It’s hardly a secret that small businesses are more susceptible to market fluctuations and economic downturns. From global pandemics like COVID19 to intense local competition or simply being unable to hook customers’ attention, several situations can spell doom for small businesses. If you are currently facing something similar, here’s how you can kickstart a financial-recovery journey for your small business and achieve a quick and effective turnaround.
Assess the financial damage
To know the full extent of the impact of an economic downturn on your business, start by assessing the number. Pull out your bank statements for a detailed, comparative analysis year-on-year. It would also help to compare sales, employee headcount, operational budgets, customer or social media engagement, and other metrics relevant to your business for a big-picture view of your business’s situation. If possible, benchmark your position against your market, industry, and competitors. The more data you have, the better off you will be when charting your recovery roadmap.
Re-evaluate your business plan
Recovering from a financial setback needs timely action; this includes changing your business strategy altogether if required. Keeping the economic downturn in view, analyse your existing business plan, and see if it holds promise in the future.
Be realistic; more importantly, be prepared to pivot. You might need to make some tough choices. If cutting headcount can help your business stay afloat, think about how you might want to approach the option. Does your business need to spread its online presence? Or do you need to set up a new brick-and-mortar facility? Going over your business with a fresh perspective and readiness to implement change will help you cut future losses and pivot in time.
The objective of the exercise is to understand your existing business plan, forecast future market behaviour and customer demands, and identify profitable opportunities to plug this gap.
Make a time-bound recovery plan
Most business owners have a very clear picture of everything they are prepared to do to save their business. But very few ever think about what they wouldn’t. The key to avoiding a downward spiral of increasing costs attributed to business revival is to know when to quit. Set a timeframe for recovery and a rejuvenation budget. Setting limits will help you quit in time and invest your focus and resources into newer, more promising opportunities.
Rework your budget to limit spending
Once you set new business goals and objectives as part of your recovery plan, re-evaluate your spending. You might need to shuffle your resource allocations, ramping up funds for activities aligned to your objectives, or cutting budgets for initiatives that are no longer necessary. This will also help you evaluate whether you need to inject additional cash into the system, in which case, you can start thinking of the best loan options to pursue.
Seek funding to get some leverage
Though it might sound counterintuitive, it is true that in business, you need to spend money to make money. If your business’s financial health isn’t looking great and you need funds to regain momentum, there are several options available to choose from. Depending on your business’s eligibility, you could opt for small business loans from banks or online lenders, merchant cash advances, government grants and schemes, crowdfunding, venture capital and other investments, and loans from friends and family, to name a few.
Research each option in detail and consider the pros and cons before you zero in on one. Keep your current business plan, recovery plan, and short-term and long-term objectives in mind while finalising the funding instrument and lender. Chart out your repayment plan and identify your hard-stop point in case things still don’t look up for your business.
Build a contingency plan for the future
The key to business success is trying to find opportunities and hope, especially when things go wrong. In the case of an unfortunate economic downturn, the silver lining is resilience. How much beating can your business take? You can turn this knowledge into insights that can inform your contingency plan for similar events in the future.
Think about how you would do things differently if the same situation came up again. Knowing what you know now, where would you devote your time, energy, and money? Would better social media reach help? Should you have had physical stores in several locations? Or would it benefit your business to offer ancillary products and services or, better still, discontinue some? Build a best practice guidebook to help you navigate through anticipated tough times without unnecessary trial and error.