While there are a few infectious disease specialists that have crawled out of the woodwork claiming that they had predicted a pandemic of this magnitude, the rest of us had no way of anticipating it and thus didn’t have much of a financial sustainability plan in place when Covid-19 reared its ugly head. While this outbreak is certainly unprecedented, it’s not as if small business owners haven’t faced various crisis situations in the past: economic recessions, industry shakeups, even just the threat of a new, perhaps fancier, competitor. In short, you might just be more prepared than you think, and even if you aren’t, we’ve talked to the pros and they’ve identified five strategies to help you develop a successful fiscal stability plan that will be able to withstand the next crisis (murder hornets anyone?)
Get your priorities straight:
Rather strangely, the advice your father always dished out to get your priorities in order is the first thing you need to do when drafting your sustainability plan. Look critically at your current business structure and the current state at which you are functioning. Ask yourself, what is essential? Who is essential? Where should you be diverting your attention to reap the best bang for your buck OR, alternatively, position you for future fiscal growth in the months and years ahead. Of note, the pros suggest that you take a long-term view to the crisis and anticipate disruption in your business into 2021, so remember that you are playing the long-game with your decisions and over-arching strategy.
Check the balance:
When we say “check the balance,” we mean the actual balance sheet! Check your cash flow, how is money coming into your business and how frequently? Then what are you currently spending on. If you have capital reserves, think realistically about where that money should go and how long you can spread it out for. In addition, you will need to look critically at your accounts receivable and determine how their cash flow (or lack thereof!) will impact yours. The experts suggest that you sit down and rank your customers in order of importance to the sustainability of your business, with those that hold big accounts or bring in large volumes of money prioritized over smaller accounts. Next, you should plan to approach these “big fish” and discuss their plans moving forward – is there more that you can do to prove your value so you stay “essential” to them or if non-payment is pending, perhaps you can work together now to figure out a mutually agreeable payment plan to get you through this crisis.
Consider your vendors:
Much like we’ve recommended you rank your customers in order of importance, you should also consider ranking your vendors as it pertains to the fiscal sustainability of your business. Those in the top spots should be the ones that are crucial to the continuation of your company, the ones without whom you really couldn’t stay in business yourself. Those at the lower end of the order, meanwhile, should be evaluated for whether their use could be cut back or omitted entirely, either temporarily or perhaps permanently, as part of a cost savings strategy should the need arise. As you would expect with a customer of yours, if you are struggling to determine how you can continue to engage a vendor in services, reach out to them NOW to create a plan whereby both parties are satisfied with the agreement.
Think about continuity of operations:
Again, the pros are suggesting that business won’t go back to usual until some point in 2021, so depending on the current state of your business may mean that you will have to scale back your operations considerably in order to survive. Think critically about who is essential to your business. Who are the stakeholders that keep the proverbial lights on in your business and, as we touched on above, thinking about your continuity of operations also means considering any vendors or services that you require in order to operate and determining what they can do to keep you comfortable for longer.
Seeking clarity in uncertain times:
Indeed, the path ahead is uncertain to say the least, but that doesn’t mean that you can’t seek clarity in your future. Specifically, the pros recommend that you engage with both investors and lenders to determine potential sources of money to support your long-term sustainability goals. Because of these unprecedented times, new and innovative lending models are being offered to businesses that would have struggled to qualify in the past. Now, you might not be at your “rock bottom” just yet, but you should lay out a worst case scenario plan that includes which avenues make the most sense to pursue in order to keep your business afloat. Again, you don’t have to sign on the dotted line and take the pile of cash just yet, rather you’re getting your proverbial ducks in a row so that if you need to access these options, you have already done your homework on the best path forward.
Still have questions about creating a sustainability plan for your business? Give us a call here at Abel HR and we will be happy to walk you through the process and help you trouble shoot some of the sticking points.