My career spans almost 40 years. And, with the exception of a few years I spent in a publicly-traded company, I have spent the bulk of my career working in, managing, or owning a small business myself. Although I’ve worked through some hard times and a couple of difficult recessionary times, none have been as challenging or devastating as what we are facing right now.
I share this because there are some things we can learn from doing business through past recessions and tough times that might benefit us this time around. I was recently speaking with Nav founder Levi King about some of his experiences navigating stormy seas and I wanted to share some of his advice on working your way through a recession with your business and your dignity intact. That’s not to say there won’t be hard times or that you will exit unscathed, because most of us won’t, but that’s not saying you and your business can’t survive COVID-19 and successfully come out on the other side.
“Don’t be afraid to not pay a bill.”
This is not the type of business advice you would normally expect to hear. Although I have had to make a late payment a time or two myself, this is not advice I would usually give. That being said, these are unusual times. Don’t just not make a payment or two though. “Talk to vendors about making a late payment,” said Levi. “It happens all the time. It isn’t just you.”
I expect that is particularly true right now. You are not the only small business that needs a little help from a supplier right now. Remember, they want you to succeed almost as badly as you do. And they want to keep their best customers, so if giving you an extra 30 days on an invoice will help, you might be surprised to see how many of them will do it.
“Pay your employees first.”
“I’ve owned eight companies, and never missed a payroll,” said King.
Pay your employees first, was always my mantra. Missing payroll is often part of running a small business, but a missed paycheck has a lot more impact on an employee, than a late payment will to a supplier.
Levi shared a story of being short one month and buying a new suit so he could go meet with all his customers to try to collect from them. “I cobbled together enough to make payroll,” he said, “but it meant going to customers, telling them what was going on, and getting some of them to even pay their invoices early so I could pay my employees.”
Everyone you do business with wants you to stay in business.
“Everyone you owe money to wants you to stay in business.”
If you owe money to lenders, defaults trigger covenants that can close your business.
“Stay in touch with your lenders,” says Levi. “Regulators right now are pressing banks to tack payments onto the end of the loan. Do that everywhere you can to preserve cash. It will add a month or two to the term of your loan, but it could give you the breathing room you need to get past the next few weeks and keep things going.”
“Who are they going to lease your space to right now?”
Levi’s advice also includes your landlord. “What about your landlord,” he asks. “If they own several buildings, or a block in San Mateo for example, they can afford to give you a break.”
This isn’t a secret to anyone, they know what’s going on. It’s happening all over the country. If they don’t want to work with you, “Call their bluff,” he says. “They don’t want to lose you as a tenant. Who is going to lease your space?”
“Everyone you owe money to wants you to stay in business,” he says. “Unashamedly negotiate with your suppliers, your lenders, and anyone else you owe money to. If you’re a good customer, there’s nothing wrong with asking for favors to help you get through this.”
“The first person you talk to will likely say, ‘No.’”
Regardless of whether you’re talking to a supplier or a lender, expect the first person you talk to will say, “No.” His or her job is to collect what you owe and get you to meet your obligation now. “Don’t stop there,” says Levi.
“If you own a pizza restaurant and are making payments on the pizza oven you just purchased last fall, nobody is buying equipment right now and lenders have an even bigger incentive to work with you,” he says. “Nobody wants your collateral.”
Levi argues the first person you talk to is paid to be a “hard case.” Push to talk to the next level. “Get out of the debt collector group. The next group is the reasonable group,” he says. “They will likely work with you.”
“Your best customers want you to stay in business too.”
If you’re like me, you probably have a favorite restaurant or two. I go to a Mexican place down the street at least once a week. They know me and I know all of them. They’re doing a curb-side pickup right now and I make it a point to pick something up every week. I want to do my part to help them stay afloat during the shutdown.
Levi told me about an Italian place close to where he lives and how he’s doing the same thing. He also buys gift cards to help them have a little extra cash. “They need my support and I want them to still be around when this is over,” he said. “It’s the best Italian place I know.”
You likely have customers that feel that way about you and your business. “Swallow your pride and ask for help,” says Levi. “And don’t forget to steer your dollars into local businesses too.”
When I asked Levi how he stayed positive when it felt like the walls were caving in he said, “We’re gonna be OK. Every so many years something happens and we survive.”
“WWII was worse than this,” he added. “It’s just math. Stuff happens and we get thrown off our game for a while, but it will come back.”
Optimism can be contagious. And he is optimistic.
“No matter how bad it is, it’s not as dire as you think,” he says. “Your kids still love you. Your significant other still loves you. The love you have in this world is not going to change.”
He added, “and I love comedy and try to laugh at something that doesn’t matter every day. It works for me and may work for you too.”
We’re all in this together. At one level or another we’re all facing the same challenges and trying to get through this crisis as best as we can. Although the advice we’re sharing might not be what we would normally offer, sometimes you just gotta do what you gotta do to keep your business alive. All of us at Nav are doing everything we can to support small businesses like yours get through this. Hopefully the information we’re sharing is providing value and helping you make informed decisions. Remember, you’re not in it alone.