Op Ed

Business Owners Can’t Plan for Future

The pandemic leaves the future so hard to predict companies are left at sea.

By - May 3rd, 2020 11:48 am
Crystal ball. (CC0 Public Domain)

Crystal ball. (CC0 Public Domain)

The most commonly used word in the business world today is “unprecedented.”

The street-smart translation of that word is that no one — absolutely no one – knows what is going to happen with the U.S. economy going forward because of coronavirus impacts. The best thinkers in the country don’t know the answer to the what is going to happen question, the when question or the how much question.

So, you’re sitting in the front office trying to figure out what in the hell to do. You may be there by yourself because the rest of the staff is working from home. You may have received a federal government loan, but you know it’s only going to bail you out for a couple of months.

Assuming you haven’t been forced to close already, that you are still operating at some level, what are you going to do in July when the federal subsidy runs dry?

The jury is already in for many, many companies, and they have laid off or furloughed their work forces in unprecedented numbers. One-third of American businesses have shut down some operations and two-thirds have reduced staff or pay.The U.S. unemployed number is probably north of 25 million, close to 20 percent across the nation. That’s a staggering total. And it could get worse.

Back to the front office of still operating companies. One tool being used is scenario planning with different outlooks for July and beyond. Four scenarios immediately surface, in the analysis of a consulting company called Trium:

  1. Gradual Recovery by mid-year.
  2. Fits and Starts — ups and downs, with lots of volatility.
  3. The Perfect Storm — one million deaths and many bankruptcies and foreclosures.
  4. The Great Correction — new models of living and working win out.

Each scenario draws different responses from customers, competitors, vendors and workers.

Your toughest call is how many people have to be let go in one form or another. If your volume runs off by 20 percent to 30 percent in scenarios 2 or 3, and your business is labor intensive, the decision will have to be made to cut 20 percent to 30 percent of your workforce. It’s that cruel and that simple.

No one wants that outcome. But if 20 percent have to go to save the jobs of the remaining 80 percent, what choice does you have? In bankruptcy, 100 percent lose their jobs.

The only way out is more federal support for businesses and workers – paid for by taxpayers of today and the taxpayers of the next generation, your kids and maybe grandkids. Even fiscal conservatives understand the need to revive companies and deepen the safety net. All political dogma gets buried in an extreme crisis.

Progressives, for instance, will have to stop demonizing corporations when they come to the realization that nothing works in an economy or society without good jobs. They are gaining an appreciation for the entrepreneurs who create all net new jobs in the country, even if they become billionaires along the way, as they bring new products and services to the market place.

Unfortunately, startup companies that could be the big employers of the future are the most vulnerable in those highly uncertain times. They need one or two good customers to get them going. But the decision makers with the purchase orders in hand are paralyzed when it comes to bringing on innovations that have a risk factor.

Right now, with crystal balls that are beyond cloudy, decisions to purchase are on hold. Inventories are being run down. Hiring is non-existent for the most part. Consumers are reducing spending, some to zero. Still you have to be prepared to make tough decisions, geared to which of the four scenarios unfolds.

The one panacea that everyone is looking for is good news on the medical and health care fronts that could fuel a rebound. The earliest the experts see that happening is 2021.

A perceived lessening of risk levels is leading to some reopening of lesser-affected parts of the country. Those experiments will have to be measured closely. Meanwhile, business managers have to batten the hatches for a long storm.

It will be years before we see the likes of the good times of 2019 again.

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.

Categories: Business, Op-Ed

One thought on “Op Ed: Business Owners Can’t Plan for Future”

  1. mkwagner says:

    Will corporations also recognize that they need consumers with sufficient means to buy the products they make?

    This has always been the problem with supply-side economics. Corporations don’t “create” jobs. It is the demand for their products that creates the need for more products requiring increased production. When the only focus is on the supply side, the demand side weakens. Without robust demand our economy can’t grow. For demand to grow, we need more individuals with sufficient disposable income to continue to demand product. Stagnant wages, the concentration of wealth at the top and the shrinking middle class ALL work against economic growth.

    These are the economic lessons NOT learned. The crisis we are in now, is a crisis of our own making. So I ask again, will the heads of corporations and financial institutions recognize they require financially stable consumers and workers — the grist of robust demand — in order survive and thrive?

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