Usually, we at IOU Financial share financial checkup tips with our readers every half-year. In normal times, we would discuss the prudent steps you should consider to increase revenues and cut costs.
Then, along came Covid-19.
So, this installment is dedicated to ways for small businesses to survive the pandemic in the second half of 2020.
Millions of business owners are going through the same problems that you’re facing, so you are not alone. There are a couple of problems with panic. First of all, it wastes physical and emotional energy that would be better applied to solving problems. Perhaps even worse is that panic begets desperation, which leaves many vulnerable owners to consider bad advice. Carefully think through your decisions using your good common sense.
Don’t count on more government help.
We can’t KNOW that the government will come out with another stimulus package or relief funds.
It’s hard to stay ahead of the pandemic because it keeps on changing. New hot spots pop up and old ones cool down. The best you can do is to pay attention to what’s in front of you and figure out if there’re any actions you can take that are under your control.
Involve your workers and partners:
Nobody wins when businesses fail. You might find that employees, vendors, and suppliers are willing to accommodate you in your hour of need.
Communicate with reputable experts:
Good advice is worth a lot, so speak with your local Small Business Development Center, your lender, your CPA, and your political representatives. It’s important to know what works and what doesn’t.
Strength from unity:
Perhaps you’ve noticed how businesses have come together to find ways to help the surrounding community during the pandemic. For example, restaurants in Brooklyn have banded together with each other and with financial resources to help feed folks who have lost their jobs. Whatever your business, you might be surprised to learn the many ways you can make a positive difference (and earn long-term goodwill).
Identify key employees:
If layoffs are unavoidable, try to protect your key employees. Perhaps they will agree to a temporary pay holiday in return for staying on the company health plan. Work with your best employees to brainstorm the most pressing problems.
Model your cashflow:
You need to know how long you can remain solvent. Stress test various scenarios to see what’s possible under different conditions. Consider marketing steps you can take to spur sales, even if you must take a hit to your profit margins. If you can cover your expenses, you are ahead of the game.
Perhaps you can sell off your invoices to collect the bulk of your accounts receivable. You might also want to liquidate some of your inventory and other assets you can survive without. If appropriate, see if you can induce your customers to order in bulk and speed up purchases. Use these moves to build an emergency cash fund.
Provide extra service:
You may be able to keep operating if you can provide extra services for free, especially if it saves your customers money. You may be able to provide free services without greatly increasing your variable costs. If you have some time on your hands because of decreased demand, spend that time helping your best customers in meaningful ways.
You may be operating at a suboptimal level right now in which your cash inflows don’t quite meet your unavoidable expenses. In other words, if you can hang on until conditions improve, your business can survive. That’s where borrowing can make a crucial difference. You can use borrowed funds to limp through the current situation in preparation for better times ahead.
IOU Financial stands ready to work with you to fund your business based on your current and projected cash flows. We can fund you quickly and offer you flexible repayment terms. Contact us today and let’s help each other survive the coronavirus nightmare.