We’re in the middle of the Coronavirus (COVID-19) pandemic, a major healthcare crisis that could potentially lead towards a worldwide recession. While some companies are continuing to conduct their business, as usual, numerous others are beginning to struggle. COVID-19 will have a negative impact on all aspects of the business as health officials start advising individuals to stay inside, avoid large gatherings, cancel all events, and temporarily close businesses.
As a small business owner, we’re in uncharted territory, we cannot afford to close our businesses for an extended period of time. Like many small businesses around the world, we’re all contemplating whether we will survive this downturn. Are you prepared?
In this blog, I’ll discuss how you can prepare your business for a downturn, understand the economic impact on your small business COVID-19 will have, and what other steps you can take to survive this economic downturn.
- This is the time to get creative. How can you adapt your small business to continue servicing your customers in a way that benefits everyone? We’re now seeing that a few industries will thrive from this, such as food delivery services, streaming, and medical. If you sell food, think about offering delivery. If you are service-based, try offering your services by appointment only to eliminate wait times and reduce unnecessary hours when no work is available.
- You may find that you have more time on your hands and see this as wasted time. On the contrary, there’s no better time to work on yourself and review which parts of your business can be improved.
- Watch announcements from local officials to stay up-to-date with what’s going on around the world, your country, your market. You need to know how a decision made by government officials will affect your business.
Financial Impact Analysis
- Industry/Customer Impact – It’s essential to understand the economic impact COVID-19 will have on your business. Create financial projections and SWOT analysis of your business – Strengths, Weakness, opportunities, and Treats. You can read more about SWOT here! Your small business might be impacted in any one or all of these areas: sales, staff, supply, and money.
- Sales – As of right now, major urban areas are being locked down and a nationwide order may be imminent. It won’t be easy for individuals to leave their residence and visit your place of business. In fact, most are pinching their pennies and spending their money solely on necessities.
- Staff – What if one of your staff members gets sick? Do you have the ability to allow them to work from home or have enough additional staff to accommodate for their absence?
- Supply chain – Your business might be limited in inventory if your supplier is located in a heavily impacted area. You might have experienced this first hand if you went to the grocery store recently. Many grocery stores and big box stores are restricting business hours and limiting the number of essential items you may purchase as they struggle to keep their shelves stocked.
- Money – When sales dry up, so will the balance in your bank account.
Reserve your cash flow
- There are many ways a small business can reserve cash. One of the fastest ways is to decrease your payroll. Though it is one of the toughest things to do, it may be necessary and inevitable during hard times.
- Reduce on-hand inventory – only buy what you need.
- Reduce other expenses
Increase cash inflow
- If you have customers who are on net 30 to 45 days, offer them a discount off the total invoice if paid sooner. This is a common practice. Commonly you will notice “Pay by this date to receive 2% off the total” or “Pay this amount if paying before X date” written on the bottom of invoices.
- Don’t offer terms; one of the best ways to improve your cash flow is to collect upfront. Don’t provide net terms to new customers and see if you can transition current customers out of their net terms.
During hard times, rely on your existing customers. Remember, just like you, your customers are also going through a hard time. Remind your customers about your services, products, low prices, and the world-class customer service you provide.
Cut Unnecessary Spending
Check your monthly expenses and cancel any monthly recurring subscriptions which are not being utilized.
Alternative Revenue Methods
Can you offer a unique product that can fulfill the needs of your customers during this health crisis? Are you selling online? Are you utilizing social media to provide additional exposure of your products to your customers?
Power of Ask!
- Have a conversation with your debtors and ask for an extension on payments or try to refinance your loans.
- Speak to your landlord regarding reducing the rent. In most cases, landlords will provide rent assistance during a recession or health crisis similar to the one we are enduring.
If you think you’ll need financial assistance during this health crisis, the government offers distress loans at low-interest rates and minimum requirements. Here is the link to SBA.Gov Disaster Loan Assistance, the website is slow and crashes often. If you want to apply for the loan, use the site at 6 AM EST (3 AM PST) to complete the application. I believe the deadline to apply is Dec 2020.
Win the competition’s business
- To grow your customer base, you’ll need to develop a marketing strategy to gain your competitor’s customers. Make sure to research your competition and see what type of products, services, and price points they offer their customers.
- Offer similar products at a lesser price and provide significantly better customer service to gain their customers’ business.