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As more and more states begin to reopen their businesses, we have seen many small companies make an effort to return to the business they had before coronavirus rocked our economy. Small businesses should start to prepare their business for optimal operation now. What steps can you be taking to get your business ready for reopening?
Unfortunately, during times like these, small businesses need to prepare for the worst. If you understand where your business stands and the impact coronavirus will have on your operations, you will be well-equipped to plan for the future.
Those with pent-up demand — beauty, wellness, and other non-essential businesses — will likely have a shorter recovery runway of around 3 months with a V-shaped recovery curve. Businesses like retail, restaurants, and movie theaters may have a longer recovery period of around 6 months. The businesses with the longest recovery period will likely be hospitality, travel, and tourism.
One of the major things to consider is how much cash flow you have available, as small businesses’ daily cash flow is the source of life. How can you increase your cash flow and optimize your business operations during a time like this?
Start by cutting out any non-essential expenses. Next, avoid making new hires, if possible, and limit large investments and financial commitments. List out your top expenses and set money aside based on when the payments are due.
Once you have assessed your regular expenses, take a look at your fixed and variable expenses. Fixed costs typically are not as flexible as variable, but you can still see where you may be able to reduce them by even 10-20% or defer for a few months. Variable costs should be limited down 80%.
After the lockdown is lifted, we will likely see an even more stressful period for small business owners. Suppliers, vendors, landlords, and banks could potentially demand their money immediately. As a small business, you must be prepared for this shock and work to negotiate new terms now before it is too late.
Here are a few business strategies to start thinking about now, before the economy reopens and returns back to normal:
First, take a look at your talent. Create a balance between layoffs, terminations, and furloughs. Continuously work to reorganize the structure of your business to build the most effective team. Set objectives for remote working, and ensure your workforce is being as productive as possible. Most importantly, be transparent with your workforce, inform them of salary cuts, no incentives, and soft payouts.
Next, consider where you can find additional revenue streams. Use sales and marketing to your advantage and be creative with how you create revenue. You can add new products, offer delivery services if you are a restaurant, or sell online learning opportunities.
Lastly, consider your goals for the next quarter. Your goals from the beginning of the year are likely not feasible anymore. Reconsider where you can succeed and how that is going to happen. One way to plan for the future is cash flow forecasting. At TGG, we created a Cash Flow Forecaster to help you consider all potential future scenarios for your business.
Contact us for more information on how to plan ahead for your company’s success.
This post was reviewed by our team of accounting and financial experts. TGG’s mission is to make business owners’ lives better through excellent financial management. We strive to provide the most up-to-date and objective information on accounting-related topics so our readers can make informed decisions based on factual content. All posts undergo a review process with at least one member of our Leadership Team to ensure accuracy.
This post contains trusted sources. All references are hyperlinked at the end of the article to take readers directly to the source.
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Matt Garrett is the Founder and Chief Executive Officer of TGG. He is a regular speaker across the country on behalf of Vistage educating business owners on the need for sound financial practices, and is Vice President of the Board of Directors of FINACA. Under Matt’s leadership, TGG has received the following recognition: INC. 5000 top companies in the U.S. five years in a row; one of “San Diego’s Fastest Growing Companies” the past four years; and is among San Diego’s “Best Places to Work.”
