How the Coronavirus Will Impact Your Business
I’m sure at this point, you have been thinking about the Coronavirus, the livelihood of your employees, its impact on your business and your clients and customers immediate needs.
Each vertical in the cannabis industry is being affected differently. Medical marijuana dispensaries may not be seeing the immediate impact, as most states are requiring them to stay open so that patients have access to their medicine. This is a good thing. But what happens when these patients, many of whom are employed by companies which are required to shut down, have no source of income?
At the time of this writing, in an attempt to stabilize the economy, the government is planning a $1 trillion dollar stimulus package which includes paychecks to Americans. This could help in the short term, but is this really a long term solution?
Companies need to understand the macroeconomic factors at play here. With many non-essential retail businesses forced to close, how are people going to earn an income? We have begun to see the immediate effects of this, but this will only worsen the longer that people are out of work.
This is a very important piece to understand as you put together a plan of action for your company to weather the storm. Consumer spending will come to a halt, affecting B2B sales, online ordering, deliveries, manufacturing, etc. This will affect everyone.
Consumer product companies will particularly be hit hard as consumers cut all non-essential spending. Manufacturing around the world will slow down thus inhibiting companies from acquiring their products and packaging.
At MOST, we have been working remotely since March 11th, and will continue to do so until April 6th. We are currently helping many of our clients, as well as new clients, develop plans of action to keep their businesses intact during the COVID-19 outbreak.
Credit: Marijuana Business Daily, Original Source: Headset
5 Issues we are Helping Clients Address and Develop Strategies:
Payroll and Employee Wellbeing
Businesses are being forced to close overnight. Many of these companies have little reserve cash to weather the storm. The last thing any business owner wants to do is to lay off their employees.
We are addressing these concerns with clients and helping put plans in place to mitigate damage to employee wellbeing. It’s important to understand that your employees are just as worried as you are, probably more!
We have been working with clients developing alternative revenue streams, expanding marketing and advertising in certain areas, reducing non-essential and non-operating costs, and compensating employees for lost hours, all in an effort to reduce layoffs. How you act as a CEO in a time like this, will long be remembered.
Marketing and Advertising
In times like these, many companies choose to pull back on marketing and advertising expenditures for fear of spending too much for what they perceive as little return. We understand this, and have been addressing each situation differently.
Marketing and advertising are the lifeline of any business. Without it, customers will not know of your products, services, etc. Understanding this, it is important to be aware the ramifications of pulling back on marketing and advertising expenses.
In some cases, we have recommended pulling back on marketing and advertising expenditures, and in other cases we have recommended increasing marketing and advertising. Particularly when working with THC plant touching companies, we have recommended spending more on marketing and advertising, as dispensaries have seen a massive increase in sales in the month of March. In almost all cases though, we have changed our approach in how we are marketing and advertising products and services for our clients. The current needs of businesses and consumers are much different than they were just a few short weeks ago. It’s important to understand these needs, as well as spending habits.
Particularly out of home advertising is taking a big hit, as many businesses are closed and people are forced to quarantine. Digital marketing and advertising has seen an uptick as online traffic numbers have increased due to people working from home and being quarantined. We are continuing to monitor these trends and adjusting strategies on a daily basis.
Most importantly companies need to understand how people are feeling during the Coronavirus outbreak. There is a heightened level of fear, doubt, sadness, and worry. Companies should be aware of this and take extra care and precaution with their marketing and advertising messaging.
Manufacturing and Supply Chain
When China shut down many of its manufacturing plants in an effort to stop the spread of the Coronavirus, it disrupted global manufacturing, trade, and distribution. Although many of the Chinese plants are back up and running, the cannabis industry is still feeling the effects. Much of the product and packaging manufacturing for the cannabis industry is done in China. This led to an almost two month period where companies could not receive or place orders with their manufacturing partners.
During this time we have been working with clients to source and establish manufacturing partners in other areas of the world. This is something we are continually doing as other countries, as well as the U.S. begin to shut down manufacturing facilities.
We have worked successfully to keep our client’s supply chain intact and functioning during this time. In some cases, this has led to an increase in costs which have sometimes been reflected in the products that are sold. It’s important to understand how an increase in pricing for products or services affects your overall business and how customers are viewing your products. Each case should, and is, approached differently.
Sales and Client Management
Depending on the type of business you operate in the cannabis space, sales can be particularly hard to come by during the COVID-19 outbreak. We have witnessed first hand, cancelled purchase orders, investors pulling out of projects, and consumer spending plummeting as people conserve cash.
We have been addressing these issues 24/7 over the past couple months. We are guiding clients to focus on tried and true sales channels and recommending working with their clients and customers to understand their current needs and cash restrictions during the outbreak and quarantines. We have done everything from recommending reducing costs, cutting product lines, launching new product lines or services, offering extended payment terms, and more.
We have addressed cash flow issues with our current clients by extending payment due dates, and restructuring contracts and obligations. Each and every day we are helping our clients install similar risk mitigation tools that we have put in place for our own business. We have had success so far in keeping sales pipelines full for our clients, while limiting risk and loss where possible.
Cost Cutting Measures
Many companies in the cannabis industry are turning to cost cutting measures in an effort to keep their businesses afloat. In some instances this can prove to be a good tactic, but as with anything it needs to be approached strategically.
In an effort to conserve cash flow, companies who are experiencing a decrease in sales due to the COVID-19 outbreak are looking to cut non-essential costs where possible. Exercising cost reduction strategies can help companies last through the quarantine periods and potential 2nd outbreak of the Coronavirus.
It is important to understand how cost cutting measures can impact those vendors from whom you would normally purchase those non-essential items or services. When we have recommended cost cutting measures, we have approached each project strategically in order to minimize the trickle down effect that could result.