There’s no denying that small businesses are the hardest hit from the current COVID-19 pandemic. The more prominent firms have a better stake of surviving; however, small businesses incline to live only with a few months of cash flow at most, so when something as momentous as this hit, it can be overwhelming not only for the small business owner but also for the employees they support.
Declines in consumer confidence and decreased sales threaten all businesses, but small businesses are particularly vulnerable as they often don’t have the reserves to help them weather difficult times. As Jasmin Guénette, VP of national affairs at the Canadian Federation of Independent Business, points out, “Thirty percent of small firms say they can survive less than a month in the current situation.”
The National Federation of Independent Business said its research shows the coronavirus outbreak is having a severe effect on small businesses as the situation drags on. NFIB reports 76% of small businesses (under 360 employees) surveyed last week consider the disruption as profound
The COVID-19 crisis will come to an end. But until we get there, we have to stay informed and do what we can to protect our local businesses and the incredible employees that sustain them.
Here are a few ways you can come out of this crisis in a single piece-
Plan for three months-
Every small business usually has the same vital expenses, which include employee salaries, office rent, and utility bills. Further costs range from industry to industry.
Speak to who you need to pay in the next three months (landlord and suppliers), and find out what options you have to spread out the costs. Chances are they may already have alternatives in place or will be understanding, as it’s in their interest to keep your business. Always be careful when you come up with payment plans with other small businesses, as they also need to stay afloat too, so this should be fair for both of you.
Look at your finances, and speak to people you may support to have a realistic discussion on how to control your spending for the next three months. What costs are necessary, what can be put on hold? If you have a partner supporting you as you grow your business as the breadwinner, have an open and honest discussion with them about your immediate and long-term plans for the company.
Also, look at ways you can cut costs. But use this as a last measure after we have seen at least two months of damage from the COVID-19 pandemic. Your most significant costs would usually be your staff and your office rent. You could perhaps freeze hiring any more full-time employees and instead work on a project basis with freelancers. You could also consider downsizing your office and using a co-working space to have more affordable and flexible payment terms.
- Apply for Administration loans- In addition to the disaster loans, which only apply to businesses in states that have declared emergency status, some state governments are offering aid packages. These loans come with lower interest rates and will keep you afloat during the pandemic.
2. Tap into resources and incentives provided by the government and private sector- Governments around the world are already putting together initiatives to support small business owners, and this is something that is evolving daily. Be up to date with how your governments can help cut costs, as well as other important institutions, such as banks who also have a social responsibility. If you’re registered in more than one market, explore support options in both markets. Facebook, in its announcement, promised to offer $100 Mn in grants to small businesses in their pursuit to help those affected by COVID- 19. While fintech companies like Fundbox and Kabbage, which are specialized in lending to small businesses, are also contemplating ways to support small businesses.
3. Keep your cash conversion cycle in check- The cash conversion cycle is about how fast cash moves through your business and into your bank account. In these times, when a lot of companies are moving to an online environment, think of ways to speed cash through your business by improving your sales cycle, reducing inventory to free up capital, improving ways to deliver your product or service, and finally, improving your billing and payment cycle as well.
4. Review and rank your products or services- Another area to focus on would be an analysis of all products and services that you provide, rank them in order of profitability, and then remove the least profitable from your range of services or products.
5. Tune your labor productivity- This is known as a labor efficiency ratio, where you calculate how much gross profit you earn per labor hour spent. The aim here is to increase this number by either increasing your total profit or reducing your labor cost. This could also lead to downsizing to keep your business alive.
6. Upskill your staff- Wherever possible, try your best to keep your staff– they rely on you, and if you have managed a good team, they should be supporting you. You could train your existing staff on additional skills, which could make them more productive and efficient, rather than hiring more staff. There’s plenty of very affordable online courses, and these will allow them to focus on other areas of the business when their department is down- for instance, your sales team could perhaps also help out the marketing team.
7. Focus on what can be done- It’s never nice to capitalize on events such as this, but they can also be a wake-up call to reconsider how you have been doing business. In this case, is your business model able to survive the changes that will come from the COVID-19 pandemic? How do you expect your customers to behave moving forward? What will and won’t matter to them, and how can you accommodate who will likely be a new type of customer? Can you digitize any of your products or services, and start offering them online? Can you implement technology to balance any loss of earnings by offering new ways to connect with your customers?
8. Stay safe and keep healthy- This can be difficult especially when cash is running out, but remember to take care of yourself in a way that works for you- for instance, eat well, and try to get some exercise in. Taking care of yourself will help you to keep calm, which in turn will also mean keeping your staff calm, and ultimately, a healthier mindset for everyone to come up with innovative ideas to move forward. If faced with some difficult decisions, take time to balance yourself and your mind before making any drastic decisio what is a very dynamic and rapidly changing situation, sometimes taking a step back to reassess, asking for trusted opinions, and also keeping perspective will help. Things will get better, and you aren’t in this alone. Ask for emotional support where you can, and when you need it.