Your small-biz clients will be just fine — and so will your firm
As I write this, close to 70,000 people have died in the U.S. because of COVID-19. Most cities and states are on lockdown. Many companies are itching to get back in business but aren't sure when and how. For small-business owners, the mood is dark and the outlook seems bleak.
If you’re a CPA, don't worry. Your small-business clients will be just fine and so will your firm. Yes, I read the reports and I see surveys like this that warn that half of small businesses could go out of business in the next few months if things don’t change. That’s nonsense. My company has more than 600 small and midsized clients and I’ve been speaking with many of them. They’re hurting, a few may not make it, but most of them will be fine. Let me give a few reasons why.
For starters, there will be an end to the coronavirus pandemic, and it will be much sooner than you think.
Most experts predict that we won't see a vaccine for at least another 12-18 months. They say that only when a vaccine is available will things get back to normal. That's also nonsense.
The flu vaccine, by most accounts, is only 40-60 percent effective and more than 34,000 people die from influenza each year in the United States alone. There's no vaccine for other “invisible” things like car accidents (39,000 annual deaths), heart disease (647,000 annual deaths) or cancer (606,000 annual deaths). Of the almost 70,000 coronavirus deaths in the U.S. so far, the great majority have occurred in older people and people with underlying conditions, so it will take some time to determine how much of a role the virus had.
What will happen much sooner — within the next few months — are announcements from the government and health care community of medical solutions available that have shown to reduce the fatal effects of coronavirus to a level that is more palatable to the American public. Within the past week, one major treatment announced a successful Phase III trial and was rewarded with a thumb’s-up from our chief infectious disease specialist.
No, there won’t be some miracle drug or silver bullet cure-all. But, as with the flu and other diseases, there will be multiple treatments. There are numerous trials already happening, as well as therapies being tested that are using already-approved drugs. Once we get comfortable that we're not going to die a horrible death on a ventilator from getting the coronavirus while doctors can only stand around and pray for a solution, people will get back to normal life and businesses will get back to normal activities. Just watch.
Second, the economic data is misleading.
The media loves to terrify us about high unemployment, plummeting retail sales, disastrous GDP and other woeful economic data. But it's all irrelevant, and as an advisor to your clients you should reassuring them, and telling them not to pay too much attention to these numbers.
Of course there’s massive unemployment and less consumer spending. Why? Because the government (rightfully, in my opinion) forced upon us a shutdown of the economy! It was not because of a failure in our financial system, a crash of a vital industry or a slowdown in consumer spending, as was the case in most prior recessions. There is pent-up demand and once freed from the constraints of shelter-in-place rules, consumers will be back spending, travelling, eating and recreating. This is not a Great Recession; this is a Great Repression. We are in an artificially created downturn. We started it. We will end it.
For your clients (and your firm), there will be many new opportunities to thrive.
There’s no escaping the fact that some businesses that weren't prepared for an economic downturn are going to go out of business. It’s also true that some businesses that were already on their way towards death (i.e., movie theatres, brick-and-mortar-only establishments, firms that haven’t adopted technology) will have their inevitable demise accelerated. That's not coronavirus; it’s Darwinism.
But once this is over, there will be a lot of catch-up. Because of the pandemic, new spaces will open up and new workplace arrangements — like working from home — will finally become commonplace. Some real estate will become more affordable. Core small businesses like hair salons, roofers, auto mechanics, landscapers, medical specialists, dentists and academics will be overloaded trying to get through their backlog. Construction projects will restart. New health care ventures will get funding.
But the best news will be that those pesky competitors who stayed in business during strong economic times despite their poor management practices will no longer be around. Those employees that you and your clients have been desperately seeking will be more available to hire. This is change. This is opportunity. This will be a good thing.
Finally, your clients will have learned some important lessons for the future.
If you’re a good business advisor, you’ve likely been telling your clients about the importance of having three to six months of operating cash on hand. You now know the importance of building good relationships with financial institutions and securing available credit. You understand the value of keeping overhead low even during the best of times. You appreciate how vital good and loyal employees really are. These are all lessons you can reinforce with your clients.
Oh, and your clients? There’s no question that you’ll have a new respect and love for each and every one of them that returns to your business. Economic recessions, regardless of why they occur, have one thing in common: They flush out the weak and inefficient from the system and refresh those that emerge with a new outlook for their businesses — and their lives.
Am I over-simplifying? Too optimistic? I don’t believe so. Of course, the impact of this experience will have long-lasting effects on some industries and governments. But just look ahead one or two years and what do you see? Do you see no restaurants? No travel? No vacations? No stores? No events? Of course not. All of this will return, and savvy business owners — and accounting firms — who navigated successfully through these difficult times will be in a position to profit.