In the current economic climate, undoubtedly dictated by the corrosive effects of the Coronavirus, small businesses are being forced to make difficult decisions every day. Cutting operating costs is, perhaps, one of the most rational measures that a business owner can take to sustain their operations during such tumultuous times. Unsurprisingly, many small business owners struggle to achieve substantial cost cuts without looking to layoffs as a sure-fire way to ease their cost burden amidst falling revenues. Yet, there are alternative ways to stay in business without resorting to such measures. As businesses are forced to act quickly, there are approaches which can be taken to preserve revenues, keep employees on payroll, and remove unnecessary costs. The following are seven actions for small business owners to consider in the age of Coronavirus.
Let’s take a look at a great example, Armoured One – a tactical security company specializing in protecting educational institutions from major attacks – will prompt a pop-up donning the title “Covid-19 Face Shields” followed by the words “from saving lives in schools to helping save lives during this pandemic.” What Armoured One did was pivot their manufacturing capabilities to produce masks, a staple in the current market.
This is just one example of a company whose business has been significantly affected by the pandemic yet has made a shift in their business to create a profitable venture for the company and the heroes on the front line of the pandemic. The lesson that a small business should take from Armoured One is that, even in the midst of a pandemic, there are opportunities that present themselves which can be capitalized on. Instead of offering your Use your business’s strengths to produce a product that people are demanding. This strategy can be synergized with the next approach to optimize cost cutting and revenue preserving measures.
Cut Unprofitable Product Offerings:
An intelligent strategy for small businesses is to cut costs by removing unprofitable or low margin skews from the pipeline. Make a list of product offerings and arrange them from highest to lowest margin and remove the products that are simply unprofitable (Hoff, 2020). Implementing this strategy will work for your business by cutting out the input costs that would otherwise be used to produce that good or service. This is a smart way to preserve your cash balance by minimizing your company’s burn rate. Doing this will also have the added benefit of streamlining the business and increasing profit margins. In addition, many companies are experiencing a significant drop in their staple product or service. This can be managed through the first measure mentioned above, by cutting costs and bolstering revenue through the sale of goods which are in high demand (i.e. face masks, hand sanitizer, ecommerce, digital products and entertainment, etc.).
As a small business owner, one thing is perfectly clear, with limited and decreasing cashflows it is imperative to make smart decisions which will preserve your financial situation. Make a spreadsheet of expected expenditures over the next three months and get in touch with entities you need to pay in order to build a mutually beneficial three-month cost plan (Bhatti 2020). An added benefit is that business owners can maintain and build upon their existing B2B relationships through a mutual goal to survive this pandemic.
Apply for Government Aid:
This is one of the more obvious measures that a small business can and should take in sustaining their business. Governments across the globe are implementing fiscal measures aimed at supporting small businesses. Programs such as The Coronavirus Preparedness and Response Supplemental Appropriations Act provides nearly $7 billion to small businesses impacted by the COVID-19 pandemic. Find out how to apply for such benefits and take advantage of the resources that are made available for small businesses here: https://www.uschamber.com/co/start/strategy/federal-small-business-stimulus-aid-programs-guide
Apply for Unemployment Benefits:
The U.S. government is allowing self-employed and contract workers to apply for unemployment benefits. By doing so, small business owners can offset the income they stand to lose from a decrease in business. This will decrease the burden that a business owner puts on their company by taking a portion of the profits, thus keeping that vital capital in the business until this pandemic subsides.
Manage Personal Finances
Actively keeping your personal finances in order will not only help you, but it will help your business as well. Managing your finances, and creating your own personal three-month plan, will help you stay organized and manage your cash efficiently, so you are not burning through precious capital. An additional benefit to managing your personal finances is accounting for the loss of income you will expect due to COVID-19, which will allow you to manage expectations, not only for yourself, but for your business.
One aspect of managing expectations during the pandemic is the new fact of life that is social distancing. However, many businesses still require basic office work to be done on a daily basis, which is made difficult during the current situation. One way to cut costs while maintaining your staff throughout the pandemic is to delegate office time to small groups on specified days, requiring social distancing requirements, of course. By implementing this measure, you are effectively decreasing hourly pay as staff members are forced to work less days a week.
Navigating the rough waters currently facing small businesses across the United States is certainly a daunting endeavor. However, with some strategic thinking and rational planning it is certainly not unfeasible for a small business to make it through such trying times. The measures stated above represent a number of considerations for small business owners to consider that avoid resorting to more traditional cost cutting measures, such as layoffs. These steps should act as a guide for small business operators as they make their way to the other end of this pandemic.