In these incredibly uncertain times, I’m fielding a lot of calls from current and past clients about what they can do to manage the current state of their businesses and hopefully emerge on the other side battered, but still in business and ready to ride the good times upwards. You are not alone!
The problem with a situation like the one we’re facing now is that no one knows when it will get better. It could be next month, it could be next year, it could be a lot longer than that. In the past few weeks, business has slowed in most professional industries. Most companies have gone into a holding pattern as they try to react to what’s going to happen next.
Please do not react, be proactive instead.
If you haven’t read it yet, check out our previous post about how businesses can responsibly and ethically use a situation like the one we’re facing to grow their business.
In this post, I’m going to look at how you can prepare your business for the worst without destroying your team or your business.
Expand Your Customer Base
Now is a great time to look at other avenues that your business can expand to. Some people call this diversifying your revenue.
“If any single buyer represents more than 10% of your business — or your top five clients together account for more than 25% — you need to diversify,” according to Forbes.
Think of this as putting all your eggs in one basket. If you drop that basket, the eggs break. By the same token, if a company that represents 10% of your revenue goes bankrupt, what’s going to happen to your business?
Look for ways to create relationships with new clients. Is there a service that you can offer that will help businesses or people feel safer during these uncertain times? Is there another market that your services can enter into at this time? Is there another use for your services in an industry that is impacted at this time? Once you have revenue, you have choices.
For example, if you normally deliver flowers but your business is at a standstill, can you use those same delivery trucks and drivers to deliver something else? Can you offer your services to a local supermarket? Can you start package delivery for Amazon? You already have the infrastructure set up, can you fill an emergency need and expand your customer base?
There are hundreds of apps out there to manage workflow within the office, keep track of your social media accounts, and manage your daily calendar.
If you haven’t already, set up some of these apps.
Automation of common tasks within the office will help manage employee time and make your business move faster. A program like Zapier, for example, will help you integrate various software systems within your office.
When you use it, you can set it up to take an order from a customer on your website, create an invoice in QuickBooks, and then send that invoice to your customer through MailChimp all without lifting a finger. Suddenly, a sale is made without a person getting involved. It’s all automated.
When done correctly, automation frees up your employees to focus on what truly matters within your business—serving your current customers and growing your customer base.
Look at every line, not just the bottom line
During good times, it’s easy to look at the bottom line and think if your net profit keeps growing, then the business is doing well. But while you’re watching that bottom line, the number of line items above it could be growing.
Now is the time to stop and take a look at everything your company is spending money on and what percentage of the revenue that spending represents. You need to ask yourself, is this cost essential to the business or is it discretionary?
Note: You should be looking at your spending two to three times a year whether or not the economy is doing well, but at this time, it’s a must-do.
Essential expenses such as salary, taxes, utilities, etc. are expenses that are necessary to run your business. But are there any ways to cut this down temporarily? Or even permanently with technology?
Discretionary expenses such as travel, food allowance, video production, and advertising are expenses can be cut down or cut out if necessary. They are more wants than needs.
Keep that discretionary spending under control. Ask yourself, can this expense be reduced? If it can, then will that reduction hurt the business or the growth of the business? Weigh all of these factors and then decide if cuts can be made.
Odds are, you’ll find one or two cuts that can be made without hurting your business or your business’s growth. You’ll also be able to identify cuts that can be made in the future if revenue streams slow down.
Manage your debt
Once those cuts are made, put that money to good use. Spilt it between paying down your company’s debt and socking the money away.
You do not have to pay down your debt all at once. Some debt is considered healthy for a business and in tough times, it’s important to find a balance between debt and a nest egg. If you’re uncertain, talk to your financial adviser or accountant. Interest that you pay on business debt is usually tax deductible and your tax CPA can advise you on that.
You also need to remember that some debt is worse than others. If you’re feeling uncertain about what debt is “good debt” and what debt is “bad debt” ask us. Every business is different and you always want to make sure you get professional advice for your specific situation.
Keep an eye on what the government is doing
Federal, state, and local governments are all working to make sure that local businesses and workers are not completely flattened by this sudden stoppage. On Wednesday night, President Trump signed the Families First Coronavirus Response Act into law. Among other things, the law creates rules for small and midsized businesses to offer paid sick leave and family leave to employees forced to stay home because of the coronavirus. NBC in Washington has a good Q&A about what the bill means for employees and Inc.com looks at some of the key provisions of the bill as they affect businesses.
States like California are also taking extra steps to try and make things easier for businesses and individuals. California’s Franchise Tax Board has extended the filing and payment deadline to July 15 without penalty. While in Illinois, the Governor’s Office is working to secure federal grants from the Small Business Administration to try and offer relief to small businesses. The SBA is (and has for a long time) had special disaster relief loans which are being strengthened specifically for this time period.
Cities and counties are doing what they can. In the City of San Jose, where Towne Advisory is based, city officials have set up a specific webpage to help small businesses navigate these difficult times and get help when possible.
Keeping an eye on what your local, state, and federal governments are doing will be an important step to making sure your business gets the best help possible.
Please stay safe and healthy.