Updated: Jan 12, 2021
2020 is finally over. But for many small businesses, the difficulty persists. In just the first six months of the pandemic last year, losses made up of lost work, earnings and total revenue have amounted to an average of £11,799 per business. While more and more people are being inoculated by the various available vaccines, business owners know there is still quite a bit more hunkering down to be done.
After the 2008 financial crisis, it took small businesses up to six years to return to pre-recession levels, a full two years longer than large enterprises. With this as a model, it would be less than productive to ask when the crisis would end. We already know that it will take quite a while. For SME owners, it would be more proactive to ask how the crisis can end, what can be controlled to ease the blow and position the business towards recovery. For this, two immediate overarching steps can be taken. First is to identify and name the problem and second, build a plan to address it.
The pandemic’s adverse impact on small businesses was immediate. In one fell swoop, closures — both temporary and permanent — occurred, and this had been exacerbated by a general financial fragility across Main Street. Because these primary problems have been experienced early on, quick tactical stop gaps could have already been applied. This might involve the streamlining of operations to manage expenses. But as the pandemic effects rage on, we explore strategic solutions with a longer-term and more strategic view for rebuilding.
First is to identify and name the problem and second, build a plan to address it.
PROBLEM # 1: Temporary business closures
According to a survey conducted from March to September 2020, no less than 67% of SMEs have had to shutter their doors in the past six months. A business owner had nothing to do with the crisis — COVID-19 is a natural disaster — but now, every aspect of operations have dramatically downshifted. If it still remains unclear how to move forward, the following guidelines can help the business owner navigate these testy waters.
Revisit your business plan
It would not be an exaggeration to say that the entire world has shifted. But rather than allow this stark reality to cause anxiety, consider it as permission to give the way you do business a second look. What does your market want now and is that what you are delivering? What is the best way to provide the demand? Confer with your employees, peers in the industry and even suppliers about trends that they see. You can use the tentative nature of reopenings as a chance to experiment.
One example comes from Noma, a two-Michelin star restaurant in Copenhagen that despite its renown was not immune to the impact of lockdown measures on the food and beverages industry. During the closure of the restaurant, its kitchen began making and selling burgers for takeout, also converting the restaurant’s yard into outdoor seating. The burgers were such a hit that when restrictions were lifted and Noma went back to service, chef and owner Rene Redzepi launched POPL Burger, a stand-alone burger joint that offers its lockdown creations. A week into its launch, Copenhagen went into lockdown again, but by then, the kitchen and its patrons know the drill: continue offering the burgers for takeout. Check their Instagram, they always sell out.
Create a recovery plan
The UK National Health Services (NHS) has rolled out a vaccination effort to inoculate as many individuals in the soonest possible time. The vaccines are said to be effective even against the new strain that has pushed parts of the nation into lockdown once again. While the disease is still raging, because of the vaccines, we have a sense that within this new year, the real end of the pandemic could finally begin.
As immunity to COVID-19 increases in the community, the rebuilding of businesses like yours must start taking place. This could involve, first, creating a priority list of items that should be recovered, such as reaching out again to your regular clients, rehiring employees and securing government loans and grants to buttress the business. In addition to these basic business foundations, incorporate the findings of your business plan review as well as the new rules of the world of work and enterprise. Ensure that your plan involves health protocols and relevant ways of delivering value.
Place these items into a schedule, a checklist or a timeline and prioritize accordingly, based on the realities in your community and industry. Most importantly, act on the plan and record the progress. It is advisable that you review the results on a weekly basis, adjusting accordingly to make sure you are tracking in the right direction.
Jumpstart a crisis playbook
Consider this perspective: a once-in-a-century disaster happens in your lifetime. It has upended all aspects of society, including your small enterprise. While it might seem unlikely, and you want it to be so, that a new respiratory virus will emerge, we cannot say that a crisis of a different nature hitting in the next 18 to 24 months is out of the realm of possibility. What the pandemic has given us is actual experience in dealing with the heaviest of blows, making us see the vulnerabilities of how our businesses are run.
Through the lockdowns, you may have discovered that your business is still heavily operating offline. Without your traditional methods of meeting your clients and networking with new ones, demand just ground to a halt. The closures may have driven you to learn how to build capacity for online customer engagement. The lessons that you learned in this regard would not only help in the post-pandemic rebuild but also beyond (read: Brexit).
A crisis playbook is all about future-proofing your business. We can argue that with COVID-19, we have seen the worst-case scenario. The adjustments we have done to manage and mitigate and our strategies to recover will now be the steps we can take to protect the business from another bad hit in the future.
PROBLEM # 2: Lack of operational cashflow
Based on a study from King’s Business School published in October 2020, more than half of SME owners predicted they would run out of money within the next 12 months. It is indeed a tenuous situation. This fragility and the interdependent relationships of small businesses, the employees, their suppliers and landlords set up the financial havoc many economies are in the midst of.
As the UK deals with the winter surge and fresh sets of lockdowns, we can be certain that many small business owners are unsure if they can bear the pressure any longer. In dealing with the cash crunch in Main Street, a few pointers are crucial in working towards business survival.
Survey the financial hit
How bad has your business been affected? What is the top-line impact on your revenues and how far have your profits shrunk? This might send feelings of trepidation, but have you updated your financial statements?
One of the first steps in rebuilding would be to assess the financial damage the pandemic has dealt to your small business. Whether it is deeper than first thought or not as bad as expected, the reality of the impact must be clear in the mind of the SME owner. The captain of the ship, in the midst of a violent storm, must know its exact location to be able to chart a way out.
Know at what level your sales are at, how profit and loss look like and how your cash flow has evolved. These would have been impacted by changes in your sourcing, manpower and the demand for your business. Consider everything — the goal of this activity is clarity that is radically important for the next step.
Assess if you need additional funding
Whether it is to jumpstart your operations or to fund the increase in costs of doing business due to continuous social distancing, your business may need additional, it is likely that you will need financing to keep afloat.
The UK has a full list of loans and support programs aimed at enabling SMEs to weather the impacts of the pandemic. Notable ones include:
The Bounce Back Loan Scheme, extended until March 2021, where the government will cover any interest payable in the first 12 months.
Also extended through March is the Coronavirus Business Interruption Loan Scheme, with British Business Bank delivering the scheme, supporting SMEs to access bank lending and overdrafts.
The Coronavirus Job Retention Scheme has been extended until April 2021, allowing SME owners to access support in paying the salary of employees who would have otherwise been laid off.
To navigate the menu of programs and to assist SME owners in figuring out which are suitable for their business, the government has released a tool to sort through available financial support.
Needless to say, going through all of these steps would be hectic and stressful for the small business owner. One might default to a bunker mentality and try to do everything alone. As has been made aware to everyone the world over, isolation is rarely a great idea. Now, more than ever, are small business communities radically important. The camaraderie shared amongst business owners who had to face the real threat of permanent closure cannot be manufactured and can be a source of encouragement that everyone needs a healthy dose of. Furthermore, if you have access to mentors, like the ones from the London Business Hub, get in touch and get that sounding board and expert opinion as you plan your business’ rebuilding.
In Part 2 of this blog, we explore how to address low or unknown customer demand as well as the reduced opportunity to attract new clients for your business.
This article was originally published on Medium.