In difficult times, keeping a small business afloat and surviving an economic crisis is not a simple task, and this pandemic has definitely roiled the waters on which small business owners must sail. Each small business is different and carries its own risks and rewards.
Whether your small business has experienced hardships during the crisis or not, it is essential to understand how to survive in challenging times. Here are the 7 tips to help not only survive an economic crisis but to come out leading your business with more confidence and strength than before.
Apply For Government Help
Government has announced a package of measures in the budget to help businesses through the COVID crisis.
The key areas include:
- Business bounce back loans.
- The COVID-19 Business Interruption Loan Scheme (CBILS).
- Cash grants of up to £25,000 for businesses in premises with a rateable value under £51,000.
- No business rates for 12 months for restaurants, pubs, shops, theatres, music venues and other leisure/hospitality businesses.
- 700,000 of the smallest businesses will be eligible for cash grants of up to £10,000.
- An expansion of the HMRC’s Time to Pay scheme for businesses struggling to pay their tax bills on time.
- Statutory sick pay relief for medium and small-sized businesses.
- Job Retention Scheme (JRS)
- Self-Employed Income Support Scheme (SEISS)
Cut your expenses
In a time of surviving an economic crisis, cut projects that are not well-paid or do not produce any marginal revenue. Marginal revenue is additional revenue generated by selling an additional unit of a product or service.
This is a time to reflect on the spending in more details. A thorough analysis of the expenditure is essential. Go through each item of the spending and ask yourself the question:
- What will happen if I don’t spend on this any more?
- You will also need to put on hold cash hungry projects. Cut these projects without any mercy because they have the potential to create cash flow problems.
- Even well-established businesses cut expenses to meet their goals. They shut down big projects in order to preserve cash.
Focus On Projects That Generate More Revenue
After you have cut off unnecessary projects, it’s time for you to optimize what you still have at your disposal. These should be the most important projects for your business in this critical time.
Increase your small business’s efficiency by investing all of your resources into projects that generate marginal revenue — not in several years, not potentially, but now. These projects, or even a project, can be able to keep your business afloat. So, pay special attention to them and delegate your best experts to work on them.
Focus On Current Customers
With the chances of a decrease in new sales, this must take the top priority on your list because your current and existing customers are your business’s lifeline.
Customers satisfaction must be one of the top priorities. After all, they guarantee you a steady revenue stream at such time and aid in your ability to survive an economic crisis. This is universally established that it costs more to acquire a new customer than to retain one.
In such uncertain economic conditions, you probably must spend more on sales and marketing to acquire a customer. With that in mind, here are a few steps you can take to retain current customers:
- Understand how their business is affected and look to solve the issues where your service or product can contribute.
- Offer additional features discounts on new purchases or, free value-added services to keep your customers satisfied.
- Stay in touch with the customers to be on top of any requirements or roadblocks they might be facing.
Sweat The Small Stuff
It is essential to keep an eye on the big picture of your business, but the small business owner should not miss smaller things that may have an adverse impact on the business.
Considering and analyzing the numerous factors that bring customers in the door can help to identify some problems. Going through your quarterly expenses line by line may also help. You should not be checking for one-time business expenses here, as those items were most likely necessary charges.
Instead, you should look for small items that seem innocent but are actually draining your small business accounts. For instance, the cost of office supplies can easily get out of hand if ordered improperly. Also, if your supplier increases product prices, you should consider looking around for a cheaper supplier.
Protect The Cash Flow
Generally, it’s a fact that economic downturns lead to slimmer profit margins and can make maintaining a healthy cash flow much tricky.
If the cash flow dries up, that is likely the end of your business. So, to survive the recession, it’s essential to plan for ways to cushion your cash flow.
Don’t Give Up
Running a small business during an economic crisis is challenging, but it doesn’t need to spell the end.
Your small business needs to be flexible to adapt to its new reality. If you plan, execute well, and stay focused; you can make your business crisis-proof and come out stronger on the other side.
In such situations, accountants can help you take effective financial decisions to take your company to the next level. Overall, surviving an economic crisis is never easy, especially for a small business. However, if you know how to take the wheel and are committed to solving problems, a crisis turns into an opportunity to improve your business.
By Aarif Habeeb