As COVID-19 continues to rage, many small businesses are still struggling. From figuring out how to pay your employees to keeping your customers safe, you are likely still harboring countless concerns you never would have imagined just a year ago. Luckily, there are steps your small business can take to manage during these unprecedented times. Read on for ways your small business can sustain itself during the current economic downturn and prepare yourself for future times of uncertainty.
Get organized and then scrutinize your business expenses.
One of the first things a small business looking to prepare its finances for a downturn should do is evaluate all current business expenses. This means getting organized and assessing where you stand and what exactly you pay for every month. To do this, make a list of each of your company’s monthly expenses. Common expenses include:
- Operating costs, such as your rent, mortgage, and utilities;
- Supplies and equipment;
- Employee payroll expenses;
- Insurance costs;
- Marketing budget;
- Machinery, including company cars or trucks; and
- Anything else you pay for on a monthly basis.
Once you create this list, you should carefully review it to see where you can cut costs. For example, can you negotiate with your landlord for a lower monthly rent, at least temporarily? You might be able to reduce other expenses, such as payroll costs, through a tool like a Paycheck Protection Program (PPP) loan.
Seek assistance from government programs.
Small businesses can, and in many cases, should, consider turning to government programs for financial help. Many of these programs were recently launched to help small businesses during the COVID-19 outbreak. The CARES Act includes provisions to assist small businesses, including the Paycheck Protection Program (PPP), which provides loans to small businesses that need help keeping employees on their payroll.
Once a business receives a PPP loan, that money can be used to pay qualifying expenses, such as payroll costs. The program was designed to provide direct relief to small businesses and incentivize them to keep their workers on staff. If certain requirements are met, PPP loans are eligible to be forgiven in full.
The CARES Act also includes tax relief for small businesses that may help to cut your tax liability. These include delaying estimated tax payments and employer payroll tax payments, and a tax credit for employee retention. Speak with a tax advisor to determine which provisions apply to your business and how you can take advantage of any new tax provisions to save cash when tax season comes around.
Reevaluate your payroll expenses.
In addition to seeking a PPP loan, there are other ways to reduce your payroll expenses. Payroll is one of the largest expenses of most small businesses. Whether you have one employee or many, there are ways you can cut back on payroll expenses without having to resort to laying off your staff. Of course, layoffs are sometimes necessary to cut expenses during an economic downturn. However, before doing so, review these alternatives. Not only will you keep your employees happy, but you will also likely save time and money in the future when you do not have to hire and train new staff. Consider:
- Eliminating overtime hours;
- Cutting back on employees’ hours;
- Closing on holidays to avoid paying employees time and a half;
- Reducing pay (while this is unpopular among employees, it is often preferred over layoffs); or
- Hiring 1099 independent contractors instead of full-time employees to save on costs such as benefits afforded to full-time employees.
Focus on customer service and retention.
As a small business, your customers are your most important asset. During an economic downturn, many businesses lose customers and, therefore, a significant income source. Small businesses that focus on their customers and on delivering exceptional customer service, even during tough times, are more likely to survive a downturn than those that try to cut costs and cut back on the customer experience.
Reach out to your customers to show that you care. Post on all of your social media channels to stay in front of your customers and engage with them, even if you cannot reach them in-person at this time. Provide them with information and resources to help them and you develop a connection that will keep them loyal. Even if they are not in the position to spend money now, they will likely line up to spend their cash at your business, in the future.
Consult with an experienced business attorney for more help
Lastly, reach out to an experienced business attorney for detailed guidance on what your small business can do to weather this downturn. If you follow the guidance above, when this pandemic ends, you will not only have kept your business afloat, but you will have set yourself up for success.
To get your business in that position, you do not have to go it alone. Business attorneys, consultants, accountants, and financial experts have worked with companies through downturns and economic difficulties many times before and can offer a new perspective and advice on maximizing your operations.