There’s no doubt that the COVID-19 pandemic has put small businesses through the wringer. Many entrepreneurs have found their brick-and-mortar establishments shut down or subjected to stringent and exhausting social distancing and safety protocols. The realm of small businesses impacted by the pandemic spans the gamut, from selling jewelry on Etsy to running a restaurant and everything in between.
Regardless of the diversity in business activities, though, one theme has consistently been present across the small business landscape: restricted funds. Small businesses far and wide continue to struggle with ongoing uncertainty, a lack of financial support from the government, and the mounting pressure to come up with the resources needed to stay afloat each day. If you’re concerned about the long-term financial viability of your enterprise, here are some financial tips to help you keep the lights on as we steadily march into the long winter that lies ahead.
There are times when business owners can’t take the time to be troubled with the tiny details. Minor discounts on raw materials or spending too much on an office party are naturally pushed to the back burner during periods when business is good and growth is taking place.
However, just as naturally, when times get tough, it makes sense to rein in the smaller spending to avoid a “death by a thousand cuts” scenario. As 2020 has drawn to a close, many businesses are finding themselves closed down once again. Customer spending, even online, is also dropping as the economy struggles. While this is obviously not desirable, if you’ve found that you have more time on your hands as you wait out the pandemic, consider the fact that the situation naturally opens up the opportunity to tighten that metaphorical belt in a variety of different ways, such as:
• Cutting down on waste: From installing a smart thermostat to going paperless with your documentation and signatures, there are many ways to reduce the waste created by a traditional office.
• Embracing the “Three R’s:” Do your best to repair, repurpose, and recycle your office equipment (both physical and virtual) before considering spending money on new versions.
• Joining a GPO: Getting a membership with a group purchasing organization (GPO) is a great way to get a small number of business supplies at bulk prices.
While there are many other splashier ways to financially survive the ongoing crisis, starting small and close to home is always a good idea. Additionally, smaller money-saving activities like these will continue to bear fruit far into the future, pandemic or not. Take the time to go over the nitty-gritty operational costs that come with running your business. Chances are you’ll end up finding a decent number of places where you can generate some significant savings.
Once you’ve addressed the smaller cost-cutting items around your office, it’s time to consider your supply chain management. There are many areas throughout your supply chain where cash can slip through the cracks, such as:
• Paying too much for raw materials: It’s always important to regularly conduct research and gauge your options to ensure that you’re getting the best price possible for your raw materials.
• Maintaining an inefficient manufacturing process: Whether you manufacture your goods in-house or (as is more likely with a small business) you hire a third-party, it’s always wise to look for any way that you can be more efficient with your current manufacturing process. If you find that a third party manufacturer isn’t interested in helping you cut costs, that may be the signal to find a new manufacturer who can give you more bang for your buck.
• Wasted warehousing space: Warehousing goods is already expensive, even when it’s done effectively. However, if you have a warehouse that is either partially empty or poorly managed (or both) it can cost you even more money over time. Look for ways to keep your warehouse operating smoothly with as little physical inventory space as possible.
• Poor shipping methods: When goods are shipped to you, the cost of shipping can be prohibitive. This is especially true when traffic congestion can add thousands of dollars per vehicle onto the bill. Do your best to batch your product shipments and ship in bulk. Also, utilize route planning software to cut down on the cost of transporting goods through complex or congested areas.
With many supply chains strained to the breaking point during the pandemic, it’s important to regularly assess if your own company’s chain is operating effectively and efficiently. If it isn’t, it can cost you in ways that you likely cannot afford during the crisis.
The same can be said for shipping. Unless you’re selling a service, chances are you’ve done your best to embrace the modern, 21st-century shipping economy. Shipping products to your customers is one of the cornerstone elements that enable a brick-and-mortar storefront to continue operating even when its doors have been forcibly closed by external circumstances.
Coffee can still be shipped even if a cafe is closed. Clothing can still be shipped even if a shop has been shuttered. No matter the product, if it can be shipped, you can continue selling it during the pandemic. However, as the business owner, it’s important to consider who will bear the brunt of the shipping costs. After all, it costs you nothing extra to have a customer enter your store and purchase an item. If you have to pay to ship the same item to them, it’s going to cut into your profits.
With that in mind, consider how you’ve approached your shipping pricing model during the pandemic. Can you charge your customers for shipping or is free shipping expected? Can you at least include a minor fee to mitigate the costs? Can you negotiate lower shipping rates with shipping vendors if you can promise a certain level of volume?
Both supply chains and shipping are expensive to maintain — even on a small level. Look for any way that you can keep your costs in these areas as low as possible.
The pandemic has created a never-seen-before push into the e-commerce world. While you may have made initial reactive changes that utilized the cloud to keep your operation functioning, it’s important to adopt a proactive attitude toward remote work, as well. Why? Because the ability for your team to operate remotely isn’t just pandemic-proof, it’s also often a great way to save costs. For instance, you can:
• Set up an e-commerce store: This can keep sales pouring in even when your storefront is closed — and at a fraction of the operational costs.
• Shift to online marketing: From free social media accounts to cost-sensitive pay per click advertising, online marketing is both effective and affordable.
• Create a virtual workspace: The fewer employees and tangible documentation you need to have physically on-site, the lower your office space costs will be.
By steering into the remote work world, pandemic or not, you can ultimately save your small business a lot of money through increased sales, cheaper marketing, and reduced operational expenses.
If you want to maintain a financially viable operation, you must be adaptable. This flexible approach to business should be applied at every level, from a shift to online marketing to being willing to work on a stronger supply chain that can withstand fluctuations like those created by the virus.
It’s also important to remain adaptable with your products and services. For instance, in 1985 Apple was mired in a losing battle to create the best desktop computer. However, the company made one of the biggest comebacks in business history by forming a new strategy that created, among other things, the iMac, iPod, and iPhone. This shift in the face of adversity allowed the company to become one of the most valuable enterprises in the world.
Small businesses can embrace a similar mindset, albeit on a smaller scale. Always be willing to consider what you’re currently offering your customers. Stay up to date on their pain points, wants, and needs. Study how your competition is adjusting its approach with customers, as well, and always stay up to date on major industry trends. Then use this combination of customer, competitor, and industry information to shift your products and services to meet your target demographic’s needs whenever necessary.
Finally, on a personal level, as an entrepreneur facing tough times, it’s also important to consider your own financial wellbeing. After all, you’ve taken on the greatest risk by launching your company, and there’s no guaranteeing that you’ll be able to survive the current challenges.
With that said, consider what steps you can take to safeguard your own personal finances if things go in a negative direction. A few suggestions include:
• Saving up an emergency fund. This can help you live through any pivot or larger transition that may take place during which you may not be able to draw a salary.
• Spreading your business investments out. This can help you avoid having “too many eggs in one basket.” That way, if something goes wrong in your primary business, you’ll have other financial lifelines to fall back on.
• Study up on how to navigate bankruptcy. This is obviously a worst-case scenario. Nevertheless, if your company does go under, are you going to be able to avoid any financial backlash? If not, brush up on how you can rebuild your credit and get back on your feet as quickly as possible.
As a small business owner, you knew that there were risks involved in starting your own company. Nevertheless, chances are you didn’t think a pandemic would be one of those risks. With such a uniquely unpleasant challenge facing so many small businesses, make every effort to prepare both your business and your personal finances for the struggle that lies ahead.
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