The COVID-19 outbreak has brought the globe’s economic engine to a halt like no other event in history. The pandemic has wreaked havoc on the world’s largest and most influential economies and made our lives rife with anxiety and uncertainty of the future.
Almost all businesses have been severely overwhelmed because of COVID-19, but larger companies have a greater chance of weathering this crisis. Small businesses, on the other hand, are the worst hit.
These businesses function optimally when there is daily cash flow; they need this to run successfully through their activities and bring in income.
According to the JPMorgan Chase Institute, most average small businesses have just 27 days of cash in reserve. But an independent small business generally has less than 20 days’ worth of money in reserve.
When something of this scale hits, it could be crushing for both the business owner and the employees. Karen G. Mills, a senior fellow at Harvard Business School, believes that small businesses will face financial turbulence that will be worse than the economic depression of the late 2000s.
In the United States, small businesses employ 58.9 million people, which is close to 47.5 percent of the nation’s private-sector workforce. Small businesses create almost 2 million new jobs a year and contribute to 44 percent of the US gross domestic product.
But, for most of the small business owners and employees, the year ahead will be fraught with instability and turmoil. Many public health experts also believe that the virus outbreak may not subside for another 8 weeks.
In this article, we have outlined steps that could be taken by small business owners to survive and recover from the COVID-19 pandemic.
1. A New Financial Plan
The crisis may have rendered existing business plans and budgets for your company irrelevant. You would have to seek COVID 19 business support options whilst preparing a new plan and budget that address previously unlikely situations, like a supplier not being able to provide a key product to you.
If you rely heavily on imports for your operations, you may want to consider reducing your dependency on imports. You could instead search for local suppliers who would be able to assist you best. If it works out well, this decision would benefit you and boost the country’s economy, too.
The most common expenses for small businesses would include employee salaries, utility bills, and office rent. When it comes to the people you need to be paying (like the property owner or a supplier), speak to them, and explore all possible options to defer payments or to spread out the costs.
It is likely that they may already have options to mitigate the issue. When creating payment plans that involve other small businesses, it is best to ensure that the proposals bring maximum economic relief to everyone involved.
Cost-cutting would be unavoidable in a situation like this. It would make sense to avoid further hiring for the time being. An alternative could be to work with freelancers on a project-to-project basis. For tackling the office rent, you could shift to an affordable co-working space.
Personal spending may need to be curtailed for the next few months. You may have to freeze all the expenses that are not necessary right now, like splurging on expensive foods or spending excessively on other luxuries.
It would be best to discuss with your partner or family and recalibrate your personal financial budget for the coming months.
However, companies must analyze and cut back as much as is necessary and not more than that. Overdoing it could cripple the company later on when the demand rises.
2. Upskill And Strategize During Isolation
For many people, the self-isolation would have freed up some extra time that was earlier taken up by things, like travel and getting ready to head out. You could encourage your employees to make the most out of the isolation by building additional skills that could be of use once the COVID-19 phase passes over.
The internet is overflowing with numerous online courses that are incredibly affordable and provide excellent value. Tapping into these resources could result in them becoming more productive, and it could better equip them to handle tasks for which you may have had to hire new employees.
For example, if the sales team is not as engaged as earlier, they could help out the marketing team with specific tasks. Reallocating employees to different departments based on the need of the hour could help handle unexpected demands.
You could use the disruption caused by the COVID-19 to reflect on the direction the company is headed in and create a new strategy for the coming year. If you are in B2B sales, the COVID-19 may be a possibility to make longer-term investments in your business.
If you have a few major prospective clients, now would be an excellent time to manage them and nurture them for longer-term opportunities. You could also check in with your leads and provide them reassurance if required.
It may also help to plan to diversify into different segments of the industry. This could create a strong foundation for your business and prove to be useful in the upcoming quarters in case there is a shift in trends.
Creating firm foundations for your business during this downtime could help you face the upcoming quarters with more ease, as clients will depend on your business for support, both during times of difficulty and prosperity.
3. Secure Cash (Liquidity)
Access to money can be a major pinch point for small businesses. Managing any business could prove to be a risky affair, but small businesses are especially vulnerable because of a lack of liquid cash. The SBA states that only around 50 percent of small businesses last longer than 5 years.
Different costs, rent, and utilities generally leave the owners with little liquid cash. This is particularly true during the early years of small businesses, and the slowing demand due to COVID-19 has made this a lot worse.
To address this challenge, one solution would be to borrow a loan. But if the borrower already has substantial debt, then it may not be a practical choice. Another option would be to sell the company’s assets.
Selling assets, too, needs to be evaluated carefully. The sale of an asset to boost liquidity may help with an immediate liquidity problem, but it could hinder the company’s ability to create revenue in the future and prove to be a short-sighted decision.
Small business owners must advocate efforts to provide quick liquidity. For example, under a proposal titled “Small Business Workforce Stabilization Fund,” the Treasury would forgive financial aid provided to all the small businesses that were solvent before the crisis, as long as the same number of employees are rehired within 12 months after the crisis.
4. Go Digital
You may want to reassess your current business model and think of ideas on how to grow your business during and after the COVID-19 phase. Seeing how the pandemic has impacted offline business and given a boost to e-commerce, it would help to focus on digitizing any of the services or products offered by your company.
When confronted by the COVID-19 shutdowns, Chinese companies began shifting their strategies online, and some of them have set a great example in this regard. Lin Qingxuan, a cosmetics company based out of Wuhan, had to close down 40 percent of its stores.
To continue engaging with customers and improve sales, over 100 of the company’s beauty advisors began connecting with customers through digital platforms, like WeChat. This resulted in the company achieving a 200 percent growth in sales compared to the previous year.
Another example would be a Chinese confectionary manufacturer who canceled offline campaigns for Valentine’s Day and, instead, channeled the resources into digital platforms, like WeChat, online advertising, and collaborations with O2O (online to offline) platforms. This helped them capitalize on the new consumer behaviors that had emerged due to the outbreak.
5. Current and Prospective Clients
Right now, several businesses are struggling just to maintain their normal operations. But this could prove to be a crucial time for you to enhance your client base.
Working on creating more prospective clients and bringing in new leads could provide a terrific boost for your company after the COVID-19 dies down.
But, maintaining current clients tends to be more comfortable than gaining new ones. So it is essential to market yourself well, especially digitally, to make sure your clients know that you are there for them.
If your business does not already have a significant online presence, now would be a great time to use tools, like email newsletters, social media, HVAC SEO, and even interactive webinars, so that your business stays at the front of your clients’ minds. If you manage to add value to their lives during these rough times effectively, they’re likely to stick with you for a long time after.
An effective tip to make clients feel connected to the company would be to communicate transparently with them and let them know what the business is going through and what you all are trying to do to provide for them. When customers know that their brand is facing distress, they can empathize with them.
Ryan Buell, an associate professor at Harvard Business School, believes that customers are less likely to be satisfied with their purchases if they do not see the work that goes into providing them with products or services. Further, he says that becoming more transparent with the company operations enables the customers to be more appreciative of the work that is happening.
6. Future Offers
During a pandemic, people’s mindsets would become more survival-centric as compared to regular times. Hence, it’s only natural for people to shift their priorities and cut down on most other non-essential goods or services.
Although it may not be easy to coax them into using your service right now, you could encourage spending by giving promotions on future services. Adding value would persuade customers to take swift action.
At the same time, be thoroughly aware of where your business stands and avoid offers that may rack up your costs and disrupt your business operations.
7. Spot New Trends
This time needs to be utilized well to optimize your business’ services so that they are useful during and after the pandemic. The economic climate could be extremely different in a few months, and it is best to be prepared to deal with a variety of tough situations.
The COVID-19 has led to the rise of several new trends, and some of them are likely to continue even after the crisis. Understanding this could be vital to the success of your business in a post-COVID world.
In China, for instance, the SARS is believed to have mushroomed the adoption of e-commerce. It may be too soon to gauge what trends will keep continuing in the world, but there appear to be opportunities in the field of online education and growth in B2B digital channels.
In India, the ed-tech firm BYJU’S witnessed a 150 percent increase in the number of new students learning on its app. In March alone, over 6 million new students began learning on the app.
8. Relief Programs
Relief programs are being launched across the world by governments and large organizations. During early March, the Trump Administration and Congress authorized $7 billion in loans for COVID-19 affected small businesses.
This program brings relief to businesses in states that have declared emergency status. It allows them to borrow up to $2 million and then repay it over 30 years with an interest rate that is less than 4 percent.
On April 24, a new $484 billion coronavirus relief bill was signed into law. It added an extra $320 billion to the Paycheck Protection Program (PPP). The PPP program provides government-guaranteed loans to small businesses.
The Small Business Administration (SBA), too, has launched a relief program to assist businesses during this crisis. To be eligible for loans from the SBA, these are some of the requirements (and these are applicable for nonprofits too):
- You would have to be a small business (500 employees or lesser. But, larger enterprises can also qualify, depending on the industry).
- You would have to be a US citizen or a permanent resident with a green card.
When applying for this loan, you will be required to fill out the SBA Form 1368, which is an estimation of your future cash flow. The following questions could help you arrive at this forecast:
- What fixed costs are unavoidable?
- What costs could be cut?
- What will the cost be to maintain 90 percent of your employees?
- What revenues have been maintained for the last two weeks?
Fortunately, more resources are providing relief against COVID-19. Below are some of these:
- Under its Small Business Grants program, Facebook is offering $100 million, and it is being offered in more than 30 countries where Facebook is operating. The eligibility requirements are as follows:
- The company must have faced challenges due to COVID-19.
- The company must have between 2 and 50 employees.
- The company should have been in business for more than a year.
- The company should be in or near a location where Facebook currently operates.
- Google is offering $340 million in advertising grants for small and medium-sized businesses, and the credit will be added directly to one’s Google Ads account.
- WeFunder, the online lending platform, is offering $20,000 to $1 million to companies impacted by COVID-19. Fintech companies, like Kabbage and Fundbox, that specialize in loans to small businesses are also working on ways to support companies during the crisis.
- Cities, as well as regions and states, are launching new programs every day to assist people. Contacting your local small business development center could help you find a cooperative relief program. The city of Atlanta approved a $7 million COVID-19 relief package on March 24. $1.5 million in that package was allocated to support a small business continuity loan fund.
- Hello Alice, a digital platform for business owners, is offering $10,000 grants to small businesses impacted by COVID-19. Along with the funding, the recipient would also receive ongoing support from the Hello Alice community.
- AltCap, a community development financial institution (CDFI), is offering zero collateral loans of up to $100,000 with a 0 percent interest rate.
- Several states have deferred tax payments. For instance, in California, the state tax deadline for small businesses has been extended to July 1. In Alabama, penalties have been waived for small businesses that are unable to pay their taxes due to the COVID-19.
- CDFIs, community banks, and microlenders are usually the lenders of the first resort during critical times. You should reach out to these local resources to see what options they provide.
9. Post-COVID Surge
In China, the post-COVID-19 economic recovery proved to be much faster than expected. While it is imperative that we take all the necessary precautions to stay safe and curb the spread of the virus, it would help businesses to set up systems today that could help deal with the rise in demand and change in trend that will occur after the coronavirus frenzy washes over.
When situations are as volatile as they are right now, proactive planning and anticipation of future requirements are critical. Master Kong, a Chinese company, had begun reviewing dynamics daily during the initial stages of the outbreak.
It expected people to start hoarding products, so it shifted its focus from offline channels to e-commerce and other digital platforms. By planning for all this in advance, their supply chain had recovered rapidly, and they were able to supply to 3 times more stores than most of their competitors.
You could work on re-evaluating and improving existing company processes. For example, you could create a well-thought-out brand and employee guidelines. Also, in case you need to hire a lot of people to manage the demand surge later, these would come in handy.
10. Employee Health and Wellbeing
The virus has coerced large numbers of people in prolonged periods of self-isolation. If a lot of your employees and you have shifted to remote work, it is probable that you all might feel stressed out or burnt out at some point.
It is important that everyone prioritizes their mental and physical health because stress is bound to impair performance. You could use various digital apps to stay connected with each other. Being social can help people maintain their productivity.
When people are at work, it is likely that they move around a lot more than they do when at home. Encourage your employees (and yourself) to stay physically active at home.
Exercising can help control stress and improve our mood. Maintaining a fit lifestyle during this period will help people feel better about themselves, which in turn could ward off a host of self-deprecating thoughts.
With a third of the global population on total lockdown, it is crucial that employees are given some flexibility with their schedules. They may have to tend to various tasks, like looking after their children or handling other family requirements.
Being understanding about this would make the employees feel valued and secure. It would push them to do their best for the company to improve. At the same time, make sure to have a back-up plan in case you become short-staffed.
Saying that the COVID-19 pandemic has been unpredictable would be an understatement. And trying to predict its trajectory continues to remain baffling.
In a scenario like this, it is best that we prepare for the worst. Preparation not just for our businesses to survive, but for us to improve and become better equipped to deal with a tomorrow that is nothing like ours today.
It is essential that we have the right mindset and take good care of our physical and mental health. The anxiety caused by COVID-19 is enormous, and we need to be functioning at our best to overcome this storm successfully.