COVID-19 Transition Playbook

COVID-19 TRANSITION PLAYBOOK:

Focused on Today for Tomorrow

citrincooperman.com/infocus/covid-19-transition-playbook | 2020

Focused on Today for Tomorrow The first quarter of 2020 has rapidly pushed us all into unchartered territory.

For the past few years, ideas like disruption, innovation, and change have been used to describe the business climate. While that wasn’t wrong – the true meaning behind these ideas were likely never imagined with the urgency needed for them today. The impact of COVID-19 has hit hard, turning “business as usual” into a foreign concept as business owners are now forced to evolve, transition, and in some cases reinvent themselves at a rapid rate to ensure their survival.

Preparation, planning, and strong leadership is crucial now more than ever to be the difference-maker between success and failure. Tomorrow’s business world will be anything but normal. Every business needs a comprehensive playbook to navigate the types of changes we face today and transition into tomorrow’s reimagined normal.

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FIRST DOWN with the ball on your own 1 yard line: Crisis Management

Governor Cuomo noted that this pandemic, like all crisis situations, brings out the best and the worst in humanity. The same holds true for business – simply put, it puts to the test a business’s model, strength, and ability to adapt and transform. During this first phase, it’s necessary to go back to basics, understand, and evaluate your business operations and priorities, understand your cash flow, liquidity, and access to additional or alternative financing, and make some key decisions. » Do you have a solid business plan for crisis management? » Do you have the right team and coordinated approach? » Is your business model set up to handle a crisis like this? » Can your technology and infrastructure support you? » Is the financial strength of your company strong enough to weather the storm? » Do you have strong relationships in place with the right external advisors?

The crisis management phase is where you must make some key business decisions check your foundation! » First things first – be the leader your people need. Establish a transparent and regular plan for communications to your leadership team and employees. Ensure they have the information they need to remain informed about changes in work-life, tools to aid them if you have moved to a remote work world, and education on health and government resources available to them. Remain present for them – culture and morale will be critical drivers to staying the course and keeping motivation and momentum going in the days, weeks, and likely months ahead. » Focus needs to be placed on your primary business drivers. Regardless of the type or size of business you run – cash flow is king.

This can never be an overused phrase in a crisis management period. The COVID-19 pandemic laid the groundwork for a chain reaction of impact, not only on global health but with every aspect of life as we knew it, including the ability to maintain stable cash

flow models. As a result, businesses must aggressively and consistently increase the speed and execution of billing and never let off the pedal to drive collections. » Consideration needs to be given to the relationship between your revenue and your expenses. Have you assessed what reductions you can make in your expenses while still maintaining the key functions and operations that are essential to keeping your business going? (i.e. talent and workforce assessment, vendor review and assessment, rent negotiations, etc.) » Develop multiple forecast models that project your revenues/expenses under various scenarios so you can stay ahead of the unexpected. More than ever, your company needs to be nimble enough to change the play right at the line of scrimmage. » Have you evaluated and moved forward with eligible government assistance programs (SBA PPP/EIDL), additional funding from current provider, or other alternative financing options?

50 YARD LINE

Recovery & Reinvention History has proven that the key to a successful recovery is preparation. The question then comes – when to begin preparing? The data is telling us the time to prepare is now, to put yourself in the best position to come back faster and stronger.

As the country begins to control COVID-19, your business, in time, will start to gain stability and, with that, give you some room to plan for recovery and perhaps some reinvention considerations. Strong preparation, critical analysis, and decisive action steps are going to be important factors in determining how quickly and effectively your business will be positioned to now begin to move the ball down the field towards a bright future.

Keeping focus on capital expenditure, forecasting, and budget remains critical in this phase to ensure you continue to have a solid foundation to work with. Here is where you may start to see the light at the other end. It’s important to keep momentum going by staying on the offensive towards your future business plans – continue to reassess your business model and make decisions on what revisions will be needed to ensure not only your survival but your potential to thrive. Business owners and their management teams should be looking at multiple factors that comprise their business model including: » Talent assessment and culture review » Compensation planning for owners and employees » Technology and infrastructure assessment » Supply chain modifications and new regulatory guidelines that could impact the way you do business » Vendor and outside advisor reviews » Product and customer assessment » Market and competitive analysis including an assessment of what opportunities may exist for potential acquisitions to strengthen your “re-entry” in what will be the new or “abnormal” normal Decisions will need to be made here to address shifts in your business model to account for what the future of your business may look like based on your internal assessment and external regulatory and environmental factors. Are new guidelines going into effect that could impact your supply chain? Are your operations and risk management processes set up to accommodate business continuity and drive productivity from a distance over an extended or permanent time period? Have you accounted for the human factor?

Are your customer’s buying behaviors changing and are you set up to accommodate this? Are you set up to keep your workforce stable and safe?

Do you have the right data to make the critical decisions you need?

Halftime Adjustments for the Business Owner With all areas of life (health, safety, finance, and business) being shaken by the impact of the COVID crisis, another important question rises to the surface, particularly for business owners. Are your personal, legal, and financial affairs in order? Though it may not seem like an urgent matter with everything else going on, now is really the time to address this very personal and critical issue. If COVID has taught us nothing else, it should teach us that we can never be overly prepared for the unknown variables that the future can bring. Are your generational wealth plans in good shape? Do you have an estate plan in place? Does it need to be reviewed?

Now is also a great time to take advantage of opportunities you may have around gift tax planning. Interest rates are at historic lows as the crisis has had a dramatic effect on valuations of investments and closely-held businesses. The current $11.58M federal estate and generation-skipping exemption is scheduled (after December 31, 2025 or earlier with legislation) to be reduced significantly. All this being said, the opportunity to move highly-appreciated assets out of your estate, with lower values reducing the amount of exemption used, should be considered.

Making gifts should be considered if a donor believes the current economic downturn is temporary. Additionally, the opportunity to gift interests in a family business to the next generation can be extremely attractive with lower valuations and interest rates, allowing wealth to be passed to the next generation and utilizing valuation discounts to reduce the value of the gift for gift tax purposes.

TOUCHDOWN Future. Reimagined.

Congratulations! You made it...sort of. You managed through the crisis and pushed through the recovery and reinvention period.

Your business is still here, your workforce is back, operations are running – what else is there? Not much really – just EVERYTHING! Don’t get the wrong message here; staying smart and resilient in crisis and beyond is critical – now that you have made it this far though, don’t relax just yet. Take a minute to breathe and smile and look around at all you have been able to accomplish, and yes, be proud… but also remember to view this as an opportunity. Ask yourself, your management team, and your employees – what lessons has the COVID-19 crisis taught you? What improvements and new processes have been put in place to enable to you do business. Will these be enough to carry you through this uncharted and definitively disruptive environment we are entering which everyone is now calling the new norm? Was the vision you built initially correct for the path you find yourself on today? Is your business the same? Has the way you work changed?

Are there opportunities to branch out into new products or services? How have your customer expectations shifted? Does your brand reflect who you still are and who you

want to be? The list of questions is long and while it may seem overwhelming, it can also open the door to a whole new world of opportunity for your business. The playbook that guided your company in the past for success will need to be revised. New plays and strategies will need to be drawn up for your company to continue to score the game-winning touchdowns.

Take some time here to re-evaluate your company’s vision and position in the market. Focus on what is working and what just won’t fit any more and reimagine what your business can be. Build a new or enhanced vision that takes into account the answers to all the questions above.

We know change is hard – but remember the saying, “Of course it’s hard, if it was easy everyone could do it!” COVID-19 has brought enough damage, don’t let the damage define your company’s legacy – instead leverage the strength of your business, and your employees to reimagine a future that puts evolution into action for your business.

The future will undoubtedly be different than today. Do you have right people, infrastructure, and data you need to manage the new normal?

CITRIN COOPERMAN IS READY TO TAKE THE FIELD Now is the time to go back to basics and ensure you are as prepared as you can be to survive and thrive in any outcome.

Citrin Cooperman’s COVID-19 Response Unit (CRU) consists of a dedicated team of partners and professionals that are trained and aligned to address your needs from crisis through transition.

Dedicated to understanding your key concerns in this new normal. Citrin Cooperman’s CRU is committed to keeping up to speed and working 24/7 to digest and understand new guidance as it happens to be able to help our clients with: » SBA and Financing » Cash Flow, Forecasting, and Modeling » Business Interruption Insurance » Recession Endurance Tools » Crisis Management » Cybersecurity and Technology Concerns » Key Industry Issues

Our COVID-19 Response Unit (CRU) is in place to give you access to help now. We have a dedicated core team that is ready to help and get you faster responses to your critical questions so you can plan for tomorrow.

Customized solutions for your unique needs. Unlike some firms that take a one-size-fits-all approach to serving their clients, Citrin Cooperman offers solutions tailored to each client’s specific needs and issues.

Speed and agility to make decisions and resolve issues. Our structure allows us to be empowered at the local level and to act quickly without the red tape of a complex chain of command.

Consistent and proactive flow of communication and information.

We have developed the COVID-19 Response Unit portal to keep you updated on the latest information around the COVID-19 situation, economic crisis, tax alerts, and industry updates. CLICK HERE to access the portal.

CRU SERVICE OFFERINGS For more thought leadership articles, webcasts, and more, visit citrincooperman.com/CRU.

CASH FLOW, FORECASTING, AND MODELING » 13-Week Cash Flow Forecasting » 6-12 Month Cash Forecasting » Scenario Planning and Modeling » Modeling Capital Requirements » Maximing Tax Efficiencies CRISIS MANAGEMENT » Bank Negotiations and Restructures » Operational and Financial Change Management » Cash Forecasting » Bankruptcy Navigation » Business Interruption Insurance Strategy » Strategic External Resource Identification COVID-19 ENDURANCE ASSESSMENT » Assessment of Your Business’s Priorities Right Now » Action-Oriented Insight into Handling the Next 6-12 Months » Data-Driven Insight into Economy-Wide Issues and Reactions » Considerations for the Financial and Operational Realities of Your Recovery SBA AND FINANCING » Program Navigation and Guidance • Paycheck Protection Program (PPP) CARES Act Loan • Economic Injury Disaster Loan (EIDL) • Impact of PPP and EIDL on Other CARES Act Credits and Benefits • Main Street Loan Facilities • Traditional Financing Alternatives

» Cash Flow Projections » Loan and Loan Forgiveness Calculations » Strategic External Resource Identification

MEET THE COACHES RICHARD DERIENZO Partner, CRU Leader rderienzo@citrincooperman.com

SHAWN HOWARD Partner, SBA Leader showard@citrincooperman.com

MARK L. FAGAN Partner, SBA Leader mfagan@citrincooperman.com

KEN KIRKLAND Partner, Crisis Management Leader kkirkland@citrincooperman.com

WILFREDO FERNANDEZ Partner, SBA Leader wfernandez@citrincooperman.com

STEPHEN RONAN Principal, COVID-19 Endurance Assessment Leader sronan@citrincooperman.com

SYLVIE GADANT Partner Cash Flow, Forecasting, and Modeling Leader sgadant@citrincooperman.com

MITZI HOLLENBECK Partner, SBA Leader mhollenbeck@citrincooperman.com

INDUSTRIES WE SERVE UNDERSTANDING OUR CLIENT’S BUSINESS IS JUST THE BEGINNING. Citrin Cooperman has deep industry knowledge to understand the unique challenges and issues facing management and stakeholders operating in your space. We have dedicated teams for a broad range of industries. » Architecture and Engineering » Automotive Dealerships » Cannabis Advisory Services » Construction » Entertainment, Music, and Sports » Financial Services » Franchising » Government » Government Contracting » Healthcare » Law Firms » Manufacturing and Distribution » Maritime, Shipping, and Logistics » Not-For-Profit » Private Equity and Capital Markets » Real Estate » Restaurants and Hospitality » Staffing » Technology and Life Sciences

citrincooperman.com/CRU