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How Small Businesses Can Survive and Thrive During a Crisis
How Small Businesses Can Survive and Thrive During A Crisis
There’s no question that COVID-19 represents an enormous and ever-changing series of obstacles to small businesses, many of which operate on thin margins even in the best of times. Between keeping employees and customers safe, balancing budgets, and regulating cash flow, it may seem like an overwhelming challenge just to stay afloat. But despite the ongoing disruptions, there are ways that even the smallest businesses can mitigate the financial impact of this crisis, creating a more resilient, adaptable, and sustainable model for the future.
Create a Continuity Plan
Having a continuity plan in place is important even during the best of times, but it becomes absolutely essential when a crisis strikes. When situations are fluid, your focus should be on resilience, and that means minimizing the impact on your company’s organization and supply chain without putting employees and customers at risk. In fact, a risk assessment should be the first step you take when outlining a continuity plan, since the strategies you use to navigate the crisis will largely depend on it. In the case of COVID-19, your continuity plan will almost certainly have to factor in remote working capabilities, sanitation needs for your storefronts or facilities, and a shift away from face-to-face customer interaction. An equally crucial but often overlooked facet of an effective continuity plan is an emphasis on communication and transparency—it is vitally important to keep lines of communication open not only with your employees, but with customers, shareholders, lenders, and suppliers. Finally, your continuity plan should include meticulous documentation, especially if you foresee the need to pursue relief funds or business assistance programs. For the sake of future planning, be sure to separate crisis-related losses from normal operating expenses.
Develop Cash Flow Strategies
One of the most common problems facing businesses in the wake of COVID-19 is the disruption of expected cash flow, and when it comes to keeping your company afloat, managing that flow is critical. The name of the game is “triage” – in other words, prioritizing your spending based on urgency. First and foremost, determine how much cash you actually have on hand by tallying up operating accounts, reserve accounts, and lines of credit. Then, identify fixed expenses that absolutely cannot be cut, such as mortgages, commercial loans, and leases on essential equipment. The next step is the most difficult: you need to identify opportunities to cut costs and expenses that won’t jeopardize cash flow. In practical terms, that may mean cutting ties with subscription services, software licenses, or work-related tools that are no longer justifying their recurring costs, or temporarily eliminating part-time work or overtime opportunities. This is also an excellent opportunity to look for any potential financial waste, such as duplicate payments, pricing errors, uncollected rebates and discounts, or inefficient parcel shipping.
Renegotiate Terms
Your contracts with lenders, suppliers, and vendors represent a mutually beneficial relationship, and in times of crisis, you shouldn’t be afraid to reach out and see if the terms of those agreements can be renegotiated. In many cases, explaining your current situation and asking for options can open the door to raised credit limits, reduced interest rates, interest-only payments, or even payment grace periods altogether. Your business is part of a complex ecosystem, and entrepreneurs the world over are being impacted in similar ways—it’s important to remember that you aren’t in this alone, and that the companies that have established contracts with you have more to gain from your success than from your failure.
Up-Skill Staff
A supportive, loyal, and well-trained pool of employees is one of the greatest assets a business could ask for, which is why you should fight to avoid lay-offs during a crisis at all costs. Experience can’t be bought, and being there for your staff during a time of economical uncertainty shows them that you have their backs. If you’ve cut as much spending as possible and your cash flow is still unsustainable, consider reducing hours and cross-training employees on additional skills to reduce hours without significantly impacting productivity—but be absolutely sure to communicate that these are temporary, emergency measures to avoid layoffs, and standard hours and responsibilities will be reinstated as quickly as possible. In some cases, free or inexpensive online training courses can even help employees assist with other areas of business if their own roles have shrunk as the result of the pandemic. It’s also important to factor in that many employees will likely need to work from home for the safety of themselves and your customers, which means that new training and communication standards should be factored into your timetables and budget.
Prepare to Pivot
Operating under a lean business model means that pivoting comes naturally, and nowhere are the benefits of that flexibility and adaptability more readily apparent than during times of turmoil. Virtually every business has found its standard operation radically interrupted, and the ones that can’t pivot are the ones most likely to go under. Start looking for opportunities to adapt the business model to the current situation—will your customer base change, and can you accommodate that? Can your products and services be digitized and offered online, or delivered directly? Is your marketing compatible with an online-only strategy? For an extreme example of the pivot in action, look no further than Portland-based Zootility Tools, a company that, before the pandemic, had been creating tourist-aimed products ranging from pocket knives and utility tools to barbecue tongs and bottle openers. After the shutdown and travel restrictions cut their business by 95%, Zootility realized they were in trouble and quickly came up with an innovative new product – a laser-cut, pocket-sized, anti-microbial tool that could be used to safely pull public door handles. By adjusting to the realities of the market and pivoting to fill a brand-new niche, Zootility was able to stay afloat and even rehire staff that they were forced to let go of. Another company, Wine Wise, shifted from in-person wine tastings to virtual wine dinners, hosted in partnership with local restaurants. Food and drinks are delivered to customers, who are then able to log onto a video call with the chefs and sommeliers to share a curated meal and conversation. These creative pivots can not only save a business but inject new life into them and open up entirely new markets, which is why it’s worth spending some time brainstorming potential ways to radically innovate on your products and services without losing sight of your higher purpose.
Small businesses and fresh start-ups are often the hardest hit during times of financial turmoil and uncertainty, and this is no exception. With constantly changing protocols and benchmarks and no clear picture of what the future will bring, it is vitally important that entrepreneurs embody the lean principles of adaptability and outside-the-box thinking in order to weather the storm and emerge from the other side intact, motivated, and more resilient than ever.
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