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Small Business Planning Guide

By Analytix CEO, Satish Patel

The COVID-19 virus has shaken the world at its core and continues to carry with it a growing sense of business and economic uncertainty. For most small businesses, the focus is on employee safety while mitigating risks to the business. The full impact of this pandemic on businesses and supply chains is still unknown.

With all this uncertainty, one thing remains certain–the global economic and financial ramifications will be felt significantly by small and mid-sized businesses. The most optimistic forecasts predict business normalcy to return in the US by the end of Q2. As these surreal business conditions play out, Analytix Solutions is working through its business continuity plans and trusts you are doing the same.

A Dozen Ways to Stay Afloat

Here are some risk-mitigating best practices that may help your business survive in the weeks to come and hopefully thrive in the years ahead.

1. Manage Cash Flow – Many SMBs are working through the financial and operational impact that a slowdown has on business. Top-performing businesses, at a minimum, should prepare a weekly cash flow forecast to better gauge how sudden downturns impact vendor payments and debt paydown. This is extremely important for businesses like restaurants, supermarkets, and construction, where cash flow is very tight. With a cash flow forecast at the ready, you’ll be able to quickly determine payment priorities.

2. Review Capital Expenditures – If your business had plans in 2020 to invest in capital equipment, it’s time to reconsider. Even if your capital expenditures are justifiable for carrying out daily business operations, consult other avenues. For example, your suppliers also value cash and may be open to price negotiation. If not, consider leasing. A third option has also recently become available via the government by providing incentives to invest in capital equipment, which will further reduce the net investment amount.

3. Assess Financing Options – Just as fast as the government is presenting new capital incentives, your banks may be removing any incentive to finance with them. Don’t assume otherwise or rely on old financing relationships. It’s best to pick up the phone and call your old contacts to re-establish terms. Also, consider factoring your receivables or other funding options into the mix.

4. Take Advantage of Federal Relief – Even though COVID-19 is taking a toll on the people, businesses, and economies around the world, know that small business relief is coming. As of this time, the government is drafting a relief act that includes the following:

● Low-interest federal disaster loans backed by the Small Business Administration

● Employer tax credit

● Federal income tax deferment

● Economic injury disaster loan, which covers things like payroll, expenses, accounts payable, and fixed debts

● Mandatory paid sick and paid leave cost offset (signed into law on March 18) for employers with an employer tax credit, equal to 100% of the benefits doled out

● April 15 income tax deferment extension without penalties for 90 days

5. Improve Cash Collections – If you were ever considering rewarding for early payments or incentivizing those slow to repay you, now may be the time to act. Consider offering discounts for prepayments. You can also improve cash flow by expediting invoice processing or try some other low-cost, high-value A/R process improvement.

6. Cut Cost Overhead – Top-performing businesses have a solid grasp of their break-even point based on different financial and operational scenarios. Figuring this out helps determine how much cash is required to run the business. The remaining costs are considered overhead and can be reduced in times of crisis. Overhead costs can be broken down into categories and prioritized based on your unique business factors, but, typically, they are broken down as follows:

  • Payroll – Here’s a list of ways to cut payroll overhead:
    • Pick up shifts if you are a manager or corporate employee
    • Reduce owner and corporate employee salaries
    • Change the frequency of staff wages
    • Lay off employees with pay
    • Stagger hourly employee shifts
    • Implement salary reduction across the board
    • Encourage vacation time usage
    • Reduce hourly labor
    • Eliminate unproductive labor
  • Payroll Taxes – Be aware of and act upon all payroll tax breaks made available to small businesses during the crisis.
  • Contract Payments – Consider reducing contracting work and redistributing work to existing employees.
  • Inventory Management – Businesses that carry inventory should consider if a drop-shipment or real-time inventory management system can improve efficiency.
  • Rents – Although a landlord may not reduce or forego rent, landlords also realize the cash crunch and want to avoid the costly experience of re-renting space in a down market.
  • Professional Fees – If a vendor is providing PR & Marketing, Human Resources, or any other consulting, consider off-loading to your internal team.
  • Events & Travel – Hold team meetings virtually rather than travel and skip any conferences or other planned business travel.
  • Other Expenses – Take an inventory of miscellaneous expenses like off-site storage, an old landline phone system, or cable TV that goes unused in the office.
  • Vendor Management – If you have yet to do so, contact vendors and seek to reduce the balance due and/or seek payment extensions. Also, review vendor contracts, and look for better deals as other vendors may be willing to provide better pricing and terms.

7. Adjust Operating Hours – When is your business typically busy? Consider closing up shop for those other periods, and then communicate with signage, email, and/or social media if you decide to go this route.

8. Assess Employee and Unemployment Insurance – Since you already pay unemployment insurance, you recognize that anyone laid off can collect on that insurance, and new collection mandates mean faster collection time for your laid off staff. Remember that they do not have to be laid off, either. If an employee’s salary is below a certain threshold, they can collect it.

9. Understand Business Interruption Insurance – If you were fortunate enough to have such a policy, this insurance generally covers losses arising from disruptions to a business’s customers or suppliers. However, the range of coverage can vary significantly by insurer policy, industry sector, and geography. Call your agent to find out your exact coverage.

10. Implement a Remote Work Option – Check out the free tools business owners are using to enable their teams to work remotely without losing too much productivity. If such a scenario meets your business model, it’s worth the effort to assess and possibly implement it. Keep in mind remote workers will need the guidance and oversight to optimize productivity, so remote work training and policies are highly recommended. If this happens, it’s likely minimal investments in modern technology to fund remote work efforts would be worthwhile.

11. Allow Employee Flexibility – Do your best to be understanding of the current climate and the impact on your workforce and their families. An illness or a family emergency will likely arise unexpectedly. Prepare a contingency plan in case you suddenly become short-staffed.

12. Close Business Operations – If retail/walk-in customers are what drives your business and you’ve been hoping this is the year to turn things around, reconsider. This actually may be a good time to close up shop, save on capital, get government assistance, and look for other business opportunities that are just now appearing on the horizon due to this crisis.

The Other Side of the Ledger

The entire team at Analytix Solutions hopes this information, along with our COVID-19 resource center, will help you better manage the business turbulence ahead.

Yes, it’s true; this ordeal will probably adversely impact your business. However, for a moment, allow yourself to consider the other side of the ledger.

On the positive side, never has such a large group of workers been forced to work remotely at the same time. Yet, this is exactly what’s happening globally right now. With such a premium on business agility and communication, many business executives and workers can now say with confidence that they’re currently enrolled in a business agility crash course. They’re learning how to plan faster as a team, how to quickly mitigate risk, and how to act in more agile ways. As a result, such businesses will likely gain a competitive edge in the long run. In addition, this collective experience may also build a more connected business culture based on relationships and resilience rather than politics and passivity. As businesses move deeper into the digital, remote-driven world, such skills are highly valued.

So here’s to the ongoing health of your workers, the recovery of your revenue, and the boost in your business resiliency in the coming months.

Updated on April 7, 2020