It’s no secret that the rapid spread of the novel coronavirus has created significant challenges for businesses large and small. Almost every business entity has been impacted on some level, whether due to federal and local mandates or even a positive diagnosis of COVID-19 within the organization.
Small businesses, however, are poised to be particularly affected by this crisis, largely because of the amount of cash that is flowing—or not flowing—into their accounts. This is causing major uncertainty as to the financial wellbeing of small businesses, their owners and their employees.
Although nobody knows for certain what will happen next, there are steps every small business owner should be taking now to prepare for what’s ahead. Take these three steps to maintain control over as much of your business’s future as possible.
1: Communicate, communicate, communicate
Above all else, communication is critical during this period of uncertainty. Make sure you’re implementing consistent and transparent communication with all critical stakeholders of your organization—particularly your employees, your customers and your financial partners.
- Employee communication: Right now, transparency with your staff is key. Employees are bound to feel uncertain or scared about their jobs and incomes. If you don’t communicate consistently and honestly, they could imagine the worst or grow distrustful. It may be useful to set up a weekly video conference if you’re not able to hold meetings in person to catch them up on new developments. Let them know truthfully what impact COVID-19 is having on your business. What have the financial impacts been so far, and what steps will you all need to take to survive this? Reassure them as much as you can, but don’t give them misleading information or false hope. Beyond that, also make sure to check in with your staff on a personal level. Ask how they’re doing and see if there’s anything you can do to make their situations easier.
- Customer communication: Aside from your staff, your customers will also want to know what’s going on with your business. Be proactive in customer communication, letting them know the steps you’re taking to protect them, your employees and your business’s products and services. If you’ve altered your delivery model or hours, update them on the changes so they can continue to support you as much as possible.
- Financial communication: Communication with your bank and lenders is also crucial. Be transparent and open in your communication to ensure you’re getting all the help you can as it relates to your business’s financials. Ask questions and communicate your needs—you’d be surprised at how willing these organizations might be to help. Is your landlord willing to defer your rent? Will the bank let you defer a loan payment or two? Can your equipment supplier find a financial situation that works for you both? Being proactive about these requests can give you the financial support you need to pull through this difficult time.
2: Make cash king
Financial control is paramount during this time of economic uncertainty. Find ways to maximize or preserve your cash flow and reduce operating expenses so your business has a nest egg ready for later.
- Plug cash leaks: Take a look at where every penny from your business is going. Are there any cash leaks? If you can identify every expense, determine which costs are needed and which are not for running your business. Can you do virtual client meetings instead of in-person appointments over lunch? Is there a way to minimize supply expenses? Every penny counts right now, so don’t spend on unnecessary extras.
- Reevaluate expenses: Next, take a look at bigger expenses that might be challenging your business’s financial stability. Is it possible to defer employee retirement contributions in order to keep your staff employed? What about healthcare contributions? Temporarily reducing these expenses can free up cash so your business can remain operational without major layoffs.
- Reduce hours: You may not have the cash to pay employees for their normal hours right now, but you might be able to keep everyone employed by reducing your business hours. This way, you’ll still have the potential for income while maintaining your staff.
- Minimize living expenses: As a small business owner, you’re in a unique position to help your business on the personal side. If you’re taking a paycheck, consider ways you can reduce your personal living expenses. The less you take from the business, the less strain your cash flow will be under.
3: Revise your 2020 forecasts and budget
You probably prepared for 2020 with a budget and sales forecasts based on last year’s numbers. Of course, nobody could have predicted a global health crisis, so those numbers are likely no longer applicable.
- Reevaluate new forecasts: Take this time to look at what your sales forecasts were and how COVID-19 might have changed them. The difference will largely depend on how operational your organization is during the pandemic. Set a conservative plan through the rest of 2020 and see how that impacts your business financials overall.
- Brainstorm sales-boosting techniques: Now is also a great time to implement changes that meet the unique needs of the health crisis. Bring your team together to brainstorm ideas for target markets, products to offer and new sales tactics for during and after the pandemic.
- Reset your operating budget: A revised sales forecast, reevaluated financials and a new marketing plan can drastically change your budget for the year. Take a look at the numbers and alter your 2020 budget—then stick to it—to make sure your business can weather the storm.
Small businesses that survived the 2008 recession were diligent in all of these efforts, and it’s important that your business follow suit now. Remember, cash is the lifeblood of your business, and communication, cost evaluations and cash preservation will help you conduct business effectively and come out successful on the other side.