small business owners be doing today if they’ve had to temporarily close their doors?
Ben: Closing a business, even if temporarily, can be extremely stressful. Before COVID-19, I knew businesses that had to close for periodic maintenance. Even under those conditions, which required very detailed planning, it was stressful for the owners and employees. Today, it is paramount that business owners aggressively review ways to right-size their operations to meet a realistic forecast of revenue once social distancing and other precautions are lifted.
Q: What do you mean by right-sizing operations?
Ben: The vast majority of small businesses, not associated with the food supply chain or distribution of goods, will face a serious uphill recovery battle after being shut down for so long. People aren’t just going to go to restaurants every day when this is over. Workers will expect to work remotely more often and the need for dry cleaning and consumer “support services” will dwindle. I fully expect businesses to default on lease payments simply because they aren’t making the revenues and profits they once did. If businesses owners begin now to think, plan, and even act on revised assumptions, they’ll be much better off in the long run
Q: What non-essential parts of a business should owners look to cut during this downturn?
Ben: The easy answer is to cut labor. While I know many businesses will make that choice, I’m a huge fan, if possible, of modifying all functions slightly while keeping the whole operating entity intact. Here are some examples:
1. Reduce your marketing spend, but continue spending something. Content matters and you’ll want to amplify that you’re open for business and continue to provide a safe environment for customers. Invest in lower cost marketing options like Facebook’s Ads which are launching grants this month for small businesses. Use one of the CRMs which are now provided for free, to automate your marketing as much as you can.
2. Renegotiate lease payment terms with your landlord. Moving is a huge expense. Plus, traditional brick n’ mortar companies will find it difficult to retain customers if they have to relocate. Avoid doing so unless truly necessary.
3. Get creative with your labor. Move to a higher commission model for the sales team where they eat-what-they-kill, but you’re not having to pay significant salaries during times when they produce less. Use freelance artists to produce creative marketing content, most of whom will accept fixed-fee payment for the pieces they produce instead of hourly rates.
4. Reduce the inventory you carry to create cash flow. Having longer lead-times to fulfill your purchase orders is a small trade off for having cash on hand (just communicate accordingly with your customers). Sell-off some of your raw materials now, but discuss with suppliers what it’ll take to get more on-hand. Plan ahead, but don’t waste an opportunity to bring in revenue. This is why restaurants are offering wine to customers at 50% off. The margin becomes thin, but wine sitting on the shelf doesn’t make them any money.
Q: What one question do you think business owners and entrepreneurs need to answer as they plan for the future?
Ben: It’s really two questions. Too often business owners and entrepreneurs focus on what the business currently does. If they truly want to plan for the future, they need to answer these questions:
1. Are they willing to do something different? Sell a different service or different product?
2. Can they utilize the skills and capabilities they have today to offer those different services or products?
Here’s an example, if I owned a beauty salon that traditionally caters to women, I’d look at ways to attract men and boys to my shop for haircuts. I can be competitive in pricing and perhaps make small changes to décor to make my shop more appealing. Being able to offer my services to 100% of the population vs. 50% increases my business viability.
How many businesses today focus solely on residential, or just commercial, or have only one delivery model of their product? Business owners need to figure out ways to cast a wider net.
· Realtors may want to get a commercial real estate license
· Office cleaning companies can beyond office sanitation to residential cleaning
· Movie theaters can create a drive-in model in their parking lot
· Boutique clothing shops can offer virtual personal styling of customers’ existing wardrobe, potentially adding one-off pieces to complement what they already have
Q: What do you believe the future holds for businesses post COVID-19?
Ben: This is a tough question. It depends on global markets and local health conditions, both of which small businesses have no control over. When is the next time that we’ll see 100,000 people gathered for a NASCAR race? When will it be acceptable to go to an amusement park and ride roller coasters? In my mind, those are real life indicators that things are returning to (old) normal. It is just too early to predict (new) normal, but I do believe there are three givens we can expect:
1. Workforce redistribution is going to occur and business will have to adjust. Workers will gravitate to where the employment is – food distribution, healthcare, banking, agriculture, product home delivery, telecommunications, among others. Small businesses need to prepare for upskilling new workers when the time comes to hire more employees.
2. Artificial Intelligence will gain serious momentum. Businesses that figure out how to automate to produce, sell, and delivery goods and services will outpace those that don’t. This applies to small businesses as well. Social distancing norms and expectations on density of people in the workplace, will make it impossible to survive without some type of remote capabilities. These will be greatly enhanced with AI.
3. Society will have a greater appreciation for corporations and the healthcare industry in America. Where would we be right now without Walmart, Kroger, Proctor and Gamble, CVS, and H-E-B? Where would we be right now without the leadership, innovation, and heroic efforts of staff in our health care system?
The US economy is far from perfect, but when it comes to resilience, I wouldn’t rather be anywhere else in the world. Today may present challenging times, but tomorrow will be brighter as we recover together.