The COVID-19 pandemic turned the US economy on the circumference of a dime. Ever since the hit, businesses of all sizes have been navigating their ships through the new paradigm of “essential” vs. “non-essential” and otherwise striving to stay afloat in non-ordinary course waters. Stories of those pivoting to survive and maybe even thrive in the initial months of the pandemic continue to flood the media outlets; distilleries reincarnating as hand sanitizer manufacturers, restaurants serving take-out with curbside pick-up or slowly opening up again under strict guidelines, local bars turning into distributors of essentials, yoga studios featuring online classes, consignment stores turning to e-commerce, and even nightclub owners throwing virtual parties. The proverb, “Necessity is the mother of invention” proves its salt yet again.
What are some of the factors connecting sidelined businesses to continued survival and even success during these times?
The key seems to be bridging the gap with immediate cash flow and innovating for a still uncertain future. Most companies have, at this point and with varied success, attempted to address their immediate operational needs through a combination of ongoing internal reorganization and review, application for Federal stimulus programs and the filing of insurance claims. The success of these options is not uniform and continues to unfold, but the options themselves endure as prudent measures.
Many businesses have to date applied for and received funding from the Federal Paycheck Protection Program (“PPP”) established by the Coronavirus Aid, Relief and Economic Security Act signed into law in late March. The PPP has authorized distribution of $600+ billion in loans to small and midsized businesses, allowing loan forgiveness so long as 75% of the funds are used toward payroll expenses. The PPP was modified in early June by the Paycheck Protection Program Flexibility Act (“PPPFA”), which addresses the fact that certain businesses have not been able to spend PPP funds on payroll while closed as required by state and local orders. The PPPFA, among other things, extends the time period allowed for businesses to spend PPP proceeds to 24 weeks (rather than 8 weeks under the PPP). It also reduces the percentage of loan proceeds that must be spent on payroll costs from 75% to 60%, which has enabled businesses to spend more PPP funds on overhead and other expenses. In the latest development, President Trump over the July 4 weekend formally extended the application period for the PPP until August 8, as over $130 billion is still available in the fund. The program was set to close but has resumed accepting applications. Additional stimulus program rollouts, which might look something like the $3 trillion proposed House-sponsored bill H.R. 6800 a/k/a HEROES Act, could include additional funding for small businesses and an additional $10 billion for COVID-19 emergency assistance through Economic Injury Disaster Loan grants. Businesses are advised to stay on top of ongoing stimulus developments in order to quickly act on programs for which they might be eligible.
Now is also the time for businesses to review and evaluate their contracts to determine the applicability and scope of force majeure provisions in light of COVID-19. Many contracts contain force majeure language to excuse performance in light of unforeseen events beyond the control of the contracting parties. Though most force majeure clauses contemplate eventualities like war, civil strife, riots and natural disasters, some specifically call out epidemics and governmental restrictions. Added to this, some provisions do not excuse payment obligations regardless of the force majeure trigger. Companies are best served by conferring with legal counsel to interpret these contract-specific nuances and the standards by which they may be invoked, especially with respect to contracts and relationships deemed material to the continuation of the company’s business.
Many businesses have also attempted to submit business interruption insurance claims in light of the COVID-19 crisis and income losses suffered. Business interruption insurance (which replaces income during suspension of a company’s operations) has commanded the current spotlight, in large part because insurers are largely refusing to provide payment for claims that are being made. The insurance typically covers losses suffered as a result of measurable physical damage to the business premises. Coverage is typically subject to various prerequisites and many such policies specifically exclude coverage for income loss due to viral contamination. The current situation surrounding business interruption insurance remains in flux. Lawmakers in certain states (New York State included) have proposed legislation to require insurers to cover COVID-19 related losses via business interruption insurance, but insurers are resisting those legislative efforts. In fact, due to solvency concerns, state insurance regulators recently urged Congress to forego requiring the insurance industry to cover COVID-19 related claims under policies that specifically exclude coverage for communicable diseases. These ongoing developments only highlight the importance for companies to check with their insurance providers to clarify policies and available coverage. If a company can successfully claim, it should do everything it can to be ready to act.
As discussed, businesses are, and should continue, to look inward to examine and fortify the operational bones of the ship as they sail the waters in this pandemic. But what else can they do to survive and perhaps even thrive as we find our way to a post-COVID-19 world? Marketing professionals are offering some insight.
Danielle Milner, founding partner and brand strategist of Michigan branding studio Do Better, writes about rebranding in the midst of the COVID-19 crisis. According to Milner, if a company is already set in its mission, market fit and long-term goals, then rebranding in response to the COVID-19 climate might involve shifting company resources or focusing on a special project (i.e., a distillery focusing on hand sanitizer). A company outside this profile trying to rebrand might feel like it’s switching horses midstream, and in such case, Milner advises to focus on community above all else. “At the center of marketing is sales and sales doesn’t sell right now. The best place to shift messaging to address this is around brand. Talk about who you are and the value that creates for the community rather than cheapening that with an offer.” Pivoting is all about positioning the business for post-COVID-19 times, and a company’s communication strategy is crucial to crossing that bridge. Milner advises companies to focus on how they want people to feel rather than what action they want them to take. She advises to think of word choice, tone and choice of medium. The oft-used phrase “We’re all in this together” comes to mind – the message is community-based, hopeful and calm in the midst of the storm. Strengthening connection with one’s customer or client base while rooted in this message supports that ethos of authenticity and unity that so many of us need, especially now. Major marketers to local coffee shops and beauty salons are taking notice and shifting as we go. This language, this message and this form of rebranding seem to be the compass pointing us to sunnier skies. And so we keep sailing.
Edward Clough, Esq. “Surviving the Covid-19 Economy.” cloughlegal.biz, May 14, 2020.
Laura K. Cowan. “How to Rebrand or Pivot a Company in the Age of COVID-19.” Cronicle Tech News, April 29, 2020.
Ring Central Team. “How 10 Businesses Are Adapting and Evolving in the Age of COVID-19.” Ring Central Small Business Blog.
Marian Salzman. “The COVID Pivot: Small Business Shifts With The Times.” Forbes, April 24, 2020.
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