During the crisis, restaurateur Emad Yacoub has focused on supporting staff and controlling cash flow
Two entrepreneurs who have pulled through tough times share their strategies for riding out the coronavirus pandemic
Emad Yacoub has survived downturns before. It was very rough during the 2008 world meltdown triggered by the collapse of the U.S. housing market. But even in the worst of times, his Glowbal dining empire, which today consists of nine mostly high-end restaurants in downtown Vancouver, still had some revenue.
“People who had ordered steak ordered pasta,” Yacoub says. “People who used to order a $200 bottle of wine would have a glass.” He’s always prepared himself for disaster, working to maintain a two-month cushion of money for when it’s needed. It’s all about the cash flow.
But the near-shutdown of many parts of the economy that accelerated through late February and March as the global COVID-19 pandemic tide reached B.C., with governments ordering businesses closed and people to stay home as much as possible, is something neither Yacoub nor anyone else has experienced before. In spite of that, he did the smart things that those who have survived or watched downturns and near-failures in business say are necessary.
At the beginning of March, after he lost $400,000 worth of reservations in the last four days of February, Yacoub started negotiating with his many landlords, to whom he pays a collective $350,000 a month in normal times. Most agreed to let him pay only half rent for three months and defer the rest until July. “So then we cut the damage in half.” Then Yacoub told his suppliers he would be extending his invoice payments to 45 days, again, to control cash flow.
That was before March 20, when the provincial health officer ordered all restaurants and bars closed except for takeout and delivery. Yacoub looked at what to do for his 900 staff, to whom he pays $1 million a month in wages and benefits. He paid out all of their vacation time owing to give them as much money as he could, then laid off almost all so they could collect employment insurance.
For some, Yacoub tried to find work within the businesses. He’s renovating two restaurants, so he convinced his contractors to hire a few staff as general labourers. Glowbal shifted to providing meals for hospitals and care homes, with donations from others and itself, then tested out the new takeout world in April before reopening five dining rooms late last month.
And like thousands, Yacoub went to his bank to ask what government support would be available. Since then, Ottawa has announced several programs to help small businesses, including a $40,000 zero-interest loan with a $10,000 forgivable portion; one that will pay 75 percent of retained employees’ wages; and a third program to give landlords half the missing rent.
All of that kind of planning is exactly what Huey Lee, who specializes in corporate restructurings and turnarounds at accounting firm KPMG, was taking dozens of his clients through during the spring.
Lee says business operators call him freaking out about two things: “I don’t have enough cash” and “What do I do with my employees?” At first, with the almost science fiction–like situation of a global shutdown happening, companies can feel like an unknowable black hole has opened up beneath them. But there are numbers owners can start attaching to reality.
If they’re planning for months of impaired operations or zero revenue, what does that actually mean? Add up the building, employee and supplies costs. Then calculate the survival numbers, says Lee. “What is the bare minimum I need so, when this passes, I will be ready?” From there, a business owner can establish what their company’s cash resources are and the gap between that and what’s needed.
In late March, Lee was helping clients get that spreadsheet ready for their banks so that, the minute the details of federal aid for businesses were announced, they would be ready. One warning he was giving to clients, though: If your business wasn’t viable before the global crash, any federal aid probably won’t help. “If they were a viable company, the application would be considered,” Lee says. “But this isn’t a bailout. It’s a bit of a shock absorber.”
Finally, Lee notes, the companies that he’s seen make it back from the brink do two important things. First, they don’t try to pretend nothing is happening. “Take it head-on. Don’t put your head in the sand.” And they’re very transparent and straightforward with everyone around them: their lenders, suppliers, landlords and employees.
All of those steps hold for both large and small businesses. Yvonne Hogenes, who has run a women’s clothing store in Cloverdale for 22 years, is following that path, having survived 2008’s recession.
“I’ve lived through these things, and the worst move is a knee-jerk response,” says Hogenes, whose Malary’s Fashion Network stocks Canadian and European designers as well as a line of custom-produced bras that she manufactures. She readied herself by reducing staff hours and calculating her losses if she has minimal or no revenue for months.
Hogenes says this round of economic shock, while far worse, is better in one way because at least governments are offering multiple kinds of help. Last time, she and her husband made it through by using $100,000 of their retirement savings. “We were left to ourselves to figure it out.”
There’s one last thing that savvy business owners are doing, as hard as it might seem when it feels like the world is crashing. Opening again. During the last downturn, which hit the construction industry especially hard, developers spent the limbo period getting projects ready to go the minute there was an uptick. That’s what Yacoub is planning for. “I think people will go out like crazy when this is over.”
That depends on how the world evolves in the next year. Yacoub is hoping for more normalcy by July, when Vancouver typically starts seeing 250,000 summer cruise-ship passengers. They won’t be here, nor will many other tourists. So it’s all riding on how much people in B.C. are willing to dine out and shop on their home turf.