COVID-19 Economic Impact on the Printing Industry
This page features updates as it pertains to COVID-19 and the Economy. Topics covered include: how the virus is affecting the economy; how Washington and the Federal Reserve are responding; what’s working (and what isn’t); what is likely next and how printing companies can protect themselves from the crisis and prepare for the upturn that will follow.
Updated May 19, 2020 @ 1:50 PM
Marketing During the COVID-19 Crisis
How do you market at a time like this? What’s appropriate and effective? And how should we market as the economic lockdown is gradually lifted?
The experts I’ve read agree that, rather than promote our capabilities, COVID-19 marketing should establish us as a resource for helping clients through the crisis. For example, Kristin Harold, author of “Coronavirus Marketing Strategy Checklist for Small Businesses,” impactbnd.com, recommends we share our COVID-19 lessons learned with clients. Maybe something we’ve learned about protecting employee health, applying for a PPP or SBA loan, a local source of aid, what to do or not to do would be valuable to them. Encourage employees, including furloughed employees, to share their lessons learned. Create blogs and videos to post on the company website. If even one piece of intelligence helps the client, we’ve distinguished ourselves.
Harold’s rule for COVID-19 marketing: “Ask yourself: Is this going to help my customers right now?” If the answer is yes, go for if. It it’s no, skip it.
Mae Rice, author of “Marketing During COVID-19: Why Every Company on Earth Is Emailing Us About COVID-19,” builtin.com, adds that marketing should brand us “as reliable, sanitary and ethical — descriptors consumers gravitate toward right now.” It should also focus on deepening relationships with our best clients, not prospecting or lead generation. Rice warns that marketing to companies with which we do not have a close relationship comes off as opportunistic and insensitive.
As the economy reopens, businesses will need to rebuild. That will take a lot more than flipping the sign on the front door from closed to open. It will take multi-media business-recovery programs to announce the reopening and to convince clients and prospects that their facilities are sanitary and health guidelines are clear to all on site. The programs will have to be updated as guidelines change. Print, including direct mail, signs, posters, and graphics, should be a big part of them.
Let’s position ourselves as the experts who can create the business-recovery programs that will help our clients get their clients back in the door. As discussed in a previous post, “Protecting Our Companies from COVID-19,” using social media to observe, listen, and learn can get us intelligence we’ll need to craft a program specific to a client’s needs and circumstances.
The bottom line: Marketing focused on getting clients through the COVID-19 crisis and up to speed when it’s over is entirely appropriate. And it’s a lot more effective than casually touching base ow and then, or even worse, going radio silent.
Updated April 20, 2020 @ 9:45 AM
Protecting Our Companies from COVID-19
COVID-19 is an existential threat to our businesses. How do we beat it? Three Harvard Business Review articles, “How Retailers Can Reach Consumers Who Aren't Spending,” “A Way Forward for Small Businesses,” and “Lead Your Sales Team Through Uncertain Times,” offer recommendations
All emphasize that we can’t just hunker down and, while essential, cash flow management, cost management, adherence to CDC health guidelines, and knowledge of government aid programs are not enough. To make it through and be ready to go on the other side, we must adapt to major changes in how business gets done, remembering that even when the crisis is over, things are not going back to the way they were.
Start with customers. We need current, detailed, actionable intelligence on how COVID-19 is affecting them and how they are responding. Use social media to get it. Join their LinkedIn networks, Facebook networks, and the forums they participate in — not to sell but to listen, observe, and learn. As stated in “How Retailers Can Reach Consumers Who Aren't Spending”: “Social distancing has resulted in a huge spike in social media traffic. If that is where your customers are, that is where you want to be.”
Take what we’re leaning and connect the dots. What looks like an opportunity? How can we most help right now? How are client needs, preferences, and practices changing and which changes are likely to continue after the pandemic? For example, even when social distancing has eased, they may still want to do more business over the Web. So beef up online sales, marketing, product demonstration, and educational/advisory capabilities. Think YouTube instead of face-to-face.
The bottom line, according to “A Way Forward for Small Businesses”: “Your short-term cash flow depends on providing them [customers] with goods and services during the crisis. Your long-term viability depends on understanding how their needs will be different when the pandemic is over.” Effective use of social media gives us a leg up on both.
Focus also on maintaining ties with your most valuable employees. In “Loans and Layoffs” we presented ways to avoid layoffs. But if we have to let some of our best go, the objective immediately becomes ensuring the separation doesn’t become permanent, because recovery will be a lot harder without them. Discuss the generous unemployment benefits authorized by the CARES Act. (Some economists worry the benefits are so generous they will hinder recovery by encouraging people to stay on unemployment rather than return to work. See “Congress Can Still Save the Recovery,” Casey B. Mulligan, Brian Blasé, The Wall Street Journal, April 8, 2020.) Discuss local sources of aid, private as well as public. And discuss everything the company is doing to remain viable and maximize the chances that their jobs will be waiting for them when the crisis is over. Quoting “A Way Forward for Small Businesses”: “The key here is to focus on the long term and to be human … Make sure that the decision [to separate] feels mutual and temporary. If you do have to make some tough decisions about who you want to keep, focus your attention on retaining people who feel like the best fit and who really care about being part of your company.”
Among the recommendations in “Lead Your Sales Team Through Uncertain Times”:
- Don’t chase just any business. Cash is extraordinarily tight. Nevertheless, instead of increasing sales calls “rigorously drive your strategy through the sales organization. Make sure your sales team is going after your optimal target client, in terms of scope, budget, the value of your offerings, and other factors that define a successful client for your company … A bad prospect never makes for a good client, and under pressure, sales professionals can be loath to let go of any opportunity that reflects even a little interest.”
- Don’t increase reporting requirements. Focus on selling to optimal clients, not on completing spreadsheets and reports. “Maintain a strong dashboard of leading indicators that provide predictive measures of success at each stage of the sales process.” Examples include “new opportunities at each stage, the value of opportunities at each stage, and the volume of opportunities progressing from each stage to the next.”
- Don’t lose focus on the early stages of the pipeline. Sure, we need to close deals that are “close to cash.” But not at the expense of missing opportunities during the early stages of the sales process: “It’s here where you have the greatest potential for strengthening the business and minimizing the effects of a recession. During the early stages, additional needs are identified, and the scope of an opportunity can be expanded. It’s the front end of the sales process that allows you to create value and ultimately set yourself apart from the competition.”
In short, we can’t wait for another round of government stimulus. We have to act now. Go to hbr.org and downloaded the articles referenced. Pick one of the ideas they recommend and get started. You will also find a fourth article worth reading. Its title — “Don’t Let Uncertainty Paralyze You” — is among the best advice of all.
Updated April 9, 2020 @ 9:50 AM
Breaking Through the PPP Logjam
Problems rolling out the Paycheck Protection Program (PPP) were inevitable. The program is big and complex. And it was assembled quickly to address what for many small businesses is an existential threat.
Rather than worry about who’s at fault, let’s focus on getting around the problems and accessing the lifeline PPP was created to provide. Here are some ideas:
1. Apply through multiple banks. Some banks still are not processing applications efficiently. And many are giving priority to customers with a loan or credit card in addition to a commercial account. That wasn’t supposed to happen, as Senator Marco Rubio made clear in a recent tweet:
“The requirement that a #SmallBusiness not just have a business account but also a loan or credit card is NOT in the law we wrote & passed or in the regulations. They should drop it. The money is guaranteed by fed.govt.”
But it is happening. Moreover, as Brit Morse warns in “Applying for Covid-Relief Loans? Here Are 4 Ways to Prepare,” inc.com, “just because a lender has accepted your application, that doesn't mean it will authorize your loan. So, go ahead and hedge your bets” by applying through multiple lenders.
2. Apply through the most active SBA 7(a) lenders. These financial institutions specialize in SBA small-business loans and so are well prepared to process PPP applications. The top 100 by loan volume are listed on the SBA website.
3. Explore other SBA loan options. Programs include the Economic Injury Disaster Loan Advance of up to $10,000, Economic Injury Disaster Loans of up to $2 million, and Express Bridge Loans of up to $25,000. See our post, “Accessing CARES Act Loans,” for details.
Even if you don’t plan to apply for a PPP loan, consider preparing an application anyway. With business conditions so erratic, you never know. In “How to Submit Your SBA PPP Loan Application and Calculate the Loan Amount,” in Entrepreneur, Mat Sorenson walks us through the process.
Sorenson advises completing the SBA Paycheck Protection Program loan application even though most banks are using an online application. That way, you will be prepared to move quickly should you decide to apply.
The loan amount is determined by multiplying your company’s average monthly payroll over the prior 12 months by 2.5. But what’s included in payroll? Sorenson answers in detail: salaries, wages, commission, and tips; vacation, medical, parental leave pay, and sick pay; payments for group healthcare benefits, including insurance premiums paid; and employer and employee contributions to retirement funds. (He even explains that contributions to post-tax Roth funds are treated differently from contributions to the more common pre-tax funds.) Concerning payroll taxes, state and local payroll taxes are included but federal FICA taxes are not.
And remember the advice of Cameron Albert-Deitch, author of “The Paycheck Protection Program: Chaos Begins,” in Inc: “Don't assume that because you've applied, your application will be processed or funded. A number of online financial firms, for example, are collecting applications. But many haven't yet been approved to make Paycheck Protection loans themselves. In the meantime, many companies are packaging up applications hoping to sell them to banks in bulk.”
Congress will allocate more money to the Paycheck Protection Program. They know the original $349 billion is not going to be nearly enough, given how rapidly the economy is contracting. Our job is to draw on resources such as the ones above to make sure we have timely, maximum access to funds, whatever the glitches.
Updated April 6, 2020 @ 9:25 AM
Recession? Or Depression?
This quarter GDP will decline at a 34.0% annual rate, according to Goldman Sachs, and the unemployment rate will reach 32.0%, according to an economist at the Federal Reserve Bank of St. Louis. Those are depression numbers. And as shocking as they are, initial claims for unemployment benefits suggest we could see them: During the two weeks ending March 28, claims jumped from 282,000 to 6.6 million, approximately 10 times the previous record high of 695,000.
When will the contraction moderate? When will recovery begin? And what kind of recovery can we expect? It all depends on when propagation of COVID-19 slows enough to ease social distancing. Even the world’s leading epidemiologists can’t put a date on that.
We do know that our margin for error is exceedingly thin. The longer we keep the economy locked down, the greater the risk of moving from recession to depression. But open up too early, and we risk even wider and more rapid spread of COVID-19.
We also know that testing is the answer. We’ve come up terribly short there. But tests far superior to what we have been using are on the way. They will be easy to administer, producing results in hours or even minutes, not days. One will identify the infected even before they show symptoms, while another will identify those who have developed immunity. Administering the tests to statistically significant random samples of the population will yield the facts and risk assessments we need to best decide when, where, and how quickly to liberate the economy.
On the economic front, it’s all about aid and stimulus, both fiscal and monetary. The $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) correctly focused on job #1: get households and business a lifeline. We discussed the specifics in previous posts: the Paycheck Protection Program to provide government-guaranteed loans with forgiveness provisions to small business; cash payments to approximately 140 million Americas; and substantial expansion of unemployment insurance, including increased benefits, wider eligibility, and suspension of waiting periods and work-search requirements. Expect key provisions, including small business loans — $377 billion isn’t going to be enough — and loan forgiveness, to be enhanced and extended.
Work on a stimulus package will begin April 20, when Congress returns from recess. Additional aid to state and local governments and to public health (the CARES Act provides about $340 to the former and $154 to the latter); expansion of family and medical leave provided in the Families First Coronavirus Response Act; and investment in a broad range of infrastructure, including broadband, energy, transportation, housing, schools, and water purification, have bipartisan support. Additional proposals include a payroll-tax holiday, expansion of the Earned Income Tax Credit, and expansion of tax credits for child and dependent care. Deregulation to promote quick, efficient spending of the stimulus funds will also be considered. We’ll discuss the proposal in future posts as its details emerge.
Add unprecedented monetary stimulus from the Fed. There is quantitative easing and support for the commercial paper markets and repurchase markets that are so important to public corporations. There’s support for money markets, the Exchange Stabilization Fund (an emergency reserve fund to stabilize the international value of the American dollar), and essential global supply chains. The Fed is even lending directly to American businesses, acting as a commercial bank as well as a central bank. Their policies are arcane and go by long names such as Term Asset-Backed Securities Loan Facility and Primary Market Corporate Credit Facility. But they are just as important as fiscal policy: Without the Fed’s aggressive actions as lender of last resort, both domestic and global markets credit markets would have seized up and we’d be heading into depression.
All this aid and stimulus will contribute to recovery. Some prominent economists expect recovery to begin next quarter, as social distancing and warm, humid summer weather slow propagation of COVID-19. But that’s increasingly unlikely, given how deeply the pandemic has damaged the economy. Based on the best information available — and that changes daily — the most favorable outcome is contraction slowing in the third quarter, with recovery beginning in the fourth quarter and accelerating in 2021.
And we aren’t heading for depression. We’ll see depression-like numbers this quarter — but not much longer. That’s why annualizing second quarter rates, while valuable for showing how deeply COVID-19 has shocked the economy, is misleading. Contraction at those rates would only continue for a year if we were not doing anything to combat COVID-19 or to stimulate the economy. Comparisons with the Great Depression are also misleading: Back then, unemployment rose to 20% for four years, not for four months. Unprecedented fiscal and monetary stimulus will kick in. And as noted, the superior testing on the way will be a game changer.
What does all this mean for our industry? SGIA/NAPCO COVID-19 Print Business Conditions Indicator Research, to be launched the week of April 12, will tell us. Results will be presented by segment (graphic and sign production, commercial printing, apparel decoration, etc.) and include percent change in sales, an index of coincident business indicators, and an index of leading business indicators. Come to https://www.sgia.org/resources/covid-19-test for bi-weekly updates on the research results.
And keep coming back for direction on how to protect your company from the pandemic and prepare for the upturn that will follow. After all, there’s plenty we can do beyond waiting for stimulus to kick in.
Updated April 1, 2020 @ 11:30 AM
Effective Crisis Communication
Let’s not depend on federal stimulus and aid to make things right. Let’s move aggressively to protect our companies. In “Loans and Layoffs” we talked about how we can minimize layoffs, and so qualify for loan forgiveness under the Coronavirus Aid, Relief, and Economic Security Act. This time let’s discuss effective crisis communication.
And let’s begin with our employees, because nothing matters more than keeping them informed and safe. Martin Reeves, Nikolaus Lang, and Philipp Carlsson-Szlezak, authors of “Lead Your Business Through the Coronavirus Crisis,” Harvard Business Review, recommend the following:
- Create an information hub. The authors warn, “don’t assume information creates ‘informedness.’” Employees have access to plenty of information about the virus, but much of it is not particularly helpful or accurate. So create an information hub that includes the most recent federal, state, and local health guidelines; what the company is doing in response to the crisis and why; the aid Washington is providing, how the company will access the aid, and how it will help; state and local sources of support on which employees can draw, etc. The many benefits of the hub include getting the facts out “so time is not wasted clearing up misconceptions.”
- Don’t be afraid to change the message. We worry that frequently changing the message makes us look indecisive and ill-informed. But with so much change and uncertainty, we need to regularly update strategies and tactics. Reinforce that guidance is based on the best information available to date, will be updated as circumstances change, and all updates will be shared with employees.
- Be specific. Take on the tough questions: How is COVID-19 affecting the company? What is the company doing about it? What are management’s priorities? How will the priorities be achieved? But don’t waste time with generalities that leave employees guessing or drawing their own conclusions. Instead, answer as specifically as possible, reinforcing that the answers are based on what we know today and will change as conditions do.
Communication with clients (and prospects) should show you are open, active, and ready to help, according to “How to Protect Your Small Business’s Bottom Line From Coronavirus,” www.insureon.com. Use the company website, social media, email, telephone, and all other communication channels to get that message across. Describe how you are reducing risk, protecting your employees and their families, and contributing to your community.
Contributing to your community is particularly important, according Reeves, Lang, and Carlsson-Szlezak. They call it “embeddedness,” explaining that every company is part of a socioeconomic system. Because of COVID-19, those systems are universally under stress. Turning inward “will create mistrust and damage the business in the longer term.” In contrast, supporting “customers, partners, health care, and social systems in a time of adversity can potentially create lasting goodwill and trust. A key element of dealing with economic stress is to live one’s values precisely when we are most likely to forget them.”
Louis Mosca, author of “Coronavirus & Your Business: 3 Steps To Protect Your Employees & Your Organization,” forbes.com, emphasizes that communication with suppliers should closely monitor the state of delivery channels. Are interruptions likely? If they are, when and how severe? What are the alternatives? Mosca recommends designating a “point person” to collect this intelligence daily, because conditions are changing that quickly.
Finally, Reeves, Lang, and Carlsson-Szlezak remind us that communication among the management team should be on a “rapid response” cycle. Performance metrics should be collected, evaluated, shared, and acted on immediately because “a crisis doesn’t imply immunity from performance management, and sooner or later markets will judge which companies managed the challenge most effectively.”
With all the upheaval, it’s easy to forget these basics. But practicing them faithfully is essential to both weathering the crisis and coming out stronger.
Updated: March 31, 2020 @ 4:00 PM
Accessing CARES Act Loans
Washington came through with the money. Now how do we access it? Here’s a summary of the small-business loan programs included in or enhanced by the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Paycheck Protection Program
- Companies with 500 employees or fewer, operating on or prior to February 15, 2020. Companies with more than 500 employees in industries that meet certain SBA criteria are also eligible.
- Loan Amount: Up to $10 million, based on payroll costs. Payroll costs include total W2 wages and salaries (capped at $100,000 per year per employee), health insurance costs, and employer 401k contributions.
- Loan Structure: Up to 10 years at a maximum interest rate of 4%. No origination fees, and the SBA will instruct lenders to defer principal and interest payments for between six and 12 months.
- Qualified Uses: Loans can be used to cover payroll, healthcare benefits, paid sick leave, mortgage interest, rent, utilities, and interest on some debt. Loans apply to costs incurred through June 30, 2020, retroactive to February 15, 2020.
- Loan Forgiveness. An eight-week loan forgiveness period begins the day a loan is originated. A loan will be eligible for forgiveness (conversion to a grant) if it has been used to cover the qualified expenses listed above. Borrowers will have to document that it was. And forgiveness will be reduced in proportion to the reduction in average employment during the forgiveness period compared with average employment during the same period of 2019. (Reductions in wages and salaries exceeding 25% of a company’s total wages and salaries will also reduce forgiveness rates.)
- Hiring Back. Borrowers who rehire workers or make up for reductions in wages and salaries by June 30, 2020 will still be eligible for at least some loan forgiveness. (See our previous post, “Loans and Layoffs,” for tips on avoiding layoffs and maintaining eligibility for forgiveness.)
- Borrower Requirements. Documentation that the loan is necessary because of economic disruption caused by the coronavirus. No collateral or personal guarantees are required.
- Applying for a Loan: The SBA is administering the Paycheck Protection Program through 1,800 approved lenders. Contact your bank to see if it is in the network. If it isn’t, contact the SBA to find a lender who is by emailing email@example.com, calling 800-827-5722, or going here.
In any case, begin getting your company’s tax returns, financial statements, and payroll data together (as mentioned, payroll costs will be a major factor in the loan application and forgiveness process), so you can apply as soon as you have identified an SBA-approved lender.
Small Business Administration Loans
In response to the pandemic, Congress has significantly expanded SBA loan programs and streamlined access to them. Businesses that currently have a SBA disaster assistance loan may still be eligible for a Paycheck Protection Program. Moreover, the SBA has deferred payments on all existing disaster loans through December 31, 2020. Learn more and apply for SBA loans here.
- Economic Injury Disaster Loans (EIDL): Working capital loans of up to $2 million to help small businesses overcome the temporary loss of revenue due to COVID-19. These loans cannot be used for business expansion, bonuses, etc.
- Economic Injury Disaster Loan Advance: Small business owners are now eligible for an EIDL advance of up to $10,000. Owners must first apply for an EIDL and then request the advance. The advance may be used to cover payroll, sick leave, rents, and operational costs. The funds will be made available within three days of application even if your application for a full EIDL loan is denied.
- SBA Debt Relief and Enhanced Debt Relief: The SBA will pay the principal and interest on 7(a) loans issued prior to September 27, 2020, as well as principal and interest on current 7(a) loans for six months for small businesses impacted by COVID-19.
- SBA Express Bridge Loans: Allows small businesses that have a relationship with an SBA Express Lender to quickly access up to $25,000. Bridge loan provides relief while applying for an EIDL. Apply by contacting your SBA District Office.
The loans carry many provisions that must be evaluated carefully before committing. But tapping into Washington’s unprecedented effort to help small businesses access the aid they need quickly and efficiently is worth the effort.
Updated: March 27, 2020 @ 1:30 PM
Loans and Layoffs
The stimulus bill passed by the Senate and working through the House includes expansion of Small Business Administration loans and creation of the Federal Reserve’s Main Street Business Lending Program, described by the Fed as extending credit to “eligible small-and-medium sized businesses, complementing efforts by the SBA.”
We don’t have the details or confirmation yet. But reports are that the final bill will include loan forgiveness if a company minimizes layoffs.
Why wait for confirmation? Stay a step ahead by drawing on resources such as, “The Coronavirus Crisis Doesn’t Have to Lead to Layoffs,” Atta Tarki, Paul Levy, Jeff Weiss, Harvard Business Review.
The authors make two major points. First, consider all options before resorting to layoffs. What might work? A four-day workweek? Half-time work? Unpaid leave? Furloughing? Temporarily suspending payments into retirement funds? Where might we be able to save before laying off?
Second, ask employees for their ideas. Emphasis that the goal is to minimize layoffs, so we’re looking for ideas “with lower capital requirements, lower risk profiles, proven positive impact on cash flow, higher chances of saving jobs, and so on.” We will not be losing control. Rather, we will be building support for the actions we eventually take and goodwill based on our efforts to keep our people employed. In the authors’ opinion, it will not be a hard sell: “One common misconception is that most people primarily look out for themselves in turbulent times. On the contrary, our experience is that during a crisis, individuals overwhelmingly prefer to make sacrifices if it means that their company can help more of their colleagues keep their jobs.”
Remember, there will be an economic rebound after the crisis — likely a sharp one, given the amount of stimulus Washington and the Fed are creating. Having our workforce intact will position us to participating fully in the upturn.
Updated: March 26, 2020 @ Noon
Not Just Stimulus — Aid
On March 25 the Senate passed a $2 trillion fiscal stimulus package. To be effective, the package has to do more than boost spending and hiring: It has to provide immediate income support — whether stimulative or not — to the tens of millions who can’t get back to work because it isn’t biologically safe to be around their coworkers. Among the bill’s key components:
- Expanded unemployment insurance: $600 per week increase in benefits for up to four months. Eligibility expanded to include gig workers and freelancers. Waiting periods and work-search requirements eliminated.
- Direct loans to small businesses: $350 billion to support the Fed’s Main Street Business Lending Program that will provide loans to eligible small and midsize businesses.
- Direct cash payments: $1,200 to adults with adjusted gross incomes of $75, 000 or less, $2,400 to married couples with adjusted gross incomes of $150,000 or less, and $500 per child, with payments reduced at higher incomes. Traditionally, one-time payments — helicopter money — haven’t been effective in stimulating the economy (the money is saved or used to pay debt). But, again, this is about more than stimulus.
- Funds for the nation’s healthcare system: $130 billion for hospitals and $150 billion to the state and local governments that administer vital healthcare programs.
Of course, nothing is final until the Senate bill is passed by the House and signed by President Trump. We will examine the details in future posts. But it looks like Washington nailed it, providing both economic stimulus and a direct, immediate boost to household income, business cash flow, and the healthcare system on which every American depends.
Andrew D. Paparozzi joined PRINTING United Alliance as Chief Economist in 2018. He analyzes and reports on economic, technological, social and demographic trends that will define the printing industry’s future. His most important responsibility, however, is being an observer of the industry by listening to the issues and concerns of company owners, executives and managers.
Previously, he worked 31 years at the National Association for Printing Leadership. He has also taught mathematics, statistics and economics at various colleges.
Andrew holds a Bachelor’s degree in economics f rom Boston College and a Master’s degree in economics — with concentrations in econometrics and public finance — from Columbia University.