Businesses everywhere are feeling financial pressure from the economic uncertainty brought on by the coronavirus epidemic. For smaller businesses, the impact can be especially severe. We see this reality every day while serving our customers at C2FO, but we also experience it in our personal lives.
Last week, my family visited one of our favorite Indian restaurants in Overland Park, Kansas. The restaurant’s owners had recently closed their dining room and were only providing take-out, as mandated by the local government. They told me customer traffic had slowed to a trickle.
It reminded the owners of when they started their business years ago by cooking in their home and delivering orders at customers’ doorsteps. From that simple beginning, they built a thriving restaurant. Now, it seemed, they were back to square one.
No one knows the full impact of this crisis, but I shared five pieces of advice with the restaurant owners that I believe can apply to many businesses at this critical time.
If you haven’t already, consider adding these steps to your crisis management “to-do” list:
1. Go Back to What Made You Successful
If you expect a revenue shortfall, now is the time to scale back to core offerings your customers want or need at this time. For my friends at the restaurant, that might mean returning to home delivery service and cutting their menu items to four or five popular dishes. For a manufacturer, it may mean suspending products that have lower demand. Retailers might halt orders of less popular SKUs that are taking up valuable shelf space.
A recent example of scaling back is Amazon’s decision to leverage its distribution network to deliver only medical and household staple items during the crisis. It’s a drastic move, but it gets to the heart of what the online retailer does best.
Returning to the basics also means taking a hard look at your overall cost structure. Focusing on the essentials of running the business and rolling back new initiatives can rationalize the number of resources you need for the near future.
These are tough decisions that may seem counterintuitive to business owners. They may also be critical to your company’s survival.
2. Negotiate Terms of Your Contracts and Debt
If you haven’t done so already, get in touch with your landlord or mortgage lender. Many banks have offered to defer mortgage payments, at no extra cost, to consumers and businesses affected by the coronavirus. Many utilities nationwide have announced they will not shut off power for unpaid bills during the crisis.
Even if you aren’t concerned yet about fixed costs, now is an optimal time to explore how flexible your lender or landlord might be in this crisis. If you can renegotiate your contract to pay more later and pay less now, that could free up some cash to help you address variable costs and more pressing concerns.
Also, many companies have business interruption insurance. Contact your insurance broker to make sure you fully understand your coverage in the event of an extended outbreak.
3. Consider Government Loan Programs
The United States government is making several moves to help small businesses affected by the coronavirus. The U.S. Small Business Administration has offered Economic Injury Disaster Loans for working capital. These 30-year loans range in value from $25,000 to $2 million, with an APR of 3.75% for businesses and 2.75% for nonprofits.
More government help is on the way. Congress and the White House are hashing out a $2 trillion stimulus bill that could provide small businesses with $350 billion in guaranteed federal loans, as well as about $500 billion for industries hit hard by the crisis.
Finally, if you expect to owe money on your company’s 2019 taxes, take advantage of the extended federal tax filing deadline, which is now July 15, 2020.
4. Explore Every Possible Source of Capital
Facebook recently made a splash by pledging $100 million in grants to small businesses. This well-intended gesture is, unfortunately, a drop in the bucket of funding needs businesses have now and in the coming months.
Fortunately, there are many funding sources ready and willing to help small businesses. A group of lenders that includes several leading banks announced they are suspending stock buy-backs until June in order to provide more financial support to consumer and business clients.
Alternative financing options are also available to help bridge funding gaps. As a supplier on the C2FO platform, you have access to invoices your customers are willing to pay early, which could be a source of much-needed cash flow for your business. Additionally, C2FO provides a suite of financing products like asset-based lending that can also provide a quick injection of working capital.
5. Plan for a Prolonged Crisis
No one knows how long this crisis may last, but it’s better to over-prepare than to hope for the best.
Envision what your business might be like if these uncertain economic times drag on for months. Anticipate possible supply chain shortfalls. Make sure your company has adequate inventory in the event of a drawn-out crisis. Examine and diversify your distributor resources in case a supplier cannot meet an order request.
Finally, explore what opportunities might lie ahead at a time of radically different consumer needs and social norms. For my friends at the Indian restaurant, that means creating an easier take-out process with an open carry-out window.
These are critical times when business owners’ adaptability and ingenuity will come to bear. As you prepare your business for today’s uncertainties, make sure you’re using every tool at your disposal.