Best Business Advice in 2020 – Prediction for 2021

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At the very end of a traumatic year, I just felt like sharing some thoughts on what I have seen in my practice with the hope that it may help some people in 2021.

My practice focuses on advising small businesses facing financial difficulties and this year, more than any other year, I have been directly approached by many directors for advice. Unsurprisingly, retail, restaurants and entertainment have been the most frequent visitors.

The initial economic shutdown on March 16, 2020 was a shock, but it seemed that most people felt it would be a bit of fun working from home and perhaps they could find a way to unlock the funding from the government’s borrowings. I received a lot of proactive calls in that first month from people looking to strategize for the longer term. Insolvency professionals often moan that businesses never come for advice early enough and the available corporate rescue options become fewer. For once, directors were asking for help before overwhelming pressures built up. As time went on, the calls began to be from directors who could see no end to the financial pressures nor could anyone confidently predict the resumption of the economy. Many of the directors wanted to immediately file an insolvency process, particularly if they had already consulted other insolvency professionals and were just shopping around.

The best advice I have given this year was to WAIT! Hold the horses, take a breath and slow down. And then I repeated it, just wait.

Most businesses that came to see me did not have an absolute crushing need to seek protection from creditors via a formal insolvency filing. Their doors may have been shut, or only slightly ajar, and although it was unpleasant, there was nothing to be gained overall by filing immediately. I have actually sent away most of the people who sought advice in 2020 and told them to carry on unless and until the pressure becomes insurmountable. I also provided them with the warning signs to look out for. Whilst sending away people at your door goes against the grain of sales orientated business, I cannot conduct my practice in any way other than to give the advice that is best for the director, their employees and their families, and indeed to any other stakeholder who approaches me. It can happen that a better salesman elsewhere can induce a director to take another course of action, but I can only provide people with their best options and let them choose.

The fact is that in Canada the CRA, landlords and creditors do not want to drive companies out of business. Quite rightly, the CRA currently have political directions and want to maintain contributing members of our society. Landlords do not want a series of empty premises for which they require new tenants to be found. Creditors also realize that there will be little, if any, recovery for them from asset sales if they push a debtor into a formal insolvency proceeding at this time.

Once the economy reopens, those companies that have managed to survive the Covid19 troubles will have less competition and will be able to service the pent-up demand. There will be an economic boom in many industries. Therefore, if a company can hang on for a few more months, then they should do so, and if need can do so with a “holding proposal”. In short, this will mean that a company can seek immediate protection but not take material repayment steps until they are back up and running at a significant level again.

I should state that my firm has been busy with businesses that have reached the end of their ability to continue and we have been busy helping businesses and people whilst this terrible virus has destroyed and diminished the lives and hopes of millions. We do advise people how to restructure or close down businesses when that is needed and then we help them cope with the personal and business consequences. There is a time for everything and sometimes formal protection is the only choice left, but this year, the time of being forced to make the last possible choice could be extended. I am always willing to talk to directors and discuss their business options, even if it is simply to give them confidence to persevere.

Looking back over the past 10 months, “wait” has been the best business advice I was happy to give to directors. One should never tear up your dreams before they are taken from you. If your business is struggling, please wait and hang on for a little bit more. Hopefully by the end of 2021, you will be enjoying a healthy year in body and finance.  

May you and your loved ones enjoy 2021 in good health and have a happy, peaceful and successful new year.