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Writer's pictureMark Lipton

And the Hits Just Keep on Coming!


As the news from around the world regarding the spread of the coronavirus continues to worsen, companies of all sizes are making fast plans to adjust to a business climate where expenses have not changed and revenue may be down as much as 100%!


A catastrophic change beyond the province of any known contingency planning.


Trying to make sense of all this and the effects on your business will be the single greatest challenge of your career. And if you’re near the end of your career, this challenge will make small, anything you went through during the Great Recession or after 9/11.


Guy and I continue to be safely isolated in our home with the kids safe and lonely in theirs. Food seems plentiful around here and we have lots of olive oil; so we should be fine. Guy prays and I hope, that all of you are safe and secure as we ride out this storm together.


WE WILL GET THROUGH THIS!


Last blog, I gave dealers some advice on where to begin addressing some of the effects of this calamity on your businesses. I hope by now that all of you have taken at least some steps to address the “low hanging fruit" that can be easily cut from your operating overhead. Even if you are a small business, just a store or two, there may have been over $1,000 of monthly savings there.


Any reductions you make to your overhead reduces your burn rate and we NEED to get it down FAST! Because that will determine how long you survive and if you are even around selling paint when it's time to recover.


Sadly, we need to chat about the bigger expenses if we are going to make a significant difference in the trajectory.


Staffing!


At the beginning of the Great Recession, my stores had 13 employees. Within a month of that dark October in 2009, we were down to seven AND they were all making 10% less than they were just a month previously.


I fired them all myself; it really sucked. Barnes (just Barnes, like Madonna....only Barnes) told me I was doing the right thing and that he understood. I waited until he left to cry.


But the reality was that had I not made those drastic steps, we would have closed for good in under 60-days and here’s why:


At the time of the economic collapse, we were doing about $300K a month in sales: That was October of 2009! On a break-even of $250K a month at the time, I was doing very well!


But when sales plunged closer to $150K per month, I was bleeding badly and no pay-cut was going to be deep enough to cover the difference. I needed to resize my staff to establish a new breakeven level more in-line with my current sales.


That is the situation you likely find yourselves in now. In the very best-case scenario, most of you will lose two-full months of operations in 2020. You need a staff size that allows you to make money or at-least breakeven at these new levels of expected revenue. And be careful because you calculate breakeven for the year but this year only has three-quarters left in it! So any adjustments you make only have nine months left to effect the full-year.


You may need to overcompensate for that, in other words cut staffing MORE than what seems necessary!


It is possible that when you read this, it comes off as cold or callus. That’s not so. This whole situation is heartbreaking to me and I feel awful having to give you this advice.


But this is what you need to hear. In New York, we will likely be sheltering in place within the next 48 hours. That will grind most revenue to zero or near it, in paint stores around the city. Other parts of the country will have similar fates. Maybe all of us will?


I cannot make or even help you make the “local” decisions of who to keep and who to let go. That awful work is on you. You know your business best and only you can decide which employees, when you consider compensation and performance, gives you the best chance for future success.


It’s going to be really difficult, I’m sorry.


You should be as generous (and as sensitive) as you can be, while protecting your long-term viability as a business. Make sure to communicate clearly what your plan is so all know that they are being treated fairly. I hope that knowing that the federal government is already stepping into some of the void with payments for those unemployed by this disaster, makes doing this a little easier.


I could write all night because we still need to cover vendors and landlords! But I’d like to leave you with one final thought and get back to how to handle your vendors the next time we are together.


I am hoping to gather some useful data on what independents are thinking about their businesses at this time as well as what their needs MAY BE in the coming months. I plan on sharing this information and hope that it becomes the foundation of conversations with manufacturers on how they can best support the channel at this time. I need a FEW HUNDRED retailers to take this 90 second survey please??? It’s important!



Also, companies have started to share their plans for managing these challenges. As I see them, I am going to try and post them here or on LinkedIn so please, follow along to stay informed.



BE SAFE and follow best practices for good health and we will all see each other at a trade show soon!


Mark




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