The COVID-19 outbreak has caused financial chaos around the world, and many small business owners are struggling to survive. The short-term prospects of these companies are highly industry-specific, but it is important to think through the recovery process for each of them. The following five tips will help you with this.
1. Calculate the financial damage
First, determine how badly your business has suffered.
Here you need to take into account many details, first of all, specific numbers. If you haven’t updated your financial documents for a long time — for example, profit and loss statements or cash flow statements — it’s time to do it. The numbers can then be compared with last year’s data to see how much they have deteriorated. And although only a few say about the positive impact of the pandemic, it is possible that the damage may be less than it seems.
In addition to sales, profits and cash flow, assess other aspects of the business that could be affected. For example, if you had to lay off all or at least a few employees, cut advertising and marketing budgets, and lose customers, this will also have to be considered in order to assess the financial resources that will be required for recovery.
If you are struggling with all the papers, taxes and accounting, tax agents from Glebe can properly do it for you.
2. Review the business plan
Even if the old business model worked fine before COVID-19, it may now need adjustment.
In particular, it is necessary to understand how to rebuild in order to adapt to the new norm. For example, if previously the bulk of sales came from pedestrian traffic at a physical point of sale, you may now have to go online to attract people who shop from home.
In any case, you are not the only one in this situation. It is also useful to analyse how the industry as a whole has been affected by the pandemic. Pay attention to trends and focus on opportunities. Finding a vacant niche that your business can satisfy which was ignored until now can be crucial to rebuilding and expanding your customer base in the future.
While adjusting your business plan and business model, clearly identify the strengths and weaknesses of your company. Then decide which of the previously worked solutions are no longer as relevant now, and see what you can adapt or improve to stay competitive. Finally, remember to revisit the targets and make sure they are realistic in the current circumstances: for example, the annual revenue target will now need to be adjusted to reflect the impact COVID-19 may have had on sales in the second quarter.
3. Assess if external funding is required for the recovery
If during the pandemic you did not manage to make a lot of money, it is likely that external funding will be required to resume the processes.
In the recovery period from COVID-19, small businesses can obtain it in a variety of ways, from government support programs to business loans. Each of them has its pros and cons, but in any case, lenders need to be sure that they will get their money back. You will have to compete for funding: evaluate your capabilities in order to understand how likely the application will be approved.
4. Adjust your budget to reflect new expenses
After a pandemic, you are more likely to incur more costs than earnings in the beginning. For example, hiring and training new employees or re-employing those who had to be fired. It is possible that investments in equipment and advertising will be needed.
During the recovery phase, the entrepreneur should have a clear idea of what to budget for and what expenses to cut in order to get the maximum profit. You need to control the operating budget as tightly as possible to invest in growth as soon as the opportunity arises.
An extreme measure that can be taken is to cut or give up your salary. Whether this makes sense depends on how well you manage your personal finances, whether you have savings or other sources of income. But by giving up your salary for the near future, you will help the business get back on its feet faster.
5. Develop a recovery schedule
Perhaps you want to implement several measures to restore your business at once, but doing everything at once may be unrealistic. Develop a timeline that prioritises steps.
For example, first, you need to provide financing for the business. After that, you can set a deadline for re-hiring employees, restocking goods and, finally, start work again if the company was closed due to a pandemic.
Do not forget to track your progress. This is especially important if you have invested your own money in the business and cannot spend time on something that does not pay off the investment. In the early stages of recovery from COVID-19, you can check weekly which measures are working and which are not. Later, when the situation begins to stabilise, you can track your financial performance on a monthly basis.
The coronavirus pandemic may seem like a once-in-a-lifetime event. However, the reality is that at any time there could be an emergency that can ruin your business. Use what you have learned now to prepare for the next crisis and protect your business from future shocks.
Pandemic taught us all of the importance of being adaptable and flexible. Use that knowledge.