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| The Coronavirus Crisis Is Revealing These 5 Problems With Your Business Model—Here’s How to Fix Them Posted: 11 Apr 2020 12:30 PM PDT By Sofiya Merenych The 2020 coronavirus crisis is now global. And it's practically impossible to find an industry that hasn't been affected by the COVID-19 outbreak. Most airlines have had to adjust their schedules or even cancel some, if not all, flights. The film and entertainment industry is in danger because of the cancellation of major events worldwide. Local hospitality businesses all over the world have been forced to close their doors due to the quarantine measures implemented in many countries throughout the world. The coronavirus pandemic has revealed many business bottlenecks that were not so obvious before. And while it may be too late to make a difference in the current situation, coming up with solutions now will ready your company for the next time there is a crisis. Here are problems the outbreak has highlighted and lessons your business can learn: 1. Your company is too dependent on manual workAutomation in business has been a hot topic for the last two decades. Gartner identifies hyperautomation as a top strategic technology trend for 2020. There are many small businesses that have not automated key jobs and are doing tasks manually. What are the downsides of manual work?First of all, it is slow and not always exact. The human factor is hard to avoid, so mistakes happen which can lead to losses. This is also true for manufacturing, logistics, accounting—but almost any department in your company can be modernized for the sake of clear processes and exact calculations. But it's not just about money and business. The main question of the 2020 crisis is: Can you ensure healthy conditions for all your employees? The coronavirus spreads from person to person, and direct contact is unsafe. Putting many workers in one room risks turning a workspace into a potential virus incubator. This creates a situation that’s not only dangerous for employees, but also for their families, neighbors, and even random people who shop for milk at the same grocery store. Being too dependent on manual work is a huge business risk; a quarantine automatically means all business processes stop. How can automation help?Business automation allows you to replace manual work with software algorithms. Smart automation will lessen the workload of your logistics office and help sales managers and accountants. But what’s even more important is your manufacturing department won't be as dependent on a certain number of workers. A quarantine won’t have as much of an impact on an automated factory; production can go on even when 90% of your employees have to stay at home. What you can do right nowMost likely, your company is already quarantined, so you can take your time to work on mistakes, preventing such a crisis in the future. First of all, analyze your current company structure. Which tasks involve the most manual work? These will be your first candidates for optimization. Then, find a contractor who can do the automation for you. Outsourcing a task has two major benefits: First, the contractor has experience in business automation, and can counsel you concerning your specific case. Next, unlike hiring an in-house tech team, which can take a lot of time and effort, a contractor already has a team that is ready to start working on your case immediately. Also, don't limit your search to your country. Outsourcing gives you access to thousands of professionals all over the world. If you don't feel comfortable working with remote teams, then the next two lessons are also for you. 2. You are too dependent on personal, face-to-face meetingsWhen you first heard about the COVID-19 quarantine, you probably thought, "No way, we can't do this. We have dozens of meetings scheduled for this week." And then it turned out that something was more important than the meetings. What are the downsides of in-person meetings?First of all, you can't have any meetings during a pandemic. However, personal meetings can be toxic, even during much less dark times. The main reason: they limit your team. The fact is you don't have to sit next to another person to have an efficient discussion. Replacing meetings with online calls can help. Why are calls more effective?You can schedule an urgent call anytime, anywhere, and solve problems without needing to head to the office. It also gives you the opportunity to work directly with contractors located in other regions or continents who may be the best professionals in the world. What you can do right nowExplore online conferencing tools. First of all, there is Zoom. This tool was created specifically for video calls and conferences, and with it you can do video and audio calls, screen sharing, chat, recording, and automatic transcription—even encryption is available if you are sharing sensitive data. Other major tools to consider are Slack, Skype, Google Hangouts, or Google Meet for corporate users, and many more. Some of these tools have specific features that make a video conference even more effective than a personal meeting. Just choose the one that best fits your needs. Other Articles From AllBusiness.com:
3. You don't trust remote work (or workers)How could this even happen in the 21st century? Of course, there are specific professions that can't work remotely (surgeons, cooks and waiters, home-service workers, etc.). But what's wrong with remote work for programmers, accountants, journalists, lawyers, and writers? Your main argument against remote work is likely the inability to control your employees. But ask yourself what is more valuable: the process or the outcome? Many employees claim they are more productive when working from home compared to the usual 9-to-5 office hours. Dozens of companies have adopted an all-remote approach:
What you can do right nowIf you make remote work a part of your company policy now, the next crisis won't be as painful for your team. 4. Your focus is too narrowYou have a clear company development plan for the next few years and you strictly adhere to it. You're not leaving any room for improvisation and fresh ideas. This doesn't sound like a solid plan. Why is narrow focus a problem?It's a risk. Even if your company shows great results in the current situation, circumstances may dramatically change tomorrow. You have to be ready to adjust to those circumstances to keep your business alive. What you can do right nowBe flexible! You have to be ready to react instantly to any changes in the world. Restaurants and cafes were hit hardest by the lockdown in many countries, but a few of them have managed to survive because they quickly adapted their business model and switched to food delivery. Language schools were forced to pause all learning programs, but some have employed online tools and are accessible to a wider audience, overcoming any location limits. Always think of additional services your business can offer. Sometimes, solutions are not that obvious, but new ideas will help you in two ways: outplaying your competitors and surviving in a crisis. 5. You're working with one big clientHaving one client that covers more than 50% of your working capacity is like putting all your eggs in one basket. Why is relying on one client a problem?Imagine an unpredictable local crisis in the region where your principal client is located. This may be thousands of miles away from you, but it affects your business directly: supplies that can't be sold, employees who have no work to do, and high bills at a time when your income drastically drops. The same thing happens when the crisis hits a single industry your client belongs to. What you can do right nowNever stop looking for new clients. It is always safer to have 10 small clients than one huge customer. Sell your goods or services to a variety of clients in different industries and regions. This can save your business in the next crisis. You don't have a risk management planHow much time did it take for you to develop a crisis management plan for the current situation? Maybe you are still working on it. Meanwhile, your company is losing money every single day. Having a risk management plan could save you hours of non-stop work and thousands of dollars. A risk management plan will allow you to:
Create such a plan and be ready to react quickly to all possible changes in your industry, in the global market, and in the world in general. Take a big leap forwardCOVID-19 is a global crisis that has affected all industries. And most companies are experiencing negative growth. You are in the same situation as all your competitors. Many of you had to pause business and simply hope to recover after the pandemic. But this is actually a time for opportunity. The global quarantine is your chance take a big leap forward. Use this time to upgrade your company by following the lessons outlined in this article. Businesses will suffer during this crisis, but smart entrepreneurs will use this unique opportunity to build new or better companies. RELATED: Business Owners: Don't Sacrifice Long-Term Success by Making Short-Sighted Decisions The post The Coronavirus Crisis Is Revealing These 5 Problems With Your Business Model—Here's How to Fix Them appeared first on AllBusiness.com. Click for more information about Guest Post. Copyright 2020 by AllBusiness.com. All rights reserved. The content and images contained in this RSS feed may only be used through an RSS reader and may not be reproduced on another website without the express written permission of the owner of AllBusiness.com.  |
| Where’s the Money? The Top 10 Frequently Asked Questions About CARES Act Loans Posted: 11 Apr 2020 11:44 AM PDT The federal government enacted in late March legislation to help small businesses suffering from the COVID-19 crisis. The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) provides for the availability of $349 billion in Small Business Administration (SBA) loans. There are currently two types of loans available: Economic Injury Disaster Loans (EIDL) and Paycheck Protection Loans (PPP). The goal of the government was to get these loans into the hands of business as quickly as possible. But there have been delays in implementing the processes for issuing these loans. The overwhelming majority of businesses have not received any funds. Two issues have caused the holdup: First, banks are concerned that the regulations aren't clear enough, and they need protection against fraud and (without expressly saying it) bad debt at the end of this crisis. Second, the process requires the SBA to review all loan applications and it is dealing with an unprecedented volume. The following are the top 10 questions and answers about these loans: 1. What is the status of the PPP loans?On a call with Vice President Pence and SBA Administrator Jovita Carranza, hosted by the NFIB on April 7, 2020, Carranza stated that banks have held up disbursing funds as they wait for more clarity on loan guaranties and other regulations around the CARES Act. Banks are concerned about fraud as they claim the PPP loans don't require the usual amount of background information or creditworthiness that come with conventional loan applications. Former Fed Chair Janet Yellen told members of Congress this past week that banks need a "safe harbor" to protect them against fraud claims. The bankers have told the government that there's also a need for a slower process with more due diligence. 2. When can I reasonably expect the loans to be funded?At this point, it is impossible to tell, but likely it will be a longer time frame than expected. If the banks do not receive some kind of assurance or "safe harbor" against future liability, they may sit on some applications or funds. And, perhaps more important, the SBA has to review the applications and approve them before banks can write promissory notes and release funds, and that could cause major delays. In a typical year, the SBA processes about 1,000 loan applications for $20 billion; to date, approximately 250,000 PPP loan applications for the $349 billion program have already been filed. While the SBA is trying to outsource and ramp up, it could take weeks or longer. 3. What process are lenders going through to approve loans?Each lender was able to set up their own process and requirements for loan applications. For example, BB&T and SunTrust, now Truist Bank, set up an online portal to receive applications. It required a Borrower Application Form, 2019 tax returns, proof of payroll, and IRS Form 944, among other documentation. In an email to customers, the bank stated that it is reviewing applications in the order received and that the SBA also needs to review the applications, something that is out of the bank's control. In addition, it stated that if more documentation was necessary, the customer would need to provide it. At that point, they may be moved to the end of the queue of applicants due to the delay. 4. Should I apply for the PPP loans through multiple banks and see which one is faster?At this point, most banks are only taking applications from existing customers due to the fraud concern, so this isn't even possible. If banks open up to non-customers, it is still not advisable to submit multiple applications. The regulations only allow for one PPP loan per business, therefore, applying through multiple banks could cause confusion or even fraud alerts down the line. Due to this requirement, the regulations recommend applying for the maximum loan amount. The best bet is to try to communicate directly with your bank's representative via phone or email for more guidance. 5. What happens to the loan forgiveness if I have to lay off employees (or already have)?It is important to remember that the main purpose of the CARES Act as outlined in the regulations is to keep workers on the payroll. The forgiveness portion covers 8 weeks of estimated payroll costs multiplied by 2.5. The regulations do provide that 25% of the loan can be used for other expenses like mortgages, rent, utilities, and health insurance, and still be forgiven. Therefore, if a business is forced to lay off employees or already has and doesn't rehire them, the loan amount not used on payroll or approved expenses must be repaid over two years at 1% interest. This also makes banks nervous as they see a scenario in which businesses don't use the PPP loans for payroll as envisioned, still go under, and can't repay the loans. While the CARES Act provides that the SBA will guarantee the loans and cover lenders, there could still be allegations of writing bad loans and litigation down the line. This could leave banks holding more bad debt than they can tolerate, such as happened in 2008. 6. When do I start tracking the 8 weeks of payroll that will be forgiven in the PPP program?According to guidance issued by the Department of Treasury on April 2, 2020, the eight-week period begins on the first day lenders disperse funds to businesses. This regulation also noted lenders should issue funds no later than 10 calendar days from the date of loan approval. 7. What is the status of the Economic Injury Disaster Loans (EIDL) $10,000 grant? It's been longer than three days and I haven't received it.The main issue here is whether every business and independent contractor even qualifies for this grant. In a case of "too good to be true," it's been reported that the SBA will only provide $1,000 per employee up to 10 employees, not $10,000 for each business. It might also look at revenue as part of the calculation. In addition, the EIDL loans claimed the upper limit is $2 million, but again due to high demand that number may be lowered to $15,000 per company. There has been no final guidance on this but, suffice it to say, whatever grant is allocated, it will not be in any business's bank account within three days. If you have applied for an EIDL loan, you can theoretically check the status with SBA by email at disastercustomerservice@sba.gov. But emails to this address have gone unanswered to due to the high volume of inquiries. 8. Can independent contractors apply for PPP loans?The short answer is yes. The law clearly states that businesses cannot include independent contracts in their payroll calculations, and also that independent contracts can apply separately for the loans. April 10, 2020, was the first day that independent contractors could apply for the loans. 9. What is the process for independent contractors applying for PPP loans?Despite efforts to simplify the process for America's 23 million independent contractors, it is the same as regular businesses. Independent contractors should contact their bank to begin the application process immediately. Fintech companies are also being certified for the loan program, which may be a better option for independent contractors. Since independent contractors do not have a payroll, they can calculate their loan amount by using their Schedule C on their tax return; their net revenue, calculated as income minus expenses, will constitute the yearly income number. Independent contractors can document their income with 1099 forms, bank records, and tax filings. And, while more regulations are necessary, they can use the loan to pay themselves even if their revenue is zero, and can have the loan forgiven. 10. Will this program run out of money?The PPP loans are "first come, first served." Clearly, this initial round of $349 billion will not be enough to address every loan application. That being said, the Trump Administration and Congress is committed to providing more funding. The Senate on April 9, 2020, was negotiating a package in the $250 billion range. Senate Majority Leader Mitch McConnell (R-KY) wants the money to solely go to bolster the PPP program while House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) want to include funding for other needs, such as state and local governments and healthcare providers. The bill remains at an impasse; however, it is highly likely that legislation passes with more funds for the PPP loans. ConclusionThe key takeaway from recent events is that the government needs to dramatically improve the loan approval process and address the concerns that banks have regarding fraud and guarantees before the money will start to flow. If you haven't yet done so, apply for the PPP loan, but figure out another short-term solution for keeping your business going before the money finally arrives. Related Articles:
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