Your small business might have unprecedented reach today thanks to technology, but it is also susceptible to more risks than ever before. There are the usual suspects – periodic economic ebb and flow, recessions, market crashes – and now a global pandemic that’s threatening to wipe out wealth worth decades. But as the impact of COVID-19 mellows and the business pace picks up, it’s worth taking the time to think about applying learnings from this disaster to your business strategy and mitigating future economic downturns. Irrespective of your industry, business type and size, or market you serve, ensuring that your business is future-proof has become more important than ever before. Here are a few things to focus on to design a strategy that’s perfect for you.
Re-assess business goals
Examine your market fit. Is your product or service still relevant in the post-COVID-19 market or after another recession? Usually, with a few tweaks, you might be able to continue aligning to your existing business objectives, so be open to the possibility of having to start afresh. Along with your main aims and objectives, think about a set of secondary, spare goals. You should be able to achieve these even in the worst market conditions, and they should be able to keep your business afloat. Also, think about the skill sets you need to keep the lights on. Map those with existing employees or draw up a plan that will make hiring new talent seamless and quick. You may have to push for digital transformation too. Your strategy should demonstrate an openness for change, for grabbing newer, more suitable opportunities if they present themselves.
Diversify your services
There’s a good reason why it is said that you shouldn’t put all your eggs in one basket. Think about how you can diversify your services and products to reach new markets and new customers, in turn, generating new revenue streams. Identify dependencies – even in terms of suppliers – and work out how you can spread your risk thin.
Focus on finances
Take a realistic look at your financial situation. What does your projection look like? What’s your pipeline or order book currently? Get a detailed picture of your expenses, liabilities, and fixed costs regarding equipment or inventory and warehousing. The components might look different based on your business, but list them out to know what’s the least profit you need to make to stay in business. Work out a plan of action in case your business credit score takes a tumble, and you need funds to stay afloat. Find out what types of funding will be available in that scenario. Familiarise yourself with instruments like merchant cash advances, loans from credible online lenders like All Year Funding, government grants, support schemes, or even new-age methods like crowdfunding. Having all this information handy in advance reduces stress and anxiety during a crisis and eliminates the possibility of nasty surprises.
Set up emergency funds
Eventually, if you backtrack enough, you will see that most problems, if not all, can be solved with money. Maybe that is why one of the most basic tenets of finances is to plan for the future and stash some cash for a rainy day. How much you should set aside depends on your fixed costs, and to some extent of variable but anticipated expenses. Once you’ve gone through your financial situation, you should be able to work out how much you need to stay afloat for 6-12 months in case of another recession. The more, the better. In a personal context, it is recommended to conserve six months’ salary as an emergency fund. You use this as a benchmark and start saving today or planning for a business line of credit that ensures you have a credit limit that covers this amount, at least.
Embrace your paranoid, pessimistic side
While it generally helps to be optimistic in life, don’t discount your irrational paranoia. If COVID-19 has proved anything, it is that your worst fears might sometimes come true. But use your paranoia and pessimism constructively. If you feel – unreasonably – that your product is not good enough, perfect it. If you feel you aren’t drawing in as many customers as you’d like to, leverage social media and market your business relentlessly. If you think about failure often, think instead of what you can do to cushion the blow. Use your negative thoughts to prepare, positively, for all eventualities. If you can’t help think about everything that can go wrong, use it to drive efforts towards covering bases. The formula is rather straightforward – take something negative, and think about how you can prepare for it! You will eventually see that everything about your business is in order, and grow confidence, while also being well prepared for the worst-case scenario.
Test your business regularly
The only way to know if you are ready to tackle any challenge that comes your way is to actually test yourself. Regularly run drills to go through negative scenarios and evaluate responses. What do you do if your inventory doesn’t move for a few months? Are you in a position to slow down production to cut your losses? What happens in case of a trade embargo with another country? Do you have a list of local vendors and suppliers? What if you make no sales for a few months? What if your bank loan or credit line doesn’t come through? How long can you sustain your business? Think about situations relevant to your company and regularly test your course of action for each one of them. Revise inadequate responses and double down on those that tie back to your business goals.
Overall, in case things don’t look upbeat, be patient. Your business might take time to recover from the COVID-19 blow, so do everything you can to speed up the recovery process but don’t expect miracles. Being realistic and aware of problems as well as opportunities will help you make the right decisions when faced with another economic downturn.