The #most-unusual-year-ever is almost over. Will we ever see a year as disruptive as 2020 in our lifetimes? Well, maybe. And, it might be right around the corner. Just when you thought our world couldn't get any wackier, 2021 is shaping up to be a doozy. Buckle up buckaroo, and get back in line. The ride isn't over.
But first, let's quickly recap the 2020 madness:
- Millions of people lost their jobs, with unemployment peaking at 14.4% in April
- We all had to drastically change how we lived our lives
- And…a coronavirus nearly knocked out our economy
Phew! And 2020 isn't even over.
Now, we have seen some positive signs recently; however, it's uncertain how our lives will continue to be impacted over time.
Unfortunately, this unknown future also applies to business.
But, alas, as we've all learned from the school of hard knocks, uncertain times can create unique opportunities.
That's what we all should have in mind as we think about 2021. And to help get those creative brain muscles moving, here are some ideas to consider:
Acquire a Business
Some companies are always in acquisition mode, but most are not. If your firm doesn't typically look to grow through acquisition, you may want to consider a strategy change. A lot of businesses are distressed right now. Indeed, the number of companies filing for bankruptcy protection is increasing by the day. Many of these firms are actively looking for a buyer. But even companies that are solvent may be more open than ever to being acquired.
Acquisitions are always challenging, but the benefits can absolutely outweigh the hassle of merging two or more companies, especially if the purchase price is attractive.
Taking the leap to acquire a business – especially one that has been negatively impacted by the pandemic – is a risk. But you can be certain that our economy will recover in time. That's not a guarantee that the acquisition target will recover, but it does lower the risk.
Drop an Unprofitable Business Line
Students of business will recall GE's former CEO Jack Welch's strategy of "fix, close, or sell." In three years from 1983-1985, he disposed of 71 underperforming business units. Welch turned a struggling GE into a worldwide juggernaut. During his 20-year tenure, GE's revenue rose from $28 billion to over $170 billion.
More recently, in July 2020, Coca-Cola announced that it was discontinuing its Odwalla juice smoothie brand. The company has also shuttered hundreds of other low-profit items, and more are rumored to be on the chopping block. Fresca and Cherry Coke (Noooo!) are among them. During the second-quarter earnings call, CEO James Quincey said, "We are shifting to prioritizing fewer but bigger and stronger brands across various consumer needs."
If your company has an underperforming business line, this is a good time to consider closing or selling it. It can be a difficult and painful decision to make, but putting more time and energy into your top performers is often the right approach.
Buy a Building
Similar to acquisitions, your company may not have had an interest in buying commercial real estate in the past. It may be time to reconsider this.
The pandemic has disrupted the commercial real estate market. The hardest-hit area, of course, is retail spaces. In the heat of the pandemic, many retailers simply stopped paying rent, including Staples, Subway, and Mattress Firm. Thousands of others have gone out of business, leaving landlords scrambling to try to fill empty units.
Because of the millions of employees forced to work from home, the office space segment is also in trouble. Many companies previously were concerned about whether or not employees could truly be productive while working remotely. Most have found that productivity has not skipped a beat. Thus, thousands of businesses, including Facebook, Twitter, and Square, have switched gears and are now allowing staff to work from home permanently.
The industrial real estate market is different from retail and office space. With e-commerce booming, many companies are actively expanding their warehouse footprint. However, in more depressed markets, warehouse space is readily available. If you are looking to acquire more warehouse space, whether for future needs or investment, you'll need to be selective in your search. The industries most impacted by the pandemic include hospitality, oil and gas, construction, brick-and-mortar retail, and some areas of manufacturing. Start your search with industrial space related to those segments to find the best deals.
Yes, the #most-unusual-year-ever is almost over, but don't expect 2021 to be much different. However, with these strange times comes opportunity. Start thinking about how your business can be opportunistic amidst all of the madness. If your business doesn't normally acquire other companies, this might be a good time to rethink that strategy. If you've been struggling with what to do with that underperforming line of business, this could be the right time to dump it and put more focus on your winners. Finally, whether or not you typically buy commercial real estate, this is a good time to look into it. Yes, with the madness has come opportunity. This is the time to take advantage of it.