Business owners struggle to keep their lights on as the global coronavirus pandemic continues. The lockdown has been especially challenging for mom-and-pop stores, resulting in over 100,000 shuttered small businesses.
While bigger businesses have a better chance of surviving with their cash reserves, small businesses tend to live only with a few months of cash flow at most. So the economic fallout brought by the pandemic not only spells bad news for the business owner but their employees as well.
Small businesses in the U.S. must survive the pandemic. They’re critical to restarting the country’s economy, especially since they employ 58.9 million people.
How can small businesses weather the economic crisis caused by the pandemic? Here are three ways entrepreneurs can protect themselves.
1. Downsize your office and workforce
Laying off employees amid a pandemic is an emotionally overwhelming endeavor, but it’s necessary for some businesses. Determine whether downsizing your workforce is essential or if you have other ways to reduce your operating costs.
If you’re left with no choice, figure out how and when you’ll break the news to your employees. They’ll have plenty of questions about the timing, their benefits, last payment, and severance package. It would help if you were prepared for these conversations to ease their anxiety about their impending unemployment.
You can also furlough employees instead of terminating them if you want to retain talent while cutting costs.
Moving to a smaller, cheaper office is another way of downsizing. Exchange your long-term lease contract in a commercial building for a coworking space, which offers more affordable and flexible payment terms. Make sure to find a coworking firm that has established safety and sanitation guidelines aligned with the new normal.
2. Prioritize expenses
Your priority during this time is to manage your company’s cash flow. This means maximizing the money that comes in and minimizing those that come out.
Cut all non-essential expenses. This includes business travels, employee 401(k) contributions, and company credit cards. You also want to consider putting a hold on raises, bonuses, and incentives for your employees in the meantime. It can be brutal, but holding your employees’ career progression is better than letting go of them completely.
Try to limit your inventory purchases. A lot of small businesses overstock to accommodate surges in demand. But this time, make sure your demand forecasting is accurate to meet the needs of your market without making unnecessary expenses.
3. Determine which relief programs you can apply for
Many small businesses turned to the Paycheck Protection Program (PPP) of the Small Business Administration (SBA) to seek financial aid. If you failed to apply before the August 8 deadline, you still have several relief programs you can qualify for.
The U.S. Chamber of Commerce offers the Save Small Business Fund. This initiative provides $5,000 grants to companies located in financially vulnerable communities, with three to 20 employees.
SBA also has the Express Bridge Loan Program. Small businesses that already have an SBA loan can access up to an additional $25,000 funding.
Government-backed loans can have lengthy application processes. If you’re pressed for time, private lenders can help you.
Finally, make a short- and long-term financial plan. Talk with the people you need to pay in the following months, such as suppliers and landlords, and discuss payment options. This will help you plan your finances more strategically and maximize every opportunity to increase revenues and decrease expenses.