The Coronavirus pandemic has inflicted financial crises all over the world, and many small business owners are suffering or struggling as a result of COVID-19. During the early stage of the crisis, the it was reported that 92% of small businesses said they experienced adverse effects due to the pandemic. Only 5% of small businesses reported experiencing no effects at all.
Although the short-term outlook for small businesses after the pandemic will vary significantly by industry, it is best to work on what your mode of recovery will look like when the economy is restored to normalcy or when a new normal is established.
It is always best to start planning as early as possible and this article will show you the six steps to get your business back on track after COVID-19.
1. Financial damage assessment
To develop a rebuilding plan for the pandemic, the first step involves knowing how severely your business has suffered.
Several layers are involved, the hard numbers to start with. If you know your financial statements are not up to date (cash flow or profit and loss statements), now is the time to do so. When you do this, you can compare your financial statements with the previous year to identify any decline in your business. Even though only a tiny fraction of businesses benefited from the pandemic, it is likely that the damage might not be that severe.
It would be best to consider other ways that have affected your business aside from the hard numbers involving sales, cash flow, and profits. For instance, if there was a need to let go of some or all of your workers, you have to consider that in your rebuilding strategy. If you cut down your budget on advertising and marketing, or you lost some customers, then you need to give an account to aid in recovery as you identify financial resources.
2. Go through your business plan again
Even if your business model or plan might have worked perfectly before COVID-19, you may need to fine-tune it when coming out.
To be specific, you may have to consider how your small business can adjust appropriately to a new norm. For instance, if your business depended on foot traffic to a physical location for sales in the past, you may consider a digital expansion to accommodate more people who shop from the comfort of their homes.
It is also vital that you analyse how the coronavirus crisis has affected your industry in general. Ensure you focus on looking for opportunities and pay attention to trends when looking at your competitors and the industry at large. Finding a gap, need, or solution that your business can fulfil could be the key to help you reclaim and expand your customer base.
When reviewing your business model and plan, ensure you are clear on the strengths and weaknesses of your business. Try to identify things that were working well before that may not be effective now, and look for how to improve or adjust to stay competitive. Lastly, remember to go through your business goals again to ensure that they are realistic, given the circumstances at hand. For instance, you may need to review your target revenue for the year.
Read more about creating a strategic business plan
3. Consider if your business recovery requires funding
You may need some money to kick start your business operations after the crises expect you have a lot of cash on hand going into the COVID pandemic.
There are several options to consider when you want to finance your business during the rebuild period. You can contact your bank for loans, and you can also benefit from a few programs. For example, you can benefit from the furlough scheme, which is designed to offer financial assistance to small businesses that find it challenging to retain their employees during the crisis. If you need funds for things other than retaining your employees, you can count on Bounce Back Loans for short-term financing.
The only problem with these federally mandated programs is that funding is limited. It’s likely that funds may no longer be available before your loan application is review. Thus, it is best to consider other sources to fund your small business; such as:
- Small business terms loans from banks, credit unions, and online lenders
- Equipment financing
- Purchase order financing
- Inventory financing
- Merchant cash advances
- Accounts receivable financing
- Vendor tradelines
- Business credits cards
- Business lines of credit
The options mentioned above have their advantages and disadvantages. For instance, merchant cash advances and account receivable financing can be convenient as both of them do not require perfect credit to qualify. You can use any to fund your small business in the short term.
However, both options require that you provide something to leverage, like credit card sales and outstanding invoices, respectively. Getting approval may be difficult if sales are slow or non-existent. These alternative funding options have a much higher effective annual percentage rate than other types of small-business loans and credit lines.
If you are thinking of finance to rebuild your business, bear in mind that borrowing money may be competitive, as your lenders need reassurance that you can repay the loan. To know how likely your funding will be approved, it is advisable that you review your credit scores (personal and business) and also your business and personal financials.
4. Budget revamp to account for new expenses
Exiting the COVID crises may require you to spend money before you start making profits. For instance, you may need to rehire employees or hire and train new employees. You may need to purchase inventory, and you may need to increase your budget for advertising and marketing.
In this recovery process, it is advisable to have a clear picture of the things you need to budget for and things to cut to make the most of your revenue. The aim here is to eradicate careless expenses and maximize your operating budget so you can take advantage of investment opportunities when they emerge.
Taking a pay cut or deferring paying yourself is an extreme step to consider during this period. The sense in this is dependent on you being able to manage your personal financial obligations, based on what you have saved so far or from your spouse’s income if married. However, this step could be what you need to rebuild or get your business operational within a short period.
5. Create a timeline for rebuilding
Executing all your recovery plans at once to recover your business after COVID-19 may not be realistic. Thus, you must develop a timeline to rebuild your business, and this timeline should prioritize actions that matter the most.
For instance, securing funds for your business may be your immediate goal. After achieving this, you can come up with a timeline to rehire workers, restock inventory, and lastly, resume business operations if it was closed as a result of the crises.
Ensure you track your process accordingly as you take individual steps to recover your business. Doing this is very important, especially if you have already secured the funds your business needs, to avoid wasting time on activities that won’t deliver solid returns on your investment. You may want to do a weekly check during the early stages of COVID recovery to identify what’s working and not working. As things begin to stabilize, you can decide to review your business financials monthly.
6. Develop a contingency plan for crises
Even if the COVID pandemic may look like an event that will never happen again, the truth is that an emergency can emerge to disrupt your business operations at any time. It is essential you remain alert/vigilant. You can use what you have learned so far from the coronavirus pandemic to plan/prepare your business for the subsequent crises; doing this can help protect your business from future shocks.
For example, if you had little or no money before the coronavirus outbreak started, building up liquid cash savings may be a priority for your business. Your focus may be directed to cutting nonessential spending and paying down your debt to keep your budget in check. Or still, you may be required to seek ways to help your employees work more efficiently to reduce operating costs.
Also, you may have learned one or two things from the COVID-19 pandemic on the importance of being able to adapt and keep your business operations going during hard times. For instance, if your staff did not have the option to work remotely at first, you may want to incorporate this in your business model to go forward.
The more you think outside the box to prepare for emergencies, the better. You can improve your business’s odds of surviving and thriving during difficult periods when you have more than one plan.
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