6 Ways To Rebuild Your Small Business After COVID-19
The COVID-19 outbreak has wreaked financial havoc around the world, leaving many struggling small business owners in its wake. According to National Federation of Independent Business (NFIB), as of March 30, still at the start of the crisis, 92% of small businesses said they had suffered negative effects as a result of the pandemic. Only 5% of small business owners said they had no effect.
While the near-term outlook for small businesses varies widely from industry to industry, it’s important to determine what the mode of recovery will look like once the economy begins to return to normal or establishes a new one. normality. Having an exit strategy in place after COVID-19 can help you get ready to start and rebuild. If you’re not sure what your coronavirus exit plan should include, this guide can help you get your business back on track.
1. Assess the financial damage
The first step in developing a recovery plan for COVID-19 is to determine how badly your small business has been affected.
There are different layers involved, starting with the hard numbers. If you haven’t recently updated your financial statements, such as income or cash flow, it is useful to do so now. You can then compare them to last year’s numbers to see how down your business can be. And while only a small percentage of business owners report benefitting from the pandemic, 3% according to the NFIB, the damage may not be as severe as you think.
Besides the specific sales, profit, and cash flow numbers, consider other ways your business has been affected. For example, if you have had to lay off some or all of your employees, you will need to factor this into your rebuilding plan. If you’ve cut your advertising and marketing budget, or if some of your customers have migrated to competitors, these are things you’ll need to consider when making identify financial resources to help you recover.
2. Take a second look at your business plan
Your business model may have worked perfectly well before COVID-19, but getting out of it may mean you need to make some adjustments.
Specifically, you may need to think about how your business can rotate to adjust to a new normal. For example, if you previously relied on foot traffic to a physical location for sales, you may need to consider digital expansion to accommodate the greatest number of people who shop from home.
You are not alone in this case, however. In partnership with the Small Business Administration (SBA), SCORE provides small businesses with access to mentors who can offer advice and resources as you seek to build or rebuild your business after the crisis. Remote mentoring services are available, as well as free webinars that address specific coronavirus issues.
Analyzing how your overall industry has been affected by the coronavirus pandemic is also helpful. When looking at your competition and the industry as a whole, pay attention to trends and focus on finding opportunities. Being able to find a gap or need that your business can fill that has been overlooked so far could be key to winning back and expanding your customer base in the future.
When reviewing your business plan and business model, clearly identify the strengths and weaknesses of your business. Then take a look at what worked before and maybe don’t work as well now and see where you can adjust or improve to stay competitive. Finally, don’t forget to review your business goals to make sure they are realistic given the current circumstances. For example, you may have set a target income goal for the year that will need to be reduced now to account for the negative effect COVID-19 may have had on your sales in the second quarter.
3. Determine if you will need financing to recover
Unless you have a large amount of cash on hand before the pandemic, chances are you will need working capital to jumpstart your business operations.
When it comes to financing your small business during a period of COVID-19 reconstruction, there are several options to consider. The SBA is an obvious choice for business loans, and there are a few programs that can help. the Paycheque Protection Program, for example, is designed to provide financing to small businesses struggling to retain employees during the coronavirus pandemic. Economic disaster loans can also help you with short term funding if you need cash for things other than employee retention.
The challenge with these two federally mandated programs, however, is that the funding is limited. It is quite possible that the funding will be exhausted before your loan application is considered. For this reason, it is important to consider other sources of financing for small businesses, including:
- Traditional loans and microcredits SBA 7 (a)
- Small business term loans from banks, credit unions and online lenders
- Business lines of credit
- Business credit cards
- Supplier business lines
- Accounts receivable financing
- Cash advances from traders
- Inventory financing
- Purchase order financing
- Equipment financing
Each option can have advantages and disadvantages. Accounts receivable financing and merchant cash advance financing, for example, can be convenient, and neither need perfect credit to qualify. Either could be useful for financing your business in the short term.
But they both require you to have something to mine i.e. unpaid invoices and credit card sales, respectively. If sales are slow or nonexistent, you might have a hard time getting approved. Alternative financing options like these can also have much higher effective annual percentage rates than other types of small business loans and lines of credit.
If you are considering financing to help rebuild, keep in mind that borrowing can be competitive, as lenders want to know that loans can be repaid. Review your business and personal credit scores, as well as your business and personal finances can help you assess the likelihood of you being approved for funding.
4. Reorganize your budget to take into account new expenses
Coming out of the COVID-19 pandemic, you may have to spend money before you can make any money.
For example, you may need to spend money to hire and train new employees or to rehire those you had to lay off. You may need to buy inventory, and you may need to increase your ad budget again to start building a new buzz.
As part of your recovery from the coronavirus, you should have a clear idea of what to budget for and what you can cut back to make the most of the income you have. The goal is to eliminate wasted money and get your operating budget as small as possible so that when the opportunity to invest in growth arises, you can take advantage of it.
An extreme measure you might take during this time is to defer your payout or reduce your pay. Whether this makes sense depends on how well you are able to manage your personal financial obligations, depending on what you have in savings or a spouse’s income if you are married. But skipping short-term paychecks could help your business get back on its feet faster.
5. Develop a timetable for the reconstruction
You may have multiple things you need or want to do to recover from COVID-19, but doing all of them at the same time may not be realistic. What can help is having a timeline to follow that prioritizes your most important actions first.
For example, your immediate goal may be to secure financing for your business. Once you’ve done that, you can set a timeline for rehiring employees, then replenishing inventory, and finally reopening your doors if your small business has closed due to the pandemic.
As you take individual steps towards recovery, remember to monitor your progress. This is especially important if you have secured capital to fund your business, as you don’t want to waste time on activities that don’t generate a solid return on your investment. In the early stages of recovering from COVID-19, you may want to check in weekly to see what works and what doesn’t. Later, you can move on to your monthly business financial review as things start to stabilize.
6. Create a contingency plan for the next crisis
While the coronavirus pandemic may seem like a once-in-a-lifetime event, the reality is that an emergency can arise and disrupt your small business at any time. Using what you’ve learned during the current pandemic to prepare for the next crisis can help protect your business from future shocks.
For example, building up cash savings may be a priority for your business if you had little or nothing left before the start of the COVID-19 epidemic. You can choose to focus on paying off your debts and reducing non-essential expenses to control your budget. Or you may need to find ways to help your staff work more efficiently in order to lower operating costs.
The pandemic may also have taught you a thing or two about the importance of being able to adapt and keep your business flowing so that you can reasonably weather storms. For example, if your employees didn’t have the ability to work remotely before, this is something you might want to incorporate into your business model in the future.
The more you can think outside the box to prepare for a worst-case scenario, the better. Having a Plan B (and even a Plan C, D, E, and F) can help improve the chances of your business surviving – and possibly thriving again – during tough financial times.