The rapid spread of the coronavirus has caused an unprecedented impact on humans, health and the economy. As stay-at-home orders and travel restrictions remain in place, business owners across the country are feeling the profound effect of this crisis on their companies. In fact, 76% of small businesses have been negatively impacted since the pandemic began.1 And the damage may continue.
Under these challenging circumstances, it’s still possible to steer your business through turbulent times. By assessing your company’s position today, you can create a plan to deal with the chaos and still be ready for future opportunities.
5 ways to prepare to act on opportunities
By acting early and making strategic decisions, business owners can be more prepared to weather times when business is not thriving. Consider these five strategies.
1. Assess streams of revenue
Even in times of change, business owners can protect their company’s future by reconsidering streams of revenue. To confidently navigate this slowdown, it may be a smart idea to alternate how you serve your customers and apply out-of-the-box solutions for customer problems.
2. Prioritize expenses
Now more than ever, small business owners must think about employing cost-cutting measures. Reduce non-essential spending such as expensive software, payroll for external partners (consultants, freelancers, etc.) and leased equipment. For office space, turn off unnecessary lighting to lower costs and consider contacting your landlord to renegotiate pricing. If you’re in contact with vendors, try asking for ways to work within their terms. Inventory automation and a reduction of waste can also lower your cash needs and put you in a stronger financial position.
3. Tune up cash flow
Having cash flow can be key to handling this downturn. If you are coming off a growth spurt from the past few years, there are often opportunities to reduce working capital needs and free cash. Shifting vendors to electronic card payments, digital offerings and web payments can stretch your payables and reduce working capital needs.
4. Reconsider risk-taking
While the lasting economic effects of the coronavirus downturn remain unknown, owners must look for opportunities amid constraints and focus on what they can control. If you are concerned about this slowdown, understand that launching a bold initiative—entering a new market, opening a new facility, acquiring a competitor, etc.—can hinder your strategic maneuverability and sap your reserves.
5. Be ready for changes
Downturns offer unique opportunities that owners can capitalize on by making updates to their sales strategy, marketing and pricing. Some of those include:
- Labor and employees. If you’re still hiring during this pandemic, you could find employees with skills and experience that you might not be able to recruit otherwise.
- Materials and services procurement. Look for deals on inputs and productivity tools. Struggling suppliers or partners strapped for cash may offer you once-in-a-lifetime discounts on materials or services contracts.
- Expansion with lower competition. You may lose competitors or see dramatic strategic shifts. Be ready to gain from a changing business landscape. Sales strategy, marketing opportunities and pricing adjustments should all be on the table.
- Acquisitions. Not every business will be properly capitalized or diversified to ride out this downturn. You might be able to buy a competitor for a price and terms that help both parties get out of an otherwise challenging situation.
- Equipment or real estate purchases. Large asset purchases like durable equipment and real estate often suffer from reduced demand and offer sales. Prepare for bargains.
- Capital structure. Business slowdowns can drive down the cost of capital. Whether through debt or equity capital, this may be the time to explore alternate financing options.
1 “NFIB Study: COVID-19 Impact on Small Business: Part 2,” March 23, 2020, National Federation of Independent Business
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The information provided is not intended to be legal, tax, or financial advice. BB&T hopes you find this information useful but we cannot guarantee that it is accurate, up to date, or appropriate for your situation. You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.
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