How Can Your Business Survive the Covid 19 Economic Crisis? We are at the beginning of the economic impacts of the Covid 19 pandemic. Business is going to get worse before it gets better but agile and innovative entrepreneurs can survive if they have a strategy to get through the crisis. Keeping your business open is crucial since 75% of businesses that close in an economic crisis never reopen.
In an economic crisis, entrepreneurs tend to bear the brunt of the negative impact but if they keep their eyes open and prepare to take advantage of opportunities that open up, they can not only survive but thrive. They can take market share from less agile competitors and become more profitable as they become leaner to fit the economic environment.
It’s difficult, but entrepreneurs must spot opportunities and be aggressive in capturing them. Look to the future and see how your business can take advantage of the new business landscape.
Here are 13 specific recommendations to get your business through the downturn.
- Keep a close eye on your cash flow. Conduct monthly forecasts and daily checks to make sure you have the operating cash to see you through. You should project where your business will be in 3 months as well as daily, weekly and monthly milestones. Negotiate with suppliers, landlords, and contractors to get a better price. They are feeling the pinch as well and might cut you a deal to keep cash flowing into their pockets. Look at bartering for goods and services you need. Take advantage of discounts for prompt payment and don’t pay other invoices until they are due. If cash flow is already a problem, talk to your creditors about payment extensions and don’t wait until the last minute.
- Get aggressive with collections (you don’t have to be mean to be aggressive). If a payment is due in 30 days, try and get it paid in 25 or 20. The cash is better in your pocket than theirs. Make sure your payment terms fit your business model and cash flow needs.
- Keep your inventory in check. A lot of cash can be tied up in unneeded inventory. Look at what inventory can be reduced, liquidated or sent back. It takes time and money to store products you don’t need right now. Keep enough on hand to keep orders fulfilled but try to switch to a just on time model for greater efficiency and less overhead.
- Build up your capital reserves. Become closer to your best customers and see how they are doing. This helps keep competitors at bay, keeps you informed if they can pay or not and puts you in a position to see opportunities. Set up calls and video conferences with as many customers as you can so you can win back customers who are unhappy and sell more to the ones who already love your services. Get as many long-term contracts as you are able and offer early payment discounts to get the money in the door sooner.
- Take a good long look at any capital spending. Delay long term projects and high-ticket items until the economic climate shifts. Tying up your resources now could spell our doom.
- Maintain a good relationship with your bank. Keep them informed of how you are doing. Banks like knowing where things stand so they can prepare. During economic times it isn’t advisable to get more credit. Increasing your debt load can put an undue burden on your business.
- Eliminate nonessential expenses as much as possible. Before spending any money ask if it is really needed. Do the same with your personal budget. Keep it simple and inexpensive.
- Try and reduce the cost of rented space. If you have too much room consider subletting the part that you don’t need at the moment. This reduces overhead and generates a little income as well as potentially helping another business out that needs space. Extra space that you rent takes away from your bottom line.
- Now is the time to reevaluate staffing, but don’t skimp. Service quality can suffer and your competition could earn business away from you. You may even consider hiring new sales staff during this time. If you are smart you can be aggressive in going after new business and expand while others contract. If you absolutely have to cut staffing do it early and cut deep. If you cut once then have to cut again (or suggest you may have to) then your staff will be worried about their job and not about doing their job. Put your company on stable footing so your employees aren’t worried and can concentrate on getting you more business.
- Concentrate on customer service to entice your current customers to spend more with you. As your customers buying power and interest in spending decrease, your customer service should increase to keep them coming back. Customer service is primarily viewed as a time issue by customers. Waiting time to get service, delivery time and how long it takes to help them all play a part in how they perceive they have been treated. People will abandon purchases if they believe the time it took to get help or get a delivery was unreasonably long. Look at your system and eliminate flaws that create time delays.
- A related issue is training. Sometimes the slow down is the perfect time to conduct training. Costs go down and there is more time between money-generating activities. Look at what skills will give you the advantage during the downturn and get the proper training for your staff.
- Make policy decisions alongside your employees. They are impacted by this downturn as well an being involved not only gives them ownership, it gives you a large pool of knowledge to draw from. “None of us is as smart as all of us” -Ken Blanchard. If workforce reductions are needed they can help figure out how to reduce hours and increase efficiency without having to go through the pain of layoffs. Meet with staff regularly to talk about how to reduce cost, increase production and get through this lean time. When times get tough, get the team together and put your collective minds to work.
- When a financial crisis hits most businesses decrease their advertising spend and that can be a mistake. Studies have shown that keeping the same advertising budget or even increasing your budget during a downturn will get your company in a position to outsell your competition. Good marketers can boost sales numbers and market share even when your industry is in decline. Usually, they concentrate on short term tactics like promotions and sales and using marketing targeted at the uneasy situation.
Here are some key guidelines to marketing during a downturn:
- Keep track of your competitor’s advertising. When they cut back may be the time to increase and get a bigger market share.
- Don’t use gimmicky advertising. Use your benefits and advantages to drive your advertising. Clear solid statements rather than appealing to emotions.
- Direct-response advertising is important. Simple and clear language with impactful copy and a crystal-clear call to action. The other advantage of direct-response is you will see the results (or not see them) quickly.
- Try to avoid regular looking ads. Position your ads as important messages offering them great value.
- Present value and dependability. In a downturn, people want the most bang for their buck. Avoid clichés by showing the value rather than telling about the value.
- Perception is key in a downturn. If people think things are bad financially, they will act like things are bad. Present your product or service as a smart investment.
Be ready to pivot and take advantage of the economic opportunities presented to you and your business will survive the economic crisis just fine. Keep your eye on the bottom line but not to the detriment of growth activities. Take advantage of your competition’s missteps and bring your whole team along with you. Together you can succeed, if you do it alone you won’t. Today’s difficulty is tomorrow’s triumph.
If you need help or guidance putting together your survival strategy I am just a phone call or message away. (435)554-8209 Jason@Jasonmporter.com