This document discusses challenges facing small and midsize businesses in the post-COVID recovery. It notes that 51% of operational US SMBs experienced a year-over-year decline in sales and 27% reported reduced employment. The top challenges for SMBs were financial impact from the coronavirus, growth challenges, and financial stability/cash flow issues. The document also discusses micro challenges facing businesses, such as growth, supply chain issues, talent management, organizational structure, and capital availability. Finally, it outlines differences between restructurings, turnarounds, and business transformations, noting that the type of change pursued must be aligned with the problem being addressed.

1. BusinessTransformation:
Navigating a way forward post-
COVID
June 2021
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2. “Obey the principles without being
bound by them.”
‒ Bruce Lee
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3. MACRO CHALLENGES
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4. Moving Beyond Survival
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The economic fallout of the pandemic has still been extremely severe for
small and midsize businesses (SMBs).
• Early estimates indicated that as many as 1 million small
businesses could fail as a result of the coronavirus pandemic.
• Luckily, the actual toll on small businesses, while severe, was
significantly below that number.
• For SMBs, success in charting a path in forward in the post-
COVID recovery will require a clear-eyed assessment of the
challenges ahead.
Source: Moody’s Analytics. “Handicapping the Paths for the Pandemic Economy”

5. Sales
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51%
of operational US SMBs
have experienced a YoY
decline in sales
Source: “2021 Global State of Small Business Report”, Facebook and the Small Business Roundtable, April 2021.

6. Reduced Employment
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27%
of operational US SMBs
have reported reduced
employment
Source: “2021 Global State of Small Business Report”, Facebook and the Small Business Roundtable, April 2021.

7. Negative Impact
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Source: “Small Business Pulse Survey”, April 2021. U.S. Census Bureau.
70.9%
% of SMBs that experienced a negative impact
on business due to COVID-19
Total Decreased All Other

8. Operating Capacity
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Source: “Small Business Pulse Survey”, April 2021. U.S. Census Bureau.
41.8%
% of SMBs that experienced a decrease in
operating capacity due to COVID-19
Total Decreased All Other

9. Primary Challenges
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Source: Gallup/Wells Fargo Survey, December 2020.
29.0%
13.0% 12.0%
Financial impact from
coronavirus
Growth Financial stability / cash flow
Primary challenges according to small business
owners

10. Financial Assistance
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Source: “Small Business Pulse Survey”, April 2021. U.S. Census Bureau.
47.6%
40.2%
7.8%
No assistance from any source
since Dec20
Paycheck Protection Program Economic Injury Disaster
Loans
Financial assistance sources received by small
businesses during COVID-19 pandemic

11. MICRO CHALLENGES
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12. Growth
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Both the outlook and the key drivers of growth have been scrambled for many companies, with
some facing enormous growth opportunities and others struggling with a less robust outlook.

13. Supply Chain
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The global supply chain has been
roiled by the impacts of the
coronavirus pandemic, with lead times
being extended for key inputs and
price increases challenging the
profitability of many smaller
manufacturers and distributors.

14. Talent Management
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Nearly 18 months of pandemic-
imposed behavior changes have reset
expectations for the U.S. workforce.
Leaders must steer a course that is at
once focused on company goals while
also aware of changing expectations.

15. Organization
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Having the right people, in the right
positions, properly incentivized, to
develop and execute strategy is key.

16. Capital Availability
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Opportunity, materials, talent, and
organization will not allow companies
to realize their goals absent sufficient
capital.

17. ORGANIZATIONAL CHANGE
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18. Cause and Effect
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Too often, business leaders conflate the effects of an issue with the cause of the issue,
often because the effects are easy to perceive, and the causes are more obscure.
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EFFECTS CAUSE

19. Definitions
• A restructuring is defined as a material change to the balance sheet of a
company, often executed in concert with an operational plan to improve
performance.
• A turnaround is generally considered to be an operational change to a
business or organization resulting in improved financial performance.
• A business transformation is the resetting of the strategic position of an
organization, generally encompassing both a stronger capital structure and
a substantial improvement in financial performance.
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Source: “Turnaround or Restructuring”, ABI Journal. May 2004. https://www.abi.org/abi-journal/turnaround-or-restructuring
Whereas a restructuring is transaction oriented, a turnaround is operationally
oriented, and a business transformation is strategically oriented.

20. A Spectrum of Change
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Business transformation is best viewed as a fundamental strategic change to a
company, and as such it is among the hardest types of change to execute and sustain.
Restructuring Turnaround Business Transformation
Capital markets oriented
Resetting terms with existing
lenders / creditors
Realign capital structure based on
risk/reward criteria of capital
providers
Operations oriented
Maximizing profit and cash flow
through targeted changes
Streamline decision making to
focus on opportunities for rapid
improvement
Strategy oriented
Revising assumptions and recasting
goals and expectations
Rebuild leadership team in line
with new vision and strategic
initiatives
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21. A restructuring can:
 Modify debt terms (covenants, maturity dates, rates of
interest, etc.)
 Result in a cash infusion (often via a new capital provider)
 Provide both time and capital to execute a plan
A restructuring cannot:
 Reduce expectations placed on the leadership team
 Generate operational improvements
Restructuring
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A restructuring is most effective at aligning a company’s capital structure with the risk
tolerances of its capital providers (lenders, vendors, equity partners, etc.).
Key Terms
Restructuring Support
Agreement (RSA)
Term Sheet
Covenants
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22. A turnaround can:
 Drive substantial enhancements to cash flow and
profitability through targeted improvement initiatives
 Optimize the cost structure of the company
 Demonstrate the long-term profit potential of the company
A turnaround cannot:
 Address strategic challenges
 Provide a basis for leadership
Turnaround
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A turnaround is most effective at making a small number of dramatic changes to a
company in order to optimize cash flow and profitability (in that order).
Key Terms
13-week cash flow
forecast
Turnaround plan
Liquidity
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23. A business transformation can:
 Reset expectations (internal and external) around growth,
profitability and value creation
 Provide clarity on the long-term path forward
 Offer a compelling vision for all stakeholders
A business transformation cannot:
 Resolve skill gap or fit issues in the leadership team
 Lessen the challenges of execution
BusinessTransformation
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A business transformation is often the culmination of a successful restructuring and
turnaround. It is most frequently marked by new strategic direction and leadership.
Key Terms
Transformational
leadership
Strategic plan
Value creation
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24. Problem / Solution Alignment
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Driving sustained improvement in a business starts with ensuring that the problem to
be addressed is aligned with the change type being pursued.
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Problem Change Type
Unable to service debts as they come due
Lender(s) unwilling to support growth
Cash flow is insufficient to support operations
Unclear on profitability by customer / product
Need to adjust to shifts in customer behavior
Leadership team skills misaligned with needs of the company
Restructuring
Restructuring
Turnaround
Turnaround
Business Transformation
Business Transformation
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25. SPEAKER
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26. David Johnson
Email: david@abraxasgp.com
Ph: 312-505-7238
Twitter: @TurnaroundDavid
David Johnson, founder and managing partner of Abraxas
Group, has a nearly 25-year track record of driving
organizational change. He has served as interim executive or
financial advisor to dozens of middle market companies in
transition.
Throughout his career, David has demonstrated a
commitment to thought leadership, with numerous speaking
engagements and articles on the topics of business
transformation, change management, performance
improvement, restructuring, turnaround and value creation
to his credit.
David received his MBA from the University of Chicago and
completed his undergraduate studies at Fairleigh Dickinson
University.
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