“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” Charles Darwin
There is no denying that many businesses are in uncharted territory with the recent Covid outbreak and recent marketplace changes. This particular pandemic may be new and the impact more severe than previous challenges. Still, our region has dealt with recessions, pandemics, disasters and other challenges to that impact the survival of small businesses. I’ve personally owned or managed businesses that have been damaged by windstorms, earthquakes, lightning strikes, cars driving into our storefront, H1N1, SARS outbreak and the terrorist attacks of 2001. I wish I could say that I handled all of these challenges with grace and wisdom. I didn’t. There was anger, anxiety and overreaction. Fortunately, in all cases, my businesses survived in spite of some poor decisions on my part. In hindsight, it took a combination of luck, support from others and significant adaptation in our operations to get through those challenging times. I learned quite a few lessons along the way about being resilient during times of crisis. Here are a few:
1. Revisit your budget process. If you don’t have a budget process, you need to create one, ASAP. Businesses run on resources. You need to know what resources are necessary to keep your business afloat. Your greatest adaptation you can make is to look at what resources you need to keep your business afloat during the challenging times. It’s critical to chart differences in operational issues (where sales/expenses will change) and cash flow issues (receivables/payables/inventory). Looking at what payments are critical and what can be deferred is a proactive exercise and best done with at least one external mentor for support (friend, family member, accountant, bookkeeper, trusted consultant). Often someone slightly outside of day to day operations can help you prioritize necessity of expenses with some level of emotional detachment that the business operator will never have.
2. Focus on customer maintenance and new customer development. In any economic challenge, it is important to remember that no disaster in US history has completely stopped business activity. Think of Maslow’s Hierarchy of Needs. Now is a good time to think about the base of the pyramid.
3. Look for financial resources. I like the saying, “this too shall pass.” I wish I could project forward how long it will take until there is a sense of normalcy in the marketplace, but I can’t. Experience has shown that those who have access to financial resources are better positioned to weather challenges until the marketplace stabilizes. Probably the biggest lesson I learned is that financial resources should be sought early. If possible, you want low interest, long term financing to help spread this short term hurt over a longer period. Of course, there is risk involved in any new investment of resources, so there needs to be some level of confidence that your business is positioned to recover before making a decision. There are plenty of financing sources out there, but use diligence in assessing options and think outside the box. The term "angel" is often misunderstood. An "angel" is anyone that can support you with financing. With this type of financing, terms can be negotiable and much more flexible. The are some great win/win options with private financing for small business owners and those with resources who wish to invest locally. No matter which financing you may choose, use caution to assess the cost of short-term financing before entering into any agreements. I’ve unfortunately watched clients get into onerous terms for the benefit of quick cash. I especially caution businesses to steer clear of merchant service loans. They often have high associated fees and relatively short payback schedules that can hinder recovery efforts.
Ultimately, survival requires being nimble and thoughtful with the prioritization of resources to get through these difficult times. Be prepared to do things a bit differently, but also use caution with your choices. A calm and adaptive approach to the next few months is your best chance of weathering this pandemic.