Update from Ben Godsey: Planning Forward

Aloha,

The blur of the weeks working from home continues. Someone on our team described work these days as groundhog day… Without many of the other life milestones, it does seem that way, though I noticed that the kolea left town this week, headed back to Alaska for the summer. They will return in August. They are my favorite local bird and I will miss them. It’s an incredible journey they make to and from Hawaii each year.

For good news, PPP loans to employers are getting funded, and congress signed an appropriation to open up additional funding. We are geared up to help both with tracking your payroll spend as well as helping with new PPP applications. If you have not yet applied for a PPP loan and would like to, consult our instructions here.

Last week I created a bit of controversy with my advice to employers: don’t spend the PPP money unless you have a fundamental business need. This was controversial because it was different from the advice of others who have urged businesses to quickly spend the cash. My position shouldn’t be controversial and I believe it’s very important for employers to hear. If an employer has work to do, the PPP loans are a no brainer. You do your work and your payroll becomes forgivable, allowing you to build up some cash in the bank along the way. These employers will spend the PPP money. Where it’s a challenge is when your work has evaporated, your cash reserves are low, and there is no reopening in sight. These are the hardest hit businesses and there are many of them in Hawaii.

Reopening, while necessary, isn’t a panacea either. Turning on a business is hard and expensive, and it will take months for demand to return. They will continue to be impacted – i.e., losing money – long after they reopen. I stick by my advice. I fear for the survival of many employers during this time and I worry about the impact on our community from the loss of these employers. This is a long game. Surviving will be thriving.

On Thursday I was fortunate to have a round-table discussion with some excellent CEO’s in town, leading businesses in restaurants and retail. These CEO’s are taking different approaches with PPP that are well thought through and fit their unique business circumstances. I appreciate their advice.

My two biggest takeaways were as follows:

  • We are undergoing a big reset, and far more will change than we currently foresee. The societal changes from coronavirus will be deep and we are just starting to scratch at them. To survive will require businesses to embrace new business models, new supplier and landlord relationships, and new dynamics with employees. The old models will no longer hold. How long will it be until we return to old densities and comfort levels with crowds.
  • Everyone needs a plan, and in this environment expect it to change. Changing the plan is good and reflects learning and improvement. Everyone can benefit from Acting Like a Rookie: asking lots of questions, getting feedback and changing. Also, the lack of visibility on the State’s plan for reopening is a major challenge for our community.

At ProService on Friday we spent our company all hands meeting expressing good news and gratitude. There was a lot of both and it was refreshing! We read emails from you, our clients, to our staff. Thank you. Your feedback, encouragement and appreciation sustain us and keep us striving. And then we read and shared gratitude from and for each other. Necessity is the mother of invention, and we have driven tremendous innovation in the past five weeks, but at our core in ProService are people that care for each other so that they can care for you. And that will not change.

With much aloha,

Ben Godsey

President & CEO

From Ben Godsey: Good News & PPP Funding

Aloha,

For the first time in a month, this seems like a week with more good news than bad. Our COVID-19 active case count continues to fall on Oahu, to now less than 80. Hopefully, with continued use of masks and social distancing we continue this progress and eliminate the virus completely from our community! In more good news, our State is receiving a double barreled cash infusion from the US Treasury, and it’s coming just in time. These funds are in two forms: (1) extra Federal unemployment benefits of $600 a week for anyone that qualifies for State unemployment, and (2) PPP loans for employers, which began to fund this past week. Many more should be funding in the coming week as over $2.1B in loans were approved for Hawaii employers.

At ProService, we worked hard with local banks and our clients to generate clean data and help clients apply quickly. The result was over 81% of our clients received acceptances, versus 57% of applicants statewide. We are sad for clients that did not get their loans approved in this first round, but more PPP funds will be coming from Congress and we are working with banks to help hold their place in line for this next round.

At ProService, we judge ourselves on results – were our clients better off with our assistance and advice? With the PPP program, the answer was a resounding yes! Our team worked extremely hard and I’m proud of the results. Also a big mahalo to all the local banks. They truly worked 24/7 for this two week stretch. And a special mahalo to ASB and CPB, they were particularly collaborative and innovative and they received well over half of the total loan acceptances in the State. These are much needed funds for employers. Hawaii is by far the worst state impacted economically by shutdowns – we need the cash!

This is all good news.

Now I’m going to rain on this good news. I believe Hawaii is in for a very long and painful recession. This is why, when people ask me about spending their PPP funds, my first response is “you don’t have to spend all the money”. Many business owners are surprised to hear this, and this is a shame. Unfortunately, there is a lot of bad advice encouraging employers to spend all the money during the eight week “measurement period” which starts just after loan funding. While it is true that the amount of loan forgiveness depends on multiple tests associated with how money is spent during this measurement period, monies not spent become a very favorable two year loan. Congress established a “sweetener” or incentive if you spend (some of) the money during the eight weeks, but any portion of it that you don’t spend becomes an attractive business loan at an opportune time.

So here is my advice: don’t spend the money unless you have a fundamental business need. Use the money prudently. Be judicious and focus first on the fundamentals of your business. Start your planning there. After you’ve done your planning, then look at how much of the loan might be forgiven. Don’t assume there are more easy loans coming. Care for your employees too, that is critical; but there is an extra $600 per week in federal unemployment for the next few months, and this is going to be a long, tough recession, so be prepared.

To help you prepare, ProService is here to help with workforce planning and PPP loan consults to prepare for the weeks and months ahead. To request a consult, click here.

So while there is hope that we have avoided the worst case scenarios for coronavirus, the challenges ahead are many, both for health and the economy. We don’t have a path yet for opening the economy, and even if there were, it will be slow. There will be no going back to normal. I want to see employers play the long game, and survive to the other side. That’s the best thing for our community. Those that do will find ample opportunities to grow and thrive. Until then, surviving is thriving.