A troubling headline from The Washington Post reads, “Small business used to define America’s economy. The pandemic could change that forever. More than 100,000 small businesses have closed forever as the nation’s pandemic toll escalates.”
Federal and state restrictions placed on small businesses, both those deemed essential and non-essential, have wrought economic devastation to the sector. The Washington Post article notes, “The coronavirus pandemic is emerging as an existential threat to the nation’s small businesses — despite Congress approving a historic $700 billion to support them — with the potential to further diminish the place of small companies in the American economy.”
The White House and both houses of Congress in a show of mutual non-partisanship have made saving small businesses a cornerstone of the financial rescue. The initial act was soon followed up with the passage of a second stimulus for small businesses.
The article continues, “But already, economists project that more than 100,000 small businesses have shut permanently since the pandemic escalated in March, according to a study by researchers at the University of Illinois, Harvard Business School, Harvard University and the University of Chicago. Their latest data suggests at least 2 percent of small businesses are gone, according to a survey conducted on May 9 to 11. The carnage has been even higher in the restaurant industry, where 3 percent of restaurant operators have gone out of business, according to the National Restaurant Association.”
Each of these now-defunct small businesses represents the dreams and aspirations of individual entrepreneurs who have sought to pave a road to success with sacrificial blood, sweat, and tears. Multiply each failed business by factors that point to millions of jobs lost forever — or maybe not. Americans do not give up easily. Small businesses possess a quality that mimics family. This intangible dimension cannot be bought, and it is a feature larger than a paycheck.
Survival Tips to Stay in Business During the COVID-19 Crisis
What course of action should small business owners take during the coronavirus pandemic to ensure the likelihood of survival? Thankfully, many of the best strategies are simply good business sense in normal times. In tumultuous times, these steps are indispensable.
1. Cut Expenses to the Bone.
Put capital spending plans on hold temporarily. Reduce orders for new stock or defer delivery. Return overstocked items that are not selling.
2. Increase Revenue.
Businesses must cope with the new normal. Restaurants are advertising takeout and home delivery, while people are buying new cars online and having them delivered. COVID-19 has relaxed HIPPA regulations making telehealth possible. Develop the online side of the business. The future is now.
3. Take Advantage of Credit Lines.
Because cash flow is often irregular, money may be tight. The credit line provides financial assistance in difficult times. Even though interest rates are at historically low levels, remember that banks will want their money back.
4. Negotiate With Vendors and Suppliers.
If cash flow issues are serious, have a conversation with the vendors. Do not be surprised by their flexibility. They want to keep their clients as much as anybody.
5. Collect Delinquent Bills.
Accounts receivable often go neglected or ignored and can grow to sizeable amounts. Small businesses may find that they have time on their hands to make the calls necessary to harvest some of the AR monies.
6. Utilize Government Relief Opportunities.
Take advantage of low-interest rate loans or tax deferments. Qualified businesses can obtain loans that are forgiven if all the requirements are met.
7. Care for the Interests of Employees.
Make layoffs a last resort. The restaurant and hospitality industries especially have been hard hit by the crisis. One international chain announced the Chairman and President are forgoing salaries, and senior management is taking a fifty percent pay cut. As much as possible, keep staff on board for when the economy is opened up.
8. Tap Competitors’ Inventories.
If a competitor is closing its doors for good, their inventory may be available at well below cost.
9. Pivot Production to Product Demand.
Shift or pivot production to critical areas where demand exceeds industry production capabilities.
10. Poise to Ramp up for the Recovery.
Be poised for the resurgence. The coronavirus is more like disaster recovery than depression recovery, so expectations are that economic activity will be explosive. Pent-up demand will be unleashed at the close of the pandemic. Deferred vacations will be rebooked, and people will resume buying cars, doing home renovations, and going shopping.
These simple, common-sense best practices are intended to help small businesses weather the economic storm brought on by the worldwide response to COVID-19. Survival requires business. No single survival tip will save the ship, but together they can make a significant impact on the present stability and future status of a small business.
Accurate Tax & Bookkeeping Services, LLC is a full-service business tax accounting and consulting firm located in Brandon, FL, offering services to businesses and individuals throughout the Tampa Bay area. Areas of expertise include tax preparation and planning, accounting and bookkeeping, payroll, and representation in IRS and State matters.
To learn more about how small businesses can survive and thrive in economic hard times, visit the Accurate Tax & Bookkeeping Services website at brandonaccountant.com. Contact the office by phone at (813) 655-9702.