5 Key Steps Every Small Business Should Take Coming Out of COVID-19
The spread of COVID-19 over the last four months has impacted almost everyone around the globe. While initially a health crisis, the economic and social impacts have been profound, shutting down industries and sending Australia into our first recession in twenty-nine years. Many small business owners have felt the pinch more than their corporate counterparts as they lack the systems, staff redundancy, financial capital and support networks to weather the storm as effectively.
What they do have is the ability to pivot and make fast decisions. While many small businesses in industries such as hospitality or personal services have had to shutter their operations temporarily, most are now back up and running, albeit in a modified capacity. Running a small business is demanding enough under normal conditions. It’s essential to make sure you’re well prepared to bounce back effectively over the next few months. Here are five key steps every small business should take to maximise their business’s financial health and growth opportunities coming out of COVID-19.
Know what limits and restrictions are in place
The rules are continually changing, so it is essential to regularly stay up to date with national and state-based restrictions for your industry. Adjust your operations to maximise your ability to serve as many of your customers as you are safely able to. Assess if you can operate effectively and profitably under the restrictions. Many small businesses, such as hairdressers and beauty services, are struggling to fill seats as the four square metre rule reduces the efficiency of their small floor space. Regardless of the regulations, implementing ‘COVID-safe’ measures such as hand sanitiser and temperature checks may help your customers feel at ease and confident enough to return to your establishment.
Update your budget and financials
A lot has changed over the last few months, and it will almost certainly have impacted your business’s financial plan. Many small businesses have lost significant income so you will need to make changes as your return to normal operations. It is an excellent opportunity to improve your efficiency, striving to do more with a lower cost base. Reassess your budget, continue to manage your expenses and limit new costs unless they drive a meaningful return or benefit to your returning customers. Update your financials in line with the new financial year and monitor your liquidity and operating position regularly to make the best possible decisions during this period of transition.
Is your marketing contextual and appropriate?
Take a hard look at your marketing strategy. You can’t expect to stick to your old approach and get the same results. The customer landscape and behaviours have changed, whether that be increasing online orders or a reduction in dining out and more frequent home cooking or delivery. How have customer preferences shifted in your industry, and how does your marketing connect with them?
“People typically need a strong reason to change their behaviour – give them one”
If you have recently returned to trade, entice your customers back with a compelling offer. Psychology suggests people typically need a strong reason to revert to their old habits or change their behaviour – give them one. Given costs are increasingly in focus, leverage social media and ‘free’ value-giving content such as insightful videos, blogs and entertainment. According to serial entrepreneur Lisa Teh, “start with the stuff that’s free first; get active on that. Do what you can with what is available, you don’t need a massive project to start to be active if you’re a startup or something like that.”
Have a plan in place for the end of stimulus
Small and medium-sized businesses were more likely to access wage subsidies and other government support measures than their larger counterparts. If you are currently benefiting from JobKeeper payments to support your staff, you will need to assess your ability to continue paying them should benefits be cut in September – what changes can you make over the next few months to ensure your business is able to keep necessary staff on the books?
If you have taken advantage of rent, mortgage and business loan repayment deferrals you will need to plan and adjust for your future commitments when they fall due. The six-month repayment holiday has been a useful feature of the popular SME Loan Guarantee Scheme however be aware you will need to fulfil your commitment in the coming months. Make sure you are in a position to do so.
Ensure you have sufficient access to working capital
In any business, sufficient working capital is essential to meeting your commitments as they fall due and ensuring your business can continue to operate and take advantage of growth opportunities as they arise. The economic impact of COVID-19 has affected the financial wellbeing and risk profile of most businesses, raising the risk stakes when it comes to lending. Traditional lenders such as the banks may tighten their policies and further restrict businesses that have typically struggled to obtain funding.
A small business loan, invoice financing facility, equipment financing product or business line of credit from a range of alternative lenders such as Capify may be the perfect solution.
Jason Smith is the founder of Capital Plus Finance, a broking firm specialising in finance solutions for SME’s