Published on 24/09/2020 by Any Business.Com.Au

Small Business: Steps to Surviving the COVID Recession

Drastic social distancing and stay at home measures to mitigate the spread of the coronavirus this year, have not only forced Australia into recession but have had arguably the biggest impact on the small business sector since the Great Depression.

By definition, a recession is "a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters". That's all fine but what does that mean exactly? And how as a small business can you combat it?

Because small business have greater credit constraints and are more susceptible to weak consumer demand, they are often the hardest hit when it comes to economic downturns.

The coronavirus pandemic has been uniquely damaging to the small business sector, especially hospitality and those businesses that rely on foot traffic and social interaction.

While policymakers continue to prepare relief measures to support small business, it's important that small business owners, if they haven't already, begin and continue to take significant steps in order to survive the impending COVID-19 recession.

Prepare for a long recession

Don't count on a quick recovery from recession, considering the unknown and uncertainty surrounding the coronavirus, any type of correction won't come overnight.

Assume it is going to get worse

Like you as a small business owner, customers and clients are also cutting their expenses. We may not even be at the bottom yet.

Survival hinges on cash flow

During a recession, your survival hinges on cash flow. The idea is that a you want to pay out cash later and receive cash sooner.

Reduce your monthly rent

Speak with your landlord and negotiate a lower monthly rent. Sign a longer lease if you have to in order to secure that rent reduction, this way the landlord keeps a tenant and doesn't run the risk of having their investment vacant for any period of time.

Get a discount on your utilities

Call all of your utility suppliers for your water, power, internet and phones and see what kind of deal you can strike.

There's a lot of these companies currently trying to help and they'll certainly go the extra mile if you find that you can get a better deal elsewhere.

Pay your payables later

Make sure you call your vendors and ask for extended payment terms. It may only be from 30 days to 45 days but that extra 2 weeks could mean everything to your business.

Collect your receivables sooner

By offering a small discount, you may be able to encourage your valued customers to pay their invoices early. Add the option you when you send out your invoices, it can't hurt and may just increase your cash flow.

Keep your exisiting customers

Be careful not to just so much of your business expenses that you

Don't cut so much of your business expenses that you can no longer service your customers. Now is the time to remind your customers why they chose you in the first place.

Contact your best customers

Call, email, or send a card to your best customers. Tell them you appreciate their loyalty and continued patronage. Ask them to come to you if they have any concerns during this period.

Lower inventory costs

How much cash is tied up in inventory? Do you really need to have 100 units of every product sitting on your shelves, waiting for the big order? You may be able to reduce the amount of inventory you're holding, and free up much needed cash.

Revamp your product line or marketing campaign

Consumers spend differently in a recession. They need to get more value out of their purchases. Position yourself as a quality, great value option through informed pricing and marketing campaigns.

Look for opportunities

Your competitors are in the same boat as you. If you can do it, a recession can be the perfect time to launch a new initiative, take market share from your competitors and put yourself in a position to accelerate through the recovery.

Reduce hours before reducing salaries or staff

Cutting someone's salary by 10% but asking them to work the same number of hours may result in a reduction in productivity. A better idea is to cut hours. You'll save the same amount of cash, but have a better chance of retaining your employees. You can also reduce your business' hours. As long as you're still providing the same amount of service, chances are people will not even notice.

Cut your own salary

If you're paying yourself a salary, it goes without saying that you've to cut your own before you cut those of your employees.

Pull your team together

Be open with your employees. Explain to them exactly what the situation is and cultivate

an attitude of "we're going to weather this downturn together".

Don't be afraid to say we all need to be 10% more efficient and 10% more productive if we'r going to survive this. Just involving your staff in the problem solving process is often enough to motivate them to band together to ride the wave out of recession.

You've got one goal

Keeping your business afloat during the current economic condition. Depending on your industry it can be difficult, but it's not impossible. Set realistic goals and plan for being in survival mode for a long period of time. Cut deeper than you think you need to because it will be worse if you have to go through this process again in 6 months.

AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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