Has your business had trouble dealing with this coronavirus recession? You're certainly not alone. Unlike previous economic downturns in recent memory like the 1930s Great Depression and the 2008 Great Recession, this one was induced by a pandemic.
In order to curb COVID-19 transmission rates, governments around the world mandated lockdowns that forced most businesses to temporarily cease operations. Besides this, the past eight months have caused consumer spending habits to change. For example, many more people are purchasing face masks than ever before. Consequently, even recession-proof sectors have been upended during this time.
To survive these troubled times, businesses must adapt. Here are 7 tips to help you weather the coronavirus recession.
1. Forecast Your Cash Flow
It's not unusual for business owners to simply trust their gut when it comes to evaluating their company's health. But Alan Lefkowitz, a managing director at CFO Strategies, recommends a more calculated approach: Write down all of your expected income and expenses over the next 13 weeks. This will help you understand if your business's cash flow is enough to survive and even thrive.
Doing this exercise will also elucidate your business's break-even point, which helps to ensure that you're capable of covering costs and accumulating excess cash to stay afloat.
2. Practice Transparency
Be honest and transparent with your business partners, employees and customers about how your business is doing — especially if they'll be directly impacted. It's easy to shy away from expressing your fears and issues. But doing so leaves potential solutions on the table.
"Be ready to communicate more," explains Joseph Meuse, founder and president of Virginia-based consulting firm Business GPS. "If you need help, you have to ask. If you don’t ask, you don’t know what you’re going to get."
3. Maintain an Adequate Amount of Liquidity
Forecasting your cash flow gives you a great opportunity to identify ways to reduce discretionary spending. The changes brought on by the COVID-19 pandemic mean that you should strive to eliminate all travel expenses from your budget for now. Trimming office space costs by taking your business operation remote is another viable way to decrease fixed overhead.
Taking steps like the ones mentioned above should free up capital that allows you to be better prepared for potential events in the future. To understand how you'd handle such a possibility, run a few "what if" scenarios. Anticipate the steps you'd take to mitigate the impact of these situations. Simulating this gives you a good idea about if you need to take more steps to liquify assets.
4. Lean On Your Relationships
Business isn't about selling a product or service. It's about building resilient relationships. If you've worked hard to solidify a great rapport with your customer or suppliers, don't be afraid to be transparent about your situation during this recession. Oftentimes, they'll want to help your business survive and thrive in any way they can, whether that's developing payment plans or extending deadlines.
5. Leverage Negotiation
Are suppliers hesitant to cut you some slack? Then it's time to negotiate. Propose a way you can help them if they help you. Prioritize communication, logic, and respect when you approach them with this deal. Several companies already have a forbearance program in place. By requesting it and providing proof of hardship, you'll be more likely to reach negotiation terms that benefit both parties.
6. Be Strategic About Staffing
Labor is typically one of the first factors in a business's budget that gets cut during economic hardship. But don't just part ways with your entire staff. Instead, approach this strategically; look for areas in your workforce where you can reduce redundancies. Usually, this results in eliminating nonessential roles. If that's too painful, alternate routes include changing full-time positions to part-time ones or reducing salaries temporarily across the board.
7. Focus On Established Clients
During an economic recession, it can be easy to assume that your problem lies in not bringing in enough new business. But rather than spend more time, money, and resources on customer acquisition, turn your attention towards established clients. Continue to build strong relationships with them by providing with excellent service.
In the long run, investing more in your established customers can pay off in dividends. Not only will they stick with you, but they're more likely to tell others about your business. And if you really feel that it's imperative for you to pursue new customers, then try inexpensive methods of communication such as social media and content marketing. These can help immensely in generating organic leads.
Tough Times Don't Last. Tough People Do.
We know that the coronavirus pandemic has been tough on both businesses and consumers. Hopefully, these tips can help you hang in there long enough to see brighter days. Remember that these problems are temporary — keep soldiering on, and you'll inevitably outlast them.
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