One of the most important things you can do to help your business cope during this coronavirus outbreak is to develop a plan to mitigate the potential loss of business and to protect your finances. Although the specific plan you construct and actions you take will likely be unique to your individual business, you might keep the following suggestions in mind.
Evaluate Your Finances
Like we discussed above, finances are one of the biggest concerns for small businesses during this time of uncertainty and unknowns. Therefore, one of the most important things you can do is take stock of your current finances and make plans for the immediate future. You might evaluate how much money you have in savings, what your inevitable costs are, and ways that you can save money or cut costs now.
Jeff Burkland, founder of the financial firm Burkland and Associates, recommends that businesses take the following five steps:
Consider cash conservation.
If your business has less than nine months of cash, consider accelerating your fundraising or adding debt.
Work with your CFO and finance team to develop contingency plans for a possible revenue decline.
Develop cost-saving measures that can be implemented quickly.
Continue to work with your CFO and finance team as market conditions change.
Ultimately, since it’s difficult to know how the market will change and how this virus outbreak will affect your business, it’s also difficult to know exactly what to expect in terms of your finances. Nevertheless, thinking ahead and creating a plan for the immediate future can help protect your business from suffering financially down the road.
Assess and Manage Your Supply Chain
Another thing you can do to mitigate the possible effects of coronavirus on your business is assess the status of your supply chain, and if it’s been impacted, see if there are any actions you can take to fix it. You might reach out to your vendors and discuss what they’re doing during this time, if they’ve been experiencing delays, and if there are any options to prevent a loss of supplies.
If your vendors have been affected, you might try and see if there are alternative sources of goods you can tap into. Unfortunately, depending on the products you sell, it’s possible that a delay in supplies from your vendors will seriously impact your inventory and ability to run your business. If you can’t get immediate access to your goods, you might try to evaluate your current inventory and see how you can work with the products you have until your supply chain is restored.
Consider Business Interruption or Disaster Insurance
If your business doesn’t already have business interruption or disaster insurance, now may be the right time to look into these policies. In short, business interruption insurance is a type of policy that covers lost income and operating expenses when a disaster causes a slow in operations or your business to temporarily close. Typically, business interruption insurance will cover lost income, payroll costs, business loan payments, taxes, lease mortgage payments, and relocation costs.
This being said, however, generally this type of insurance is designed to cover disasters such as fire, vandalism, riots, and some natural disasters. Therefore, because a pandemic like COVID-19 doesn’t fall under one of these traditionally covered events, you’ll want to talk to an insurance provider about how any policy may or may not cover loss of business due to this outbreak.
Additionally, another type of insurance you might want to consider during this time is key person insurance. Key person insurance is a policy that covers your business in the event an owner or critical employee becomes disabled or dies. As alarming as this may sound, it’s important to prepare for all possibilities, especially if an owner or key person in your business falls into the population that’s at higher risk of having a serious case of COVID-19.
Invest in Opportunities That Are Available
On a brighter note, despite the seriousness of the outbreak of the coronavirus, your business will certainly want to consider taking advantage of any opportunities that are available to you. As we mentioned above, the Federal Reserve dropped interest rates, which means business owners have an opportunity to receive financing at a very low rate.
According to Ethan Glass, a credit analyst at Fundera, “as companies can assume a slight downturn in business from COVID-19, now is the best time to look at financing while their financials are strong before the effects of the virus leave their mark.”
He explained further that with the lowered interest rate, the interest rate for SBA loans will also be the lowest it’s been in years—meaning guarantors will be making lower monthly payments, which puts borrowers at an advantageous position when trying to qualify for a loan.
Therefore, although you won’t want to take on any debt that your business can’t afford, if you have strong financials and were thinking about applying for business financing this year, now may be the right time to explore your options.
Moreover, you’ll want to keep an eye on actions that are being taken in your area—as we mentioned in regards to Seattle and New York City above—to find out if there are relief programs or other opportunities that your business can take advantage of.
Communicate With Customers
Finally, with all of the uncertainty surrounding this pandemic and its possible effects, it’s more important than ever to communicate with your customers. As you’ve probably noticed, many companies have sent out emails responding to the outbreak of COVID-19, informing consumers what they’ve been doing to combat the spread of the virus and what they can expect from their business.
Additionally, if you expect your business to be closed, have lower inventory, or any adverse effects from the outbreak, it’s worth communicating this information with your customers ahead of time. For example, if you own a consulting business and are shifting to calls and online meetings instead of in-person, on-location meetings, you might decide to send an email to existing customers, post this update on social media, and even update your hours on your Google business profile.
Although you may not be able to completely mitigate any negative effects of the pandemic on your business, by staying in touch with your customers, you’ll be putting your best foot forward to ensure that they know what’s going on and hopefully, when they’re able to, they’ll purchase from or work with your business.