As of this writing, we are six months into a recession according to the US Federal Reserve brought about by the coronavirus crisis. THE US economy has contracted roughly 30% as economic activity has dramatically slowed. The stock market recoiled, millions of workers 
First, some context. The Spanish Flu pandemic of 1918 came in multiple ‘waves.’ The first one began in March of that year and it was relatively mild, akin to a strong flu. The second wave arrived in August, was much more deadly, and killed the lion’s share of the roughly 670,000 American’s who perished. The third and fourth waves followed in January 1919 and spring 1920 and were similar to the first. All told, the pandemic lasted over 24 months and claimed more than 50 million souls worldwide.
I’m not an epidemiologist but I understand patterns. If history repeats itself, we are in for a tough slog for the foreseeable future. On the plus side, medicine has made extraordinary advancements in the past century and scores of teams are working on a vaccine for COVID-19. Social distancing measures will certainly help so long as people continue to maintain vigilance with regard to public health and work together to mitigate the spread of the virus. To the negative, the US population has more than tripled over the last 10 decades and all societies are infinitely more mobile. Add to that the political polarization in the US (turns out much of the same rules applied during the Wilson White House) and we have a formula for more suffering.
Summary
Five Phases of a Pandemic & Recession
Instead of looking at the financial crisis as waves ala the coronavirus, let’s consider phases. I’ll suggest there are five (borrowing from Kubler—Ross)
- Blindside
- Recession
- Depression
- Recovery
- The New Normal
Blindside
US business was blissfully unprepared for the coronavirus crisis. The average small enterprise has scant financial reserves for a rainy day no less a tsunami; on average, about two weeks of expenses. So, unless an entrepreneur is content to fund things out of their own pocket, they must rely on one of two things – credit facilities or downsizing.
Granted, as a society, we don’t prepare for doomsday scenarios nor should we. We consider probability and outcome. Fortunately, during this initial phase a third alternative reared its head – government grants and loans. The SBA programs and PPP provided a lifeline that helped stabilize businesses at favorable interest rates. Forgivable loans and outright grants went a long way to staving off immediate failures. Finally, unemployment benefit enhancements for workers help many make ends meet.
Recession
Technically, a recession is two consecutive quarters of negative GDP (Gross Domestic Product) including a pullback in income, employment, retail sales, and manufacturing. Most often recessions are called after-the-fact but in the 2020 case, the Federal Reserve didn’t bother as it was obvious to all.
Even accounting for the trillion dollars plus in stimulus, many businesses plowed through the funds quickly and as the crisis played out through this past summer, realized the monies offered won’t get them to the finish line. Not even close. Thus, expect the recession to soldier on.
Depression
No, I’m not referring to an economic depression, a series of continuous recessions over multiple years. That has happened but once in US history, the Great Depression back in the 1930s, (albeit the Great Recession of 2008 came pretty close) and in many ways was prolonged by bad government policy. It didn’t abate until a World War spawned an economic recovery (let’s hope that bit of history doesn’t repeat).
I’m talking about business owner depression. Facing the specter of collapse can be devastating. I know, because I have looked it in the eye more than once! It can be difficult to combat a pervasive feeling that things will never get better (or worse, your business is toast).
In the meantime, central banks have remained steadfast yet government policy shifts almost daily, making it impossible to predict with any certainty how the recovery will play out. It is, however, a mathematical fact the virus will recede via a vaccine, herd immunity, or it will get bored and magically disappear (not likely). In other words, this too shall pass so don’t lose perspective.
Recovery
It will take time to sort out all the economic damage caused by the coronavirus. Again, the policy response has been uneven across both the United States and abroad. For example, the specter of renewed lockdowns will hang in the air, like the virus, for a considerable stretch.
But the tide of the coronavirus pandemic will eventually turn. No, we have NOT turned a corner as of yet, so please don’t believe social media. I cannot say when but it will sometime in the future, many months or even a year or two like a century ago. The only data we can pinpoint is 100 years old, a very different time, but nothing we have witnessed thus far tell us this time will be different. What can we as business owners do to prepare?
The New Normal
You may find the next sentence chilling. Every so often, the US economy takes out the trash. Usually, it’s because economic activity has been upset by overvaluation (think the Crash of ’87), bubbles (Dot-Bomb), or a relaxation in regulation and rampant speculation (Great Recession). There’s that hackneyed expression noted above – “This time it’s different” – which in this case, might actually be the truth post COVID.
Nothing was structurally wrong with the economy last year. As we exited 2019, stock markets were a bit overvalued but they have been for much of the past decade. Yes, politics were in disarray, but again, that’s been the case since, oh, the union was founded. No, inflation was in check and unemployment was at a historic low. Interest rates were rock bottom. Business was for the most part quite healthy. That’s good news!
Sadly, maybe only for those who survive. The COVID-19 pandemic will rearrange the world economies in strange and unusual ways. Some sectors may take years (or even decades) to recover like food services and air travel. Other may bounce back quickly leading to an easing in the unemployment rate. Others still (think Apple and Zoom) may take off like a rocket now that work-from-home has been brought into the mainstream and become, sadly, ubiquitous.
So, What’s a Business Owner to Do About This Recession?
My wife’s small business is the perfect test case to discuss what you, as a business owner, will face in the coming months. A 50-year-old brick-and-mortar business located in a 30-story Manhattan high-rise, she was forced to shutter back in March when the coronavirus outbreak forced the city into lockdown. Despite the economic downturn, the bills didn’t stop so for several months she had no income and accumulating expenses. Sound familiar?
Like most of humanity, she applied for the various government programs and was accepted but those monies were only of short-term value. In no way did they make up for lost revenue. She was also able to shed unnecessary expenses and lay off employees. But the damage was done and at this point, the government coffers are bare.
Since reopening, she has a smattering of sales yet in four months, her top line was equivalent to a single month pre-COVID. As fall approaches, she has reached a crossroads.
Like many business owners, her largest monthly expenditure is rent. New York State placed a moratorium on commercial evictions that expires on October 1st. As such, she is currently in discussions with the landlord, who is facing his own cash flow issues as many tenants are in the same predicament.
Smart Business Moves In a Recession
As a rule, I like to be proactive so reaching out to stakeholders in your small business, whether it be property owners, vendors, whomever, is key. It’s easy to bury your head in the sand – DON’T. Trust me, the problem will not go away and in my (considerable) experience, it is advantageous to get out in front.
First, understand your rights, the law and the process. New York, for instance, has a reputation for being tenant-friendly. Hire a lawyer if you don’t have one at your beck-and-call. Remember, the landlord has as much at stake as you do.
Now, here’s the tricky part – find a put option. My wife has already secured an alternative space should she have to vacate, at a fraction of her current monthly nut. It’s far from ideal but any port in a storm.
I’m afraid we may be facing a commercial real estate collapse in this country. I have no empirical data to base my opinion, just 30 years in business. And eyes. As it turns out, the rental costs have fallen and should continue to as winter nears. Like a plane ticket, an empty seat is an irrecoverable loss in revenue. Same goes for a vacant commercial space. As such, your landlord should be all ears when you approach them – but maybe not all.
Can Your Business Continue As a Going Concern?
Next, be honest with yourself. Can your business continue as a going concern? The numbers should tell you all you need to know. If not, hire a pro. If you think your business is still viable, get some short-term funding. Yes, it’s risky. Yes, you may have to personally guarantee. If you can find evidence you can weather the continuing deluge, by all means do so.
Next, determine a viable horizon for demand for your product and services to recover. Be realistic, don’t live on hope. As I often say, “Hope is not a plan.” Make a plan and execute it. If you’re in a services business, perhaps a cheaper offering? Reach out to former clients, offer deals, whatever it takes. If you hold products, shed what you can to raise cash. Remember, in every economic crisis, cash is king.
Finally, find a pivot. You can only drive your expenses so low before you reach nothing but essential items. After that, you must raise the top line. Take stock of your company’s core competency and brainstorm ways to stay afloat. Continue to show the world you’re ready to whether the storm even if your shaking in your boots!
This recession, like all previous ones, will pass. I know because I’ve lived through a dozen in my lifetime. I will even go one step further and predict once economic activity perks up, we will see an enormous uptick from pent up consumer demand. There may, in fact, be a generational explosion in the US economy in expanding revenue and new business opportunities waiting just around the corner.
You’ll want to stick around for that…
About The Author
Henry Daas is a 30-year serial entrepreneur who has founded numerous companies in the 
