by Andi Gray, president of Strategy Leaders
It’s no secret that the COVID-19 pandemic has left many existing small businesses struggling, and the continued economic uncertainty threatens to kill the ambitions of entrepreneurs who planned to launch new businesses but now must put their dreams on hold.
This crisis will end up being much worse for small businesses than the 2008-11 sub-prime mortgage crisis. That 2008 crisis mostly hit banks, mortgage,insurance, automotive – all of which were primarily big, publicly owned stock companies. The only small business dominant category was the construction sector which was devastated for years.
Today’s crisis hits and potentially harms nearly every type of small business.
During that 2008-2011 period, for the first time, the number of business starts fell below the number of business failures. In other words, more businesses were killed off than were launched, and many people wondered whether we had killed entrepreneurship itself. It took five years or more for the small business community to recover from that. The COVID-19 pandemic impact is so much larger and deeper.
And when small business takes a hit, the country as a whole suffers.
Small businesses make up 50 percent of the gross-domestic product and also employ half the workforce. What happens to them determines what happens to the overall economy. We as a country cannot afford to fail them.
So, what steps should small business owners take to make sure they come out on the other side of the current crisis in good shape?
Here are a few questions you to consider:
How is your online game?
If business owners aren’t already thinking of themselves as all-virtual, e-commerce sellers, they need to be. That’s how your customer of today and the future is going to want to buy and receive products and services. You may need to update your website. Evaluate how good you are at social media communication and promotion. Rethink how you can get orders, track delivery, and receive payments virtually.
What’s happened to banking and access to capital?
In recessions, banks shut down their credit lines, and reduce capital access if they have any concerns about a customer’s ability to pay down debts on time.
This will get worse before it gets better. That means you may wake up one morning to find your business is facing challenges with access to capital. To keep your credit lines open and approved, it’s essential that you put in the time and effort to work with your bank. Without access to the proper amount of capital, she says, your business may not be able to function.
How have employees been affected?
Businesses must be prepared for challenges that impact work production, Gray says. She points to a study by Microsoft that showed employees’ brains are measurably more stressed working remotely than in an office. It’s harder for remote workers to process information and they get fatigued more easily.
And that’s just one aspect of what our employees are dealing with as the world around them changes so rapidly and dramatically. Build in as many communication and interaction tools as possible.
Is your supply chain stable?
Get prepared for more disruptions as COVID continues to emerge and reemerge and some vendors fall away. And with hurricane season followed by winter weather, many poorly funded state and local support structures could struggle.” Look at how your supplies get to you. If you’re part of the supply chain, look at how you deliver supplies to your customers. Explore alternate shipping solutions and routes – trains, planes, cars, trucks, boats. Now is the time to investigate all of them. Build in redundancy.
Staying in business is difficult even without a major crisis, as three out of four businesses fail in every 10-year cycle.
The good news is that small business owners are known for being nimble, flexible, and resourceful. Many of them are finding new opportunities by solving problems that didn’t exist, or weren’t priorities, at the start of 2020. If we can buy them some time, they’ll be able to retool, market their new services and products, and keep good people employed.
Andi Gray is president of Strategy Leaders, a business consulting firm. Gray’s career started in sales, marketing and new business development at Xerox, American Express and Contel. Gray earned an Executive MBA from Columbia University while conducting research on success and failure drivers for entrepreneurial businesses.