Many businesses experience financial ups and downs. Here are tips to help you stay afloat when business slows down.
- When business slows down, make sure you're consistently collecting receivables and eliminating unnecessary costs.
- Research your consumers and competition to find out what they are doing to manage the economic slowdown.
- Look for ways to reduce operating expenses without reducing the quality of your product or service.
During these uncertain times, many business owners find themselves navigating their companies through a new economic reality. Some have seen a dramatic loss of foot traffic, a disruption in their supply chain and other challenges that have slowed business, while others have had to shut down entirely. While these are unprecedented experiences for many businesses, the idea of slowing down or closing for months at a time is something that seasonal businesses deal with year after year.
Here are some tips you can take from owners of seasonal businesses. Their experiences in weathering annual downtime can help you manage today's business slowdown.
What do you do when business is slow or reaches a full stop?
The dramatic decline in business that many companies are experiencing now may feel like the end of the world. It's important to remember that it's not, and there are actions you can take and conversations you can have to ensure your business continues to operate.
The first thing you need to do when business slows down is communicate with the people who are integral to your business.
Talk with your employees.
Start by communicating with your employees about what is going on in your company. This opens a dialogue that allows them to ask questions or voice their concerns directly to you so you can address them immediately. It also helps your employees feel trusted and allows them to become part of the solution instead of an added stressor.
"Be transparent with your employees at all times, because they can handle the bad news, but they can't handle being misled," said Ray Zinn, founder of semiconductor company Micrel (acquired by Microchip Technology). Eliminating mystery and encouraging dialogue will make room for positivity and forward thinking.
Keep your customers in the loop.
If your business needs to make changes that will affect your customers, be transparent with them about what is happening so nothing comes as a surprise.
"How you come out of the slowdown will be tied to how well people know you are there and ready for business," Ken Yager, president of Newpoint Advisors Corporation, told business.com. "A business that is communicating and demonstrating they are clean and safe will get back to normal sales the quickest."
Talk to your bank and suppliers.
If you're unable to pay your bills, you need to reach out to your suppliers to see if they can offer you flexibility with payments, such as an extension or a payment plan. It's also helpful to communicate with your bank, and if you have lines of credit, now's the time to use them. During this time, your goal is to maximize the cash on your balance sheet. So, connect with your bank and let them know you need the funds. Just make sure you create a plan on how you intend to pay them back.
How do you survive an economic downturn?
Here are actions you can take to protect your business and financially push through such uncertain times.
Collect what you're owed.
When business is booming, it's easy to overlook collecting receivables, which can come back to bite you in times like this. It's stressful to walk the line between supporting your clients and reminding them to repay their debts, but it is necessary to pay the bills you owe and your employees so you can keep your company afloat.
Tighten up where you can.
Now is the time to tighten up financially as best you can. You can do this by double-checking your cash flow and inventory to find out where your money is going. Consider what's necessary, what you can do without and any changes you can make to reduce spending. If you planned on expanding or buying new items, push it back. Your goal is to save money so you can quickly ramp up to fill orders once the economy stabilizes and things go back to normal.
Also investigate ways to cut costs without reducing the quality of your services or product.
"Ask yourself, 'Could the item be sourced somewhere else for cheaper?'" said Logan Allec, a certified public accountant and founder of personal finance blog Money Done Right. "Is there a way to reduce shipping costs? Does the supply of each product reflect the demand? No matter how long you have adhered to a specific production method, there may be a way to refine it and make it more efficient."
Finally, consider taking a pay cut. Zinn said his company experiences economic seasonal highs and lows throughout the year. One way he combats the problem is by taking larger pay cuts than his other executives.
"I personally took larger salary cuts than my executives when we had downturns," Zinn said. "I took the biggest financial hit myself and made sure my company knew I was with them."
Change up your marketing strategy.
In a time when everyone is shut in, it's important to remind your consumers that your business is still here. Restructure your marketing so you remain visible in their lives. You may have to change how you connect with consumers, which means meeting them where they are: online.
Instead of cutting your marketing budget to save costs, put more money into it, along with social media or other digital platforms, Allec suggested. If you can pivot your business toward your consumers' interests or needs during this time, it will be extremely beneficial for your company. [Read related article: 6 Ways to Amp Up Your Marketing and PR in the Age of COVID-19]
Take into account that people are in a very different space than they were a few months ago. Their needs and interests may have shifted, so you need to figure out if your products or services are still relevant or if you need to adjust your offerings.
For instance, many restaurants are combating slow business by switching to takeout and delivery only. This allows them to continue to serve their customers while still complying with social distancing rules.
You can also use this time to create new online resources for your customers, said Nellie Akalp, CEO and founder of CorpNet.com.
"If there is no alternative, during your low season, build an educational platform through content to become a resource to your clients and customers," Akalp said. "Record videos, [conduct] webinars, or build your blog."
Check out the competition.
You can learn a lot from researching your consumers, but you can also get great ideas by studying your competition. Find out how they're dealing with the business slowdown.
"For example, you can evaluate their advertising to help you better target your customer base," Allec said. "You may be able to use the information you gather to tweak your business and thrive where your competitors are lacking."
How do you stay positive when your company is struggling?
One of the best things you can do to stay positive when your company is facing an economic decline is to remember why you started your business. Go back to your company's mission statement and remind yourself of your journey. Redirect your thoughts to focus on the post-coronavirus future of your company.
"Pay attention to what is in front of you mentally, but take the long view," Yager said. "Don't let the details distress you, and when they do, try to imagine surviving this ordeal. Imagine the steps you had to take to get past the current roadblocks. Imagine having the hard conversations and winning. Those internal experiences will give you some of the strength to survive."
How can you rebuild your business?
After the dust settles (and it will), it will be important to get back to work and use what you've learned during the hard times to fortify your company. Zinn suggests first focusing on your profits.
"Without profits, you really don't have an enduring business, so the No. 1 focus when you reboot is to focus on becoming profitable," Zinn said. "Everything else is secondary and comes in time."
Next, although it's an unusual question, ask yourself if there were any highlights of this economic downturn. Search for insights from your experience that you can incorporate into your business to improve it. Which changes were successful and beneficial?
"Use this period to come up with launching new products and services," Akalp said. Be open to a new business model.
What changes can you make now to make it easier to survive the next economic downturn?
Many things besides a pandemic can make it difficult to run your business. Whether it's a recession or a natural disaster that hits next, it's important to take precautions to bolster your business against future threats.
Reuben Yonatan, founder and CEO of GetVoIP, suggests using your time inside to focus on building outside projects that can provide additional sources of revenue. "Even if it's just something that gets you through the offseason, it's better than just sitting around and waiting for work to pick up again."
Moving forward, it also helps to prepare for the worst. Protect your business in the same way you'd protect yourself or your family, and build an emergency fund. [Read related article: From COVID-19 to Hurricane Season: Disaster Preparedness for Small Business]
"Be sure you have cash in the bank," Zinn said. "Cash has to be king in order for businesses to survive slowdowns."
You should save enough cash for your business to last about six months if your revenue were to drop by half. This is especially important for small businesses that depend on just a few customers to fuel their income.
"Run your business as though the downturn were coming tomorrow," Zinn said. "We always planned for the ups and downs of that business. It is all about knowing the supply and demand cycles of your industry and planning accordingly."