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Three Steps to Healthier Business Outcomes During the COVID-19 Crisis

Three Steps to Healthier Business Outcomes During the COVID-19 Crisis

Author: Clint Sporhase, Vice President, Business Banking

In March of 2020, the COVID-19 pandemic brought much of the economy to a halt and forced many small businesses to make drastic changes. Some moved workforces to remote operations while others were required to close doors to the public. Some saw demand for products skyrocket while others watched customer interest dwindle.

As quarantines began lifting in the late spring, it was clear that businesses were in for anything but smooth sailing. According to a survey conducted by the National Small Business Association, only one-third of respondents were confident that they would rebound from the pandemic-inspired downturn, and 99% were worried that coronavirus would have an irreparably negative impact on the future of their business.

As small businesses continue to chart new territory, here are three things small business owners can do to help encourage profitability and success in the wake of the COVID-19 pandemic.

Practice Good Expense Management

While the CARES Act offered financial aid for businesses struggling to survive, the long-term impact of the virus will require more than intermediate fixes. The small businesses that remain to see the next five years, or even 2021, will need to bolster the bottom line. For most, bottom-line support is coming through good expense management.

According to a survey conducted by McKinsey, close to a third of businesses were already operating at a loss or break-even margin prior to the start of the COVID-19 pandemic thanks to a high ratio of fixed costs. However, drastic times call for drastic measures, and businesses are taking novel approaches to expense management, such as the international architectural design firm who renegotiated a temporary lower-cost lease with the company’s landlord.

Unprecedented actions like these may become the norm as businesses seek the cost alterations necessary to remain in business. However, there are some painless and practical steps that could also help reduce overhead as well, such as powering down lights and machinery when not in use and migrating to or continuing remote work arrangements where possible.

McKinsey also indicates that technology adoption will help to curb costs by making work more efficient. Payments is an area where technology adoption has been shown to be especially beneficial in the pursuit of cost containment by reducing days to payment and allowing businesses to take advantage of early payment discounts. You can also learn more ways to controlling costs for your small business in our previous blog post.

Seize New Opportunities

According to NFIB, the Small Business Optimism Index leaped a solid 6.2 points in June. As more businesses opened doors, a majority of business owners expressed optimism that the recession would be short lived.

Another reason for the newfound hope may be due to the adaptability of small businesses, and their agility in shifting business operations to meet emerging demands. A local restaurant wholesaler, for example, sought a new audience during dine-in shutdowns and began offering products directly to the public.

This is just one example, but the overwhelming advice here is clear. Small businesses should focus on what sells and getting it in front of their customers. Sometimes, that means going online to where an increasing number of buyers are making purchases or even kicking it to the curb. According to McKinsey, 60% of restaurants in the U.S. have added curbside pickup.

For other businesses, that means shifting to new product lines. For example, quick-thinking independent distilleries began manufacturing hand sanitizer as demand for local inventory slowed due to restaurant closures. Other companies began offering new products, such as the cloth accessory manufacturer who shifted production toward creating unique face masks and the retailers who began carrying the products.

Nearly one-quarter of small businesses have added products or services since the start of the pandemic, and they believe the shift will sustain long-term growth, according to a June survey for The Wall Street Journal by Vistage Worldwide Inc., an executive coaching firm. Only 12% said the strategy was temporary, designed to meet customer needs during the COVID-19 crisis. Bottom line, maintaining the status quo generally won’t work in normal times, let alone during a pandemic. 

Plan for a Profitable Future

Many experts foresee a lengthy future for COVID-19, meaning that businesses will need to do more than pivot for the short-term. They will need to develop a strategy for addressing long-term uncertainty.

A major factor to consider is how the pandemic has impacted your target audience. If your audience is in a group that has been displaced from work, what will the impact be on their discretionary income, and how do you broaden the appeal of your product or service to attract new customers?

For most businesses, that means figuring out which new trends are applicable to their industry and which will survive long after the crisis has faded away. It is anticipated that trends of convenience, for example, are here to stay. Based on a recent survey, Accenture predicts that ecommerce purchases are destined to rise 160% from new or low frequency users.

While quarantined at home, many consumers adopted new hobbies and habits. Accenture indicates that 62% are turning to cooking or baking and trying new recipes. Forty-eight percent are getting educated, learning new skills or engaging in online classes.

Understanding how these trends are reshaping consumer populations will provide clues for engaging with existing audiences in new ways or how a small business might attract new customers or enter a new market.

Lastly, don’t forget to safeguard your health as a business owner. According to a Gallup poll, 51% of male and 62% of female business owners feel stress on a daily level since the start of the pandemic. In comparison, less than half of either gender experienced the same before the pandemic. The simple truth is, the long-term health of your business is heavily dependent on your wellbeing, so make sure to take some time for you.

Holding Steady Over the Long Haul

With additional treatments and potential vaccines in the making, we hope to see the COVID-19 pandemic improve soon. When this happens, business owners should be prepared to capitalize on an initial influx of activity as consumers begin to resume some of their pre-virus behaviors. To prepare for this influx of activity, business owners can:

  • Reconnect with previous employees or start to build a base of potential new employees, even if hiring is still a few months away.
  • Gauge your suppliers’ ability to meet any new demand and consider potential new suppliers as needed.
  • Build out your marketing plan to capitalize on returning customer confidence and consider what triggers would serve as justification to execute your plan.

Even a few months of increased demand as communities celebrate the initial steps back to a new normal could make a huge difference in many business’ bottom line!

About the Author

Clint Sporhase leads FNBO’s efforts to serve small business owners. Clint has 25 years of sales, marketing and strategy experience.