Coronavirus
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.
