Over the past five months, Coronavirus crises have put 30 million small businesses in the United States of America to the test. Many small business owners are not clear about their future. Let’s look at the struggles of small businesses and see how they can survive this situation.
Challenges for small business Owners
Essential businesses like grocery stores, pharmacies, etc. are fortunate to stay open, but they struggle with the staff’s availability and limited supply of the products. Many staff members are too scared to come to work. The store owner has to keep on the check which staff members are coming and motivate them to work.
Non Essential businesses have a significant impact on their survival. There are a few aspects
Let go, staff members.
Most of the non-essential businesses were closed during the lockdown period because of the coronavirus pandemic. Most of the company had only four weeks of cash in hand when lockdown started. Their income has reduced drastically, whereas their expenses like shop rent, staff member’s wages, utility bills, and insurances are still ongoing. 45% of the small business owners have used their savings or taken a personal loan for continuing their business as usual. There is not much business, and they need to reduce expenses; hence many companies have to let go of their staff members.
Temporary or Permanently shutdown
Small business owners have to close down their business temporarily or permanently between March 2020 to May 2020 for following reasons –
- Keep employees and customers safe.
- Follow government guidelines.
- Decreased sales or no sales
- Disruption in supply chain
- Uncertainty about how long this crisis will exist.
- More liabilities like insurance, utility bills, rent, employee salaries, etc
Re-opening the business
Businesses are re-opening with the removal of lockdown by the Government. Companies that are re-opening are risking their staff’s health to help themselves and the community. It is difficult to get raw material due to supply chain disruption. There is very little demand in many businesses.
Looking for help from the Government
The majority of these businesses are applying or looking for government help.
Majorly there are PPP (Payroll Protection Program) and EIDL (Economic Injury Disaster Loan) scheme from the US government. There are some rules based on which your PPP loan can convert into grants, which means that the Government will forgive it. There are some state and city-specific grants as well. Approximately 70% of business owners are anticipating delays or facing difficulty in passing the eligibility criteria for government relief schemes.
Can small businesses survive coronavirus pandemic crises?
People mostly talk about crises like the year 2008 or 9/11, but this COVID-19 situation is at a different level. It is a scary and uncomfortable time. In June, most businesses (approx 72%) have re-opened, but demand is still not improving. Customer demands and expectations are also changing in terms of safety. Recovery from this situation is going to take time. Most of the small businesses took approx 5 to 6 years for full recovery after the 2008 crisis. People are not working to make big money now; instead, they are working for survival. Many People are getting creative and finding ways to keep their business continues. You can find an answer to the above survival question by answering a few questions.
Are you ready to be adaptive?
80% of small businesses are either already started or planning for being adaptive in response to the coronavirus pandemic scenario. Employees are wearing protective gear and maintaining distance from customers as first protection. Most of the businesses started disinfecting surfaces frequently. They are also suggesting their employees monitor themselves for coronavirus symptoms and take leave if required.
Are you being creative and taking charge of the situation?
Businesses are making quick changes to avoid the severe impact of the current situation. Moving your business entirely or partially online is the first step. Companies who are already online are getting benefited by this situation. The fitness industry is the most significant example of it. Google trend shows that many Fitness trainers have already moved to online platforms for providing training to their clients at a cheaper fee. It has also increased its reach to millions of people around the world. Similar is the education industry online adaptation.
Small businesses will first require money for running the company, which leaves little or no room for investing in technology. Investing in technology is key here. It may be an order management system, inventory management system, accounting system, etc. It is challenging to implement than said because of less working capital in small businesses. It is now needed, and you can’t ignore it. For example, if you use an accounting system, you can quickly sort your customers by different attributes like spending amount and then give them a call if they want to order again.
Increasing promotional activity (including digital marketing), decreasing prices, and focusing on high-value items will surely help.
Did you forecast your cash inflows and outflows till the rest of the year?
It would help if you created a cash flow forecast until the end of the year, and every month you can update it based on actual financial data. It would be best if you considered paying for your employees and suppliers first because they will help make your business continue.
What are you doing for not defaulting on your business loan or debt?
Suppose you are not able to pay your loan/debt. In that case, you need to immediately talk to your lender and discuss the possibility of lowering the interest rates or lower interest-only payments. Small businesses can also negotiate with their suppliers on the pricing and payment schedule. It will help you minimize the impact on your margins.
Covid19 pandemic has taught us the importance of a 6-month emergency fund in a hard way.
We, as a community, need to overcome this covid19 nightmare. Together we can and we will.