President’s Notebook: Very few businesses have a contingency plan for a pandemic
These have been the hardest weeks of my business career. I’ve been through the crash of ’87, the dot com bust of 2000, the big recession in ‘08 and ‘09.
Nothing compares to what is going on today.
I’ve put my life into building this business – Today Media – a company of 130 people serving four communities and a robust custom media operation serving many more.
I didn’t have a contingency plan for a pandemic.
On average, companies with fewer than 500 employees have less than a month of cash reserves, according to a study by the JPMorgan Chase Institute. Smaller businesses often have just a couple of weeks’ worth of cash to keep running. Today Media is better prepared than average businesses, but few businesses are adequately prepared for an event of this magnitude.
Thirty percent of Delaware restaurants have chosen to close completely instead of continuing operations focused on takeout and deliveries. More drop daily as carryout fails to sustain operations.
Local hotel occupancies have started to drop below 50% and the stats I am hearing are in the teens. A decline of 15% puts many owners in a cash-flow negative. Many industries face the same bleak picture.
Emergency SBA economic injury loans could play a big role. They offer low interest rates and a 30-year payback. But, getting these loans can take time.
The US Chamber of Commerce said, “The SBA also should be given the authority to streamline its disaster-loan approval process for amounts below $350,000 in order to provide emergency capital more quickly.” The group urged removing a requirement that small businesses show they can’t get credit elsewhere before turning to the SBA. We would support both of these much-needed initiatives.
The State of Delaware needs to do more. The HELP program for the hospitality industry is a step in the right direction, but it seems like a modest measure, considering that tourism contributes $3.5 billion to the State’s GDP.
To be eligible, hospitality businesses must have been open at least one year, have annual revenue of less than $1.5 million (since upped to $2.5 million), and operate in certain hospitality-connected industries. These limits would exclude a huge number of hospitality businesses and thousands of their employees. In other industries, except for essential businesses, the vast majority have now been asked to close.
Surrounding states and cities are doing much more. Delaware has a Rainy Day Fund. Let me tell you – it’s not only raining it’s a Cat 5 Hurricane, especially for small businesses.
A dramatic reduction of economic activity without the right fiscal response will cause the economic pain to last much longer.
Small businesses need immediate help to survive. It seems like the federal government with their $2.0 trillion Stimulus package is offering what is needed for small businesses. Small businesses need forgivable loans to keep people employed and to pay basic services like rent and utilities.
The State needs to act FAST. We are a small state that prides itself on moving quickly. The State can be that bridge until we know how long it will take to get the Federal assistance and exactly what that looks like. The bill was passed on March 27th and the SBA was given two weeks to write guidelines. And how long after that will businesses get approved, given the sheer number of businesses applying? $350 billion for the Payroll Protection Program sounds like a lot of money, but bankers I know question whether this will be enough given the number of small businesses affected.
I share much of Tom Friedman’s sentiment in his NY Times column on Sunday, March 22nd.
He said, “These are days that test every leader…They are being asked to make huge life and death decisions, while driving through fog, with imperfect information and everyone in the back seat shouting at them. My heart goes out to them all. I know they mean well. But as so many of our businesses shut down and millions are being laid off, some experts are beginning to ask: Wait a minute! What are we doing to ourselves? To our economy? To our next generation? Is this cure – even for a short while – worse than the disease.”
We all understand the public health need to shelter-at-home for a period of time. However, let’s not move so quickly to keep things closed through the middle of May or beyond. This is a rapidly changing situation and nobody knows what is going to happen. Let’s take it a step at a time.
Friedman suggested that we need a more vertical approach that “can more surgically minimize the threat of this virus to those most vulnerable while me maximize the chances for as many Americans as possible to safely go back to work as soon as possible.” The State should be working hand in hand with our business leaders now so we have the plan in place to jump start our economy when the time comes.
That being said I can’t imagine what our health care workers and first responders are going through as the front lines in fighting this pandemic. My kudos to them for their tireless efforts.
DBT is sharing their stories in “Voices from the Crisis,” which covers businesses pivoting to keep revenue coming in and reports on businesses doing what they can to help out. This issue has a story about businesses coming together with ChristianaCare to find medical supplies in our community.
When I hear about efforts like these in Delaware, I am confident we will get through this together.
Rob Martinelli is president of Today Media Inc and group publisher of Delaware Business Times and Delaware Today, among others.