Both seasoned business owners and young entrepreneurs alike will tell you that COVID-19 is something they weren’t adequately prepared to handle. You should no longer be surprised to hear that small businesses have felt the wrath of a global pandemic in the past year or so. One in five businesses closed down, others made it out alive with a couple bruises, and some were fortunate enough to make it back on their feet before the holiday season.
Amidst the common pitfalls of COVID-19 such as layoffs, taking out loans, and trying to make up for months of lost revenue, the plus side is that entrepreneurs can come out the other end with greater knowledge and competency. As a business owner, there are a handful of lessons you can take away from an economic downturn that can better prepare you to endure another crisis. Here are some of those lessons:
1. Take advantage of government assistance
Through the CARES Act, many small businesses were able to take advantage of the Payroll Protection Program (PPP). Despite the uncertainty surrounding the program, it was able to support around 50 million jobs during the pandemic by providing up to eight weeks of payroll expenses. This funding even allows businesses to hire back those employees who were laid off and cover other expenses.
Another option is to take advantage of any business grants available. The Small Business Association has a comprehensive guide to coronavirus financial relief for employers along with alternatives to PPP, such as Economic Injury Disaster Loans (EIDLs), bridge loans, and debt relief.
2. Build an emergency fund
Having cash to fall back on in times of economic crisis is most definitely advice you’ve heard before, but it should definitely not fall on deaf ears now, especially mid- and post-pandemic. One survey of small businesses suggests that out of businesses with over $10,000 in monthly expenses, 75% of organizations had enough cash to last them only two months or less at the beginning of the pandemic.
So to keep your business from following this detrimental trend, figure out how much your business would need if another emergency arose and create a savings goal. In the case of another shutdown, build and set aside 3-6 months worth of expenses. To do so, periodically evaluate your monthly expenses and see where you’re spending more than you need to so that you can reallocate funds to conserve cash. And automate deposits into savings with each transaction to be sure you’re not missing any opportunities to save.
3. Get your personal finances in check
Though it may not be particularly obvious, your personal finances as a business owner will have a significant impact on the way your business runs. The amount of debt you’re carrying along with your payment history and types of credit will ultimately influence your credit health. Your credit score will determine your worthiness of qualifying for loans and taking on other financial ventures, like acquiring personal loans or completing the mortgage preapproval process. Homeowners, specifically, will confidently tell you that the thousands you borrow and the way you pay it back will continue to affect your credit score for decades, and ultimately, your borrowing capabilities for your business.
A poor personal credit score can take you out of the running for the most favorable business loans in terms of interest and loan terms. Essentially, this means you should pay as much attention to your personal financial situation as your business’. Having access to funding in times of economic downturn has become increasingly vital in the past year, providing the potential to salvage hundreds of jobs and your business’ success, which will come in handy in any “second wave.”
4. Remote work is in
Remote work provides peace of mind for those unwilling to put their health at risk in a communal office setting. And if your company didn’t have the capability before, it’s clear that it can benefit from adapting to the work-from-home life that is likely to stick around for years to come. Especially when considering hiring in the future, offering this benefit can appeal to more candidates and help attract top talent.
In fact, studies show that over half of employees would change companies for one that offered them this flexibility, which can dramatically increase employee retention. The same study claims that there are significant boosts in productivity, performance, and overall engagement for employees working remotely as well. That said, adapting to this style of work will be extremely valuable in building a powerful, connected workplace culture.
5. Go digital
For those businesses that have yet to venture outside of brick and mortar, the time has come for you to modernize. Though, there’s no promise that this will be a seamless transition. Obtaining the best digital tools – and the right ones for your business, at that – can take some research, trial and error. And don’t forget the monetary investment.
Applications such as Zoom, Microsoft Teams, and Slack have aided in facilitating smooth and efficient communication for remote teams during the pandemic. Besides online communication tools, it’s also critical to maintain the safety of your organization's private data with a safe cybersecurity system that prevents hackers or malware from accessing confidential information regarding your business. This is especially important for those businesses looking to continue working from home for the foreseeable future.