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The global outbreak of the coronavirus disease (COVID-19) shook the global economy and set the world haywire. The question now is how to survive a recession as a small business?
Governments multiply their efforts to have everything under control. Megacities and countries are on lockdown. The then-busy streets are now eerily quiet. Some companies are forced to lay off their employees because the business situation has gone sour.
Small businesses, startups, and independent entrepreneurs are the most vulnerable in a recession. According to a study by JPMorgan Chase Institute, companies with less than 500 employees have an average of 27 cash buffer days in reserve. If this catastrophe persists, businesses relying on daily customer visits such as restaurants and gyms are more likely to suffer given that inadequate cash reserves are one of the reasons why businesses shut down.
To save the economy from the verge of collapsing, governments of different countries are stepping in.
In the U.S., the government offers low-interest emergency loans amounting between $500 and $2 million.
Meanwhile, the UK government’s Chancellor of the Exchequer Rishi Sunak announced remarkable measures in helping the local economy and the general population.
According to Sunak, the government would cover 80% of the salary of workers whose employees can’t afford to pay them. The business loan scheme will also be interest-free for 12 months to aid large and medium-sized firms. The payment of VAT is also extended until the end of the financial year.
The universal credit standard allowance will also increase to support workers who are likely to lose their jobs, particularly those who come from the most vulnerable households. Furthermore, the UK government would also support renters through their mortgage holiday program.
The Australian government, on the other hand, pledges another $66 billion to its economic rescue package. The government also allocated a $100-billion emergency banking fund to prevent a credit freeze.
Businesses from first-world nations clearly have tons of advantages compared to those coming from third-world countries. However, they all have the same common ground:
How to survive a recession as a small business?
Ways to Survive an Unfavorable Economy
Idealism alone won’t get you out of this situation unscathed. You need to develop realistic and achievable strategies to ensure the continuous operation of your business.
What are the possible ways to survive in these tough times? Read the list below to get some ideas.
Gather a list of active clients
Despite the aid coming from the government, it’s inevitable some businesses would close shop. As a business owner, it is crucial to keep in touch with your clients to see how they are coping.
Update your client list. If applicable, categorize your clients per product offering. Create an inventory to determine which among your products gives the most value to the market. This way, you can create better decisions in allocating your resources and managing your workforce.
Listen to the concerns of your key employees
You cannot survive this crisis alone if the entire weight of your business is on your shoulders. As a leader, you have to find ways to get your employees involved in decision making. Determine what their concerns are. Be transparent when you let them know the challenges you are facing. Ask for their feedback.
When you remain optimistic and realistic in front of your customers, you can inspire them to work harder.
Monitor your cash flow
Sufficient cash flow guarantees the survival of your business even during an economic crisis. Consistently update your financial statements to guarantee its timeliness, accuracy, and relevancy. This will give you the ability to make a forecast to prepare your business for any possible challenges and developments. Limit your nonessential expenses.
Improve your core offerings
Being frugal is crucial in keeping your cash flow on track. However, it doesn’t mean that you should neglect the quality of your service since it can leave a lasting impression on your market.
Make aggressive yet calculated moves
Seek out new opportunities to expand your business. Remember that when there are problems, there are solutions. Be the first one to find out how you can solve other people’s problems. Cut your losses whenever possible, and reinvest money to something worthwhile.
Pay attention to your customer service
Customer service is essential now more than ever. Due to the stress and fear brought by this pandemic, people are becoming more sensitive. They need someone who can understand their struggles. As much as you can, be consistent in your service, especially in your delivery time.
Be smart on your advertising and promotional efforts
Your advertising should show your customers the real value of your products or services. When there’s a crisis, the people’s mindset is fixed on how they can save their resources to last until the economy stabilizes again. Focus your messages on the benefits you can offer. Make it concise and direct. Show them how your products are worth their money.
Outsource non-core business functions offshore
Outsourcing is a cost-effective way of maintaining your processes going without compromising quality. As long as you find the right service provider, outsourcing can help you get through the hard times.
Enhance your EQ and resiliency
High IQ can get you from point A to point B but emotional intelligence can help you get through the entire crisis.
Leaders with high EQ have their frequencies attuned not only on what their senses can perceive but also on people’s emotional makeup — strengths, weaknesses, drives, and values. They are also resilient, helping them to recover even if they hit the rock bottom.
When you have these characteristics, chances are high that you can make sound decisions for the survival of your business.
A Business Opportunity Amidst the Crisis?
Market conditions change during an economic downturn. Huge companies either continue their normal business operations or halt it due to the inability to adapt.
Meanwhile, the U.S. Small Business Association, the government agency tasked to provide support to small businesses and entrepreneurs, flipped the coin and presented a different angle. According to the agency, small business owners can seize this opportunity to innovate, make aggressive moves, and shift their perspectives. When they do this, they can achieve the following:
- Increase their market shares
- Maintain a steady cash flow as opposed to larger companies with liquidity problems.
- Transition into a more efficient and cost-effective operation
New challenges require new solutions. Entrepreneurs need to look beyond and find an alternative solution to save their business. Instead of sticking to their old ways of problem-solving, it is crucial to develop new strategies that will help them get through this crisis.
