COLUMN: Should You Prepare For A Protracted Downturn?

Hi-tech has largely been spared many of the challenges facing most industries as a result of the coronavirus and the forced economic shutdown used to combat the contagiousness of COVID-19. But whether that will be the case if economies worldwide are not allowed to return to normal remains unlikely.

To a large degree, high-tech has benefited from the fact that poorly prepared government agencies and politicians worldwide saw no option other than forcing citizens to quarantine. The run-up in sales of mobile devices, richer networks and videoconferencing technology is part of the proof.

The solution provider community has largely done well selling and supporting the capability to deploy a dispersed work-from-home workforce. But while some of their customers can accomplish their sales and service goals from remote nontouch locations, that’s not true across the board.

With government bailout funds ending, and not unlimited if they are extended, we are soon going to see a jump in job elimination of white-collar workers. If the economy isn’t allowed to fully open soon, the number of furloughed workers is going to skyrocket.

Empty office parks prompted by massive work-from-home initiatives mean local restaurants aren’t operating at capacity. Cars aren’t being driven as they once were, so gas pumps aren’t cranking nor are tires and brakes wearing down. Business at auto repair shops as a result is slow.

Most importantly, the fact that many schools are being closed to in-person instruction is having a huge ripple effect. It limits parents’ ability to work as they once did, in turn reducing the productivity and income or eliminating it. With no school sports, the local sporting goods store that provides uniforms and equipment is heading toward closure.

My point here is that with this pandemic problem unsolved since it escaped from China, small businesses across the country are getting clobbered, and many are closing or on the brink.

To consider the seriousness of this, small business makes up 50 percent of private sector employment and 43 percent of high-tech employment. If you categorize small business as companies with fewer than 500 employees, as the government does, of the roughly 28 million companies in the U.S. only about 18,500 are above that small-business threshold.

The supply chain has been disrupted by all this as well. Roofers are telling customers they have a six-month backlog because they can’t source the materials they need. Bicycle shops are being told by all the major suppliers to not expect any new inventory before April of next year. If you have tried to buy a new household appliance, you know the backorder is months.

The question is what will solution providers, most of which are small businesses as well, face if this goes on much longer?

Nearly every business today is a high-tech consumer. The small local bicycle shop has a point-of-sale system with ordering capabilities and inventory management. Solution providers supply them, and if there are fewer of these shops or if they have less business, so will solution providers at some point.

It’s just smart business to plan for the worst and hope for the best. The best sales team you can muster is an advantage because while there are customers in trouble, there are others that are growing nicely and weathering the storm.

It’s times like these that make it clear how important it is to build a recurring services revenue model. The surge in sales of solutions that cater toward enabling a remote workforce isn’t over and to some degree will continue as companies reexamine real-estate needs.

But this pandemic has and is causing real harm to the economy, and it isn’t going to rebound the day we begin vaccinating the population.