We have been living with COVID-19 in our world for some time now. Although it is a very fluid situation, some measures can be taken to position your business to withstand the uncertain times and thrive when the pandemic is over. From October 18th to 24th, 2020 we celebrate Small Business Week and there is no better time to share some tips for small business owners. We all have to remember that medium and large businesses were once a small business. At DMCL, we are strong supporters of small businesses and entrepreneurship. We hope these ten tips can help small business owners during the unprecedented time:
- Know all the financial programs offered by the government. There are many acronyms out there but the most important ones are around wage subsidies, rent relief and financial loans designed for businesses. Our government has taken action to help business owners with the much-needed economic support during these turbulent times. Talk to your accountant and stay informed with our DMCL blog so you are on top of the latest information. Things are constantly changing and moving fast.
- The phrase cash is king is definitely at the forefront of every business owner’s mind. Managing your cash flow is extremely important in times of uncertainty. To name a few ideas that will help you with cash flow: analyze your spending and reduce your burn rate, work out payment plans with vendors and ensure access to credit is available. You can also consider trimming any unnecessary discretionary spending.
- Consider whether your business or investment asset values have been depressed during the pandemic. This may be a time to start thinking about purifying your business in anticipation of utilizing the capital gains exemption or freezing a shareholder’s interest if transitioning your business has been on your mind.
- Prepare a financial projection and budget your cash flow often and frequently. Short term planning will help steer your business through obstacles and plan for the unexpected. A lender may request to see your financial projection as well if you are applying or extending for credit.
- Some business owners think about cost-cutting to help with their bottom line but don’t think enough about their top-line revenue. From a valuator’s perspective, it is very important to dive deep into your revenue streams and understand who your most valuable customers are. Not all customers are equal in terms of value and quality. Know who your key customers are and ensure they are well looked after.
- Think about your current accounting system and ensure you are getting accurate and timely financial statements. The more up to date and real time your financial information, the more effective your decision making. It all starts with solid bookkeeping.
- Pay close attention to your competitors and listen to your customers for feedback on how to adapt your business model to preserve the goodwill that your company has built. Consider having a larger online presence and keeping up with the latest trends in your industry. Take a moment to imagine how technology and innovation can integrate with your business model – it could very much be a possibility.
- Plan for the best-case, normal-case and worst-case scenario and how you would tackle each situation and what your options are. Being prepared and thinking ahead may be the difference between your business staying afloat or going under.
- Understand that financial institutions often consider the Five Cs of Credit before making a credit decision. Character, Capacity, Capital, Collateral and Conditions. This allows them to assess your credit-worthiness which is determining your ability to repay the loan plus interest.
- There is no better time than now to consider doing a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). While you are at it, consider revisiting your marketing strategy, empower your team to generate new ideas and think outside the box. There could be some low hanging fruits right at your doorstep.
Please contact your DMCL advisor if you have any further questions about the tips discussed in this article.