Written by JP Fritz
While it probably seems like making plans is a waste of time when every day or even every hour, the business landscape changes, there are still lots of things every business in our industry needs to be doing. As with every normal slow season, when we cannot work in our business, we should work ON our business.
On Tuesday March 10th, we had our first cancellations due to Covid-19. My initial thoughts were “what the heck are these people’s problem”. While I had been out of town much of the three weeks immediately prior to this, I had still been reading various things about the pandemic. While I knew it had caused lots of people to get sick and it had started to spread around the globe, many were likening it to the flu. I left for the Special Event in Las Vegas on the 11th and within 24 hours, our world had changed. Yet, there was such conflicting information from the government, no definitive action could be taken by any business.
Over the following weekend, I went from thinking this was probably a short term issue to this is going to be legit and affect our industry dramatically. On Monday, I had to do one of the worst things ever in business. We laid off about 25% of our work force, put everyone else on 30 hours and quit paying myself, my wife and sons. I knew how rough this would be for our employees and it really affected me. As the week moved forward, the information coming from our government became more and more frightening and everything was cancelling. By Monday of the next week, the governor had virtually shut us down. All but a skeleton crew was laid off. We did this for one reason only, to preserve cash.
This is the overriding mantra that every business in the event industry should be stating over and over again: “Cash is King”. What does this mean? First, if you have not yet, you must cut every expense you can. Start with the big stuff like laying off employees (most will receive more on unemployment than we are paying them). Talk to your landlord or bank. Negotiate with them to forgive rent or significantly reduce it while we are out of business. Ask them to accept interest only on debt or a smaller amount on rent. We were able to pay three months in advance for a 15% discount, for example. Many banks have been very helpful with giving us three months without any payment required. Contact your insurance agency, take vehicles that are not being used off your plan while you are shut down. Also lower your sales projections with them and ask if there are any other things you might do to cut your costs. Turn off water heaters, HVAC units, etc., to lower utility costs.
In the second round, go for all the smaller stuff. Get your fixed costs as low as you can. Go through your checkbook and credit card statements and look for anything that could be cut. For example, advertising for no business is a waste. Again, with the mantra of “Cash is King”, look at your payables. If the debt is not something integral to your business, contact them and let them know you cannot pay at this time and will pay as soon as normal business resumes. Do not give them a date, but let them know you will communicate with them monthly to update your status. Confirm your intent to pay in full when normal business resumes. As in all situations, communication is key.
More controversial is not repaying deposits. Tell your customer that you cannot repay the deposit at this time but that you will as soon as you are able. Explain that you kept employees hired during slow months, assisting customers like them with their future event. You spent that slow time purchasing new equipment, maintaining other equipment and getting your company ready for when the busy season was to start, but when this pandemic crippled the world, it took away any promise of a busy season for our entire industry. While you were not frivolous with their deposit, you cannot return it until your company is able to get back to normal business. Again, stay in communication with them. Tell them they can postpone their event with no cost to them. Be honest and tell them you simply do not have the money to pay them. In our experience, most people understand that without income, refunding every cancellation is nearly impossible.
Finally, put together a cash flow projection for the next few months up to a year so that you know how much money you may need to survive. If projections show you will be short of cash, you must find new financing now or make the tough decision to file for bankruptcy. Remember, even when filing bankruptcy, you need cash. Protect yourself any way you can financially to make it out the other side. It is becoming more and more likely that large events will not be back for a year or more. Once you know what you need to survive, you can begin to look to the future and put together plans for your business to survive.
Stay tuned as I will talk about these future plans in a second blog on this topic.