Letter from the Editor: Taking Stock

12
R.J. King
R.J. King

Seldom has an event upended the operations of every business. The impact of COVID-19 spared no one.

Not since World War II has an international crisis affected so many people. While some have suggested that government-mandated stay-at-home orders were unnecessary, especially in rural areas, consider what could have happened had the virus spread unheeded.

Hospitals and medical centers wouldn’t have been able to handle the rush of people needing treatment. As a result, many of those unable to access medical care would have rebelled out of fear and anxiety. The alternative of keeping everyone at home, while alarming at first, proved to be the right remedy for dealing with the highly contagious pathogen.

Looking back, though, some stay-at-home orders were too long in duration. Florida, Georgia, Texas, and other states that reopened their economies within two months of the outbreak proved to have made the right call. In Michigan, the argument that home confinement rules were too long and too arbitrary is open to debate.

Rather than blaming those in charge, which the mainstream media is the undisputed master of, let’s focus on the road ahead. Businesses that are well-run, have plenty of cash reserves, and can pivot quickly, have the best chance of riding out a storm. Other companies saw opportunity in the crisis and developed new products and services. Quite a few, on the other hand, closed up shop because their business models weren’t sustainable.

As we assess what’s left, an axiom of economics that supply always follows demand has never been more accurate. How many companies, from the Big Three automakers to small apparel enterprises, shifted their business model seemingly overnight to provide for personal protection equipment? And once the demand for respirators, ventilators, face shields, and masks is met on our shores, there’s an entire world in need of medical supplies that can be put to use immediately or stockpiled for another crisis (that hopefully never arrives).

As unsettling as some hours have been through the crisis, the process of rebuilding our economy now moves to the forefront. Social distancing guidelines won’t be abandoned anytime soon, whether by government orders or concerned individuals, which will put constraints on service businesses that rely on catering to groups of people such as restaurants, concert venues, and sporting events.

For the most part, these companies will adapt. Or, better put, as patrons we’ll adapt. Keep in mind a restaurant that’s operating at half capacity doesn’t have the same expenses as one that’s fully operational — but that doesn’t mean the rent will be lower. The trick to a successful outcome in this situation will be how landlords respond to negotiating new or deferred rent payments with their tenants.

If they demand too much in light of the current business climate, the prospect of generating zero rent looms large. In this case, if the landlord is paying off a note, the lender will be impacted, as well.

In large part, smart businesses will find a way to survive. After all, this isn’t the first time the world has dealt with a global pandemic. The 1917 Spanish flu was especially contagious, just like COVID-19, but a century ago the world lacked the technology and medical remedies that would have spared the lives of millions of people.

Still, what followed was amazing. If history repeats itself, the Roaring Twenties would be a welcome sequel to what we’ve all just endured.

— R.J. King, rjking@dbusiness.com

Facebook Comments