It’s been almost two years since the beginning of the COVID-19 pandemic. Remember when we thought it would be a two-week shutdown? Nobody was prepared for two years of turmoil, uncertainty, and stress. And small businesses in particular are still feeling the effects.
Whether you’re a small business owner who weathered the storm or an entrepreneur ready to seize the moment, preparedness for the future is paramount. The 2020 pandemic may have felt like a once-in-a-lifetime event, but economic tidal waves are always a possibility. What can you do to disaster-proof your small business?
In this article, we’ll touch on the ways in which COVID-19 is still sending shockwaves through the business world, and then give you five valuable tips on how to prepare your small business to withstand future crises.
Is COVID-19 still affecting business?
With the development of vaccines and various anti-viral treatments, society has slowly found some new footing for managing COVID-19. But the challenges facing small businesses keep evolving faster than you can say “killer bees.”
Full blown shut-downs have shapeshifted into supply chain disruptions, inflation, and labor shortages. Different year, same problem: they still boil down to the bottom line.
Supply chain disruptions continue to throw a wrench in the operations of small businesses across the country. According to the Small Business Pulse Survey, “38.8% of U.S. small business respondents reported domestic supplier delays during mid-2021".
If that wasn’t challenging enough, materials (if you can get them) are pricier than ever thanks to inflation.
How can you better prepare for a crisis?
Entrepreneurs are adaptive and resilient. It’s basically a prerequisite for opening your own business and keeping it afloat — even in good times.
With the lessons of the past few years in mind, a proactive attitude can help to safeguard your business when things go topsy-turvy. So what are some steps you can take?
- Emergency Funds
“Emergency funds are important” is the understatement of the year. Without enough cash flow, an economic downturn or even an unexpected expense can send your business spiraling into debt.
An article published in PNAS found that businesses with $10,000 or less worth of monthly expenses only had about a month’s worth of cash on hand at the start of 2020. Business with more than $10,000 in monthly expenses? Two weeks worth of cash flow before they were in the red. It’s no wonder that between February and April 2020 the number of active business owners in the US dropped by 3.3 million.
Don’t want your small business to be a failure statistic in the future? Consider beefing up your emergency fund to help you sleep better at night. Set small goals to contribute and increase over time. Where should you put it? Open up a separate savings account using your business bank account.
- Loans and Credit
Small businesses operate on tight margins. It can still be hard to build an emergency fund even with strategic planning.
Sometimes a loan may be just the thing to navigate sudden inflation prices or invest in better equipment. Make sure you have the pieces in place to obtain either if need be.
Hesitant about taking on debt? Loans or credit can be an immensely helpful tool if used correctly. With a thoughtful, concise repayment plan, loans or a line of credit can be the life raft you need when times get tough.
- Attract Top Employees
Labor shortages are real. So what’s your business doing to attract new employees and keep the ones you got?
Maybe it looks like retirement benefits or competitive pay. Sound expensive? A recent Goldman Sachs survey found that 97% of small businesses are feeling the pain in their bottom line when it comes to “hiring and retaining their workforces.”
If financial incentives aren’t doable, think outside the box. People value being treated like…people. Perhaps you offer flexibility for where and when your staff works. Or focus on improving the company culture.
- Have a Plan B and C
Remember fire drills in middle school? If your business doesn’t have a contingency plan, it's time to figure one out.
Thinking about the worst case scenario isn’t fun. But acknowledging its possibility may be the key to avoiding it all together. Maybe it’s time to build that website. Investigate new supply chains. Target new demographics.
Fun bonus? You might actually discover ways to pivot and diversify your business that could lead to growth. Employ these new ideas in stable times and you can stay calm and collected when the unexpected hits.
- Hire a Pro
Fortifying your small business against harsh financial realities? This is no time to mess around. Don’t have an accountant? Time to call in a professional.
Accounting can be tricky for any small business owner, whether you have a knack for numbers or not. An expert can help you streamline emergency funds, weigh-in on strategic decision-making, and keep you organized.
Sounds like a worthwhile business expense.
- Need some help?
It can be hard to plan for something that hasn’t even happened yet. Where do you even start? How do you begin to allocate precious resources to hypotheticals when margins are tight to begin with?
Planning for challenges can mean the difference between survival or a shuttered business. With some savvy planning it could even mean thriving and expansion.
Ready to add a professional to your emergency arsenal? Reach out to KNY Accounting today for a consultation.