How Struggling Government Contractors Can Navigate Uncertain Times

The pandemic has created many challenges for government contractors. At the height of it, many new government contracts were delayed 30 or 60 days because of health concerns and competing priorities. As the delta variant surges throughout the country, and new vaccine mandates emerge, many contractors now wonder how the latest situations around COVID-19 will impact their business and workforce.

Like many business owners throughout the country, what lies ahead for government contractors remains unclear. With that said, no matter the situation that a business is in, below are financial and technical steps that contractors can take to ensure their business can survive difficult and uncertain stretches: 

• Remember the importance of cybersecurity: At some point during the pandemic, you likely implemented a remote working environment. Don’t forget about important items like cyber and data security, including the actions of your employee's spouses and children, who may still have access to your company’s networks. Do not take threats to cyber and data security lightly.
• Leverage technology wisely: Ensuring that appropriate safeguards are in place, use technology to your advantage. One benefit that the pandemic created is that it encouraged business owners to throw out old paradigms and use assets that were necessities at the time because of the new realities created. These new tools can be helpful to them and their employees moving forward.
• Make sure your loan is current: If your company has a business loan, it's crucial you keep your loan current. Doing this may make an important difference for business owners seeking access to lending programs.
• Analyze your cash flow: It’s important to understand your company’s cash flow. Business owners should determine what lines of credit and lending options they have, and what ways they can take advantage of applicable business insurance.
• Focus on execution and planning: Prioritizing execution and planning is critical for government contractors struggling financially. First, concentrate on how to successfully operate your business over the next several months. Install business continuity plans to safeguard employees, customers, suppliers and all stakeholders and work to ensure there is limited disruption to operations.
• Reforecast your budgets: Reanalyzing short-term budgets and long-term financial plans takes priority now. Instead of reviewing these monthly, or even every so often, it is recommended that struggling businesses look at these weekly. It is essential to understand any possible liquidity constraints the business may have and enact measures to shore up financing and insulate the business in the event of any potential economic downturn.
• Manage business transition: For contractors who were about to start the process of monetizing their business through a mergers and acquisition process before the pandemic began, the process may now look suddenly very different. Once your business is stable, re-evaluate pre-M&A planning work.

For years to come, potential investors will be evaluating your financial performance during this uncertain period in order to measure the cyclicality and overall resilience/risk profile of your business. The appropriate course of action for each contracting company is unique and complex, but your management team will also be measured on how you navigate this environment.

While we are more than a year and a half removed from the start of the pandemic, to the extent possible, continue tracking any coronavirus related impacts on your business and expect that at some point you may need to explain in detail how and why the business performed the way it did during this disruptive period. Also consider tracking "exceptional" events like contract delays, overtime costs, sick leave, supply disruptions, increased transportation costs, etc.

Stephen Park is a senior vice president and managing director of wealth management at UBS Wealth Management USA.