A crisis, such as the COVID-19 pandemic, can impact the way we all live and work. Small and medium-sized businesses are often among the hardest hit. So, how should you lead your business through such turbulent times? While there are no easy solutions, here are some tips on managing your finances, your people, and your future prospects.
If you don’t have a financial plan, make one
Like a lot of other small-to-medium businesses, you may rely on cash flow that lasts only a couple of months at most. So it’s important to have a clear view of your future expenses. Make a list of important items you’ll need to pay and when they’re due, such as:
- employee salaries
- office rent
- utility bills
- tax obligations
- supplier payments
This will give you a better understanding of your financial position, and may help you make quick, informed decisions when challenges arise.
When forecasting earnings and expenses, err on the side of caution. It’s safer to assume the road to recovery will take twice as long as predicted.
If necessary, consider where to reduce costs. Employees and office rent are often the biggest costs.
You may need to put plans to hire full-time employees on hold – hiring freelancers on a project-by-project basis could be an alternative.
Outsourcing could also be an option if you need to keep the headcount while reducing overhead costs. If you have an office, you could look to downsize, or use a co-working space, which may allow more affordable and flexible payment terms.
Talk to your suppliers and creditors
Speak to everyone you need to pay over the next 3 to 6 months. This could include landlords, suppliers, lenders and the tax office. Find out if you can spread out or defer any of your costs. They may be willing and able to make provisions.
Be open with your suppliers and creditors. And keep in mind that other small businesses may be in a similar situation to you, so try to make any new arrangements mutually beneficial.
Consider additional funding, if necessary
If you need more funds, talk to your bank about your options. Look into government grants or other forms of financial support that may be available to your business.
If you can afford to, you could consider using your own funds to sustain your business in the short term. But assess your own financial position and only commit your personal money to the business if you’re confident it will remain viable.
Finally, you could look to find external investors who can inject funds into your business. However, you may not get a fair valuation for selling a share of your business during periods of uncertainty. Giving up a share of your business may also reduce your control over it.
It’s impossible to know how long a crisis will last and what the road to recovery will look like. But proactively protecting your finances, gives you a chance of emerging from it in a stronger position – opening up future opportunities for growth.
Explore new opportunities
You may feel as though you’re in survival mode while a crisis is unfolding, but try to find time to reflect on your business model. Think about not just how you’ll get through this period, but also how you can adjust to thrive in the future. Here are some questions to ask yourself:
- How will your customers behave after the crisis?
- What will and won’t matter to them?
- How will you attract and cater for new customers?
- Could you offer more digital services?
- How might you use technology to create new revenue streams and new ways to connect with your customers?
Study your competition
Not all businesses will have the same experience of a crisis. Some will cope with changing circumstances better than others.
Find those that seem to cope well and learn what they do differently. Look at both your direct and indirect competitors to get a better understanding of what strategies seem to work.
Not every strategy will apply to your business, of course – but look for aspects you could tailor to suit your needs. There may be opportunities to adjust your broader business strategy and position yourself to be more competitive.
Take care of yourself and your staff
It can be hard to keep your spirits up during tough times. But it’s vital to take care of yourself physically and mentally. This may help you remain calm and maintain a positive mindset, and help your staff do the same.
Depending on your business’s financial position, you may have to look at cutting pay. Recognising the situation, your staff may be willing to make some compromises to help each other. For example, those who are in a better financial position could work reduced hours. That way, those who are more dependent on income from your business can be spared pay cuts.
As a last resort, you may need to lay some staff off. If this is the case, be as open with them as possible about the business situation and talk to them to find out about their own financial position. It probably goes without saying, but do what you can to support them.
If you feel like you need a hand, you can get in touch with us. You can speak to your Relationship Manager or call our contact centre at +603-8321 8888 for any enquires related to HSBC Fusion.