The COVID-19 pandemic has left the world in despair. The world economy is slowing down and businesses are bearing huge losses. But the worst affected are the small businesses that are struggling to stay afloat. What they need during these testing times is to think rationally and take the necessary measures as soon as possible. Or else, they won’t be able to recover from this setback.
I am sharing a few tips on how can small businesses survive during a pandemic and keep them running. If you run a small business, this article is for you.
Increase Your Emergency Fund – The COVID-19 pandemic has affected almost every industry. And as a result, the global economy has taken a hit. Therefore, business owners who think that everything will go back to being normal once all of it is over are being over-optimistic. We may have to bear the long-term repercussions of this pandemic. So, it is only wise to prepare an emergency fund or, if needed, increase it.
If funding is an ongoing problem in your business, you can consider taking a personal loan, or even better, get access to a personal line of credit. This will prepare you for the contingencies and help you keep your business running.
Consider Cost Cutting – You may not be generating as much business as you used to. And the recovery process may be longer than you think. Hence, you may have to cut down costs. This will require you to make some tough decisions. See how much you spend on incentive programs, customer loyalty programs, rent, etc. And pull back wherever possible. Moving into a smaller workplace is much better than shutting it down altogether.
Do Not Withdraw Your Long-Term Investments – Investors have started withdrawing their investments in fear that the market would dip to the extent that the investments will become unrecoverable. But the history of the investment market has taught us that stock prices always come up. And the ones who are patient enjoy huge profits. So, do not withdraw stock market investments or SIPs unless you’re left with no other choice.
Try to Maintain Liquidity – The revenue of your business must have taken a hit, and the situation can get even worse. However, to keep your business to stay afloat, you must maintain liquidity. But if your financial obligations are greater than the revenue your business is generating, everything will start to fall apart.
So, evaluate the total amount you owe to landlords, vendors, and creditors. See if you can negotiate the payments or postpone installments, if possible. If necessary, seek legal counsel. In any case, do not try to pay off at the cost of your company’s liquidity.
Assess Supply Needs – People around the world are experiencing the shortage of goods due to the pandemic. Because of cities under lockdown, the supply chain has been heavily disrupted. And this is impacting businesses. For example, a small paper manufacturing firm requires a whitening agent, which it sources from an MNC. Now due to the lack of supply of the whitening agent, the paper manufacturing firm may have to shut down completely. Similarly, the pandemic can impact your business too. So, prepare for the situation and store sufficient supplies that can last for at least a few months.
If you do not act immediately, you won’t be able to save your business from going into a downward spiral. So, assess your current situation and take effective measures so that you can successfully come out of this situation and recover quickly.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters, and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at firstname.lastname@example.org.