The economic consequences of COVID-19 have taken a toll on many small businesses. From restaurants to construction companies, “the vast majority of small businesses require human contact of some sort”, says Rob Einstein, a regional sales manager at U.S. Bank. Social distancing measures might be making it difficult for you to operate your stores, office or warehouse normally.
Though there are still many economic unknowns, you can take steps to alleviate some of the hardship and worry. Learn more about how to strengthen your business during this time and prepare for a brighter future.
Understand your expense structure
If you haven’t already, Einstein recommends conducting a detailed analysis of your finances. “Knowing exactly how each dollar is earned and where it’s spent is always a good idea, but it’s more important in hard times,” he says.
Do a deep dive into all of your revenue sources. When you know where your money is coming from, you can make a plan for what to do if that revenue source dries up. Take note of your expense structure — know which of your costs are fixed and which vary to help you stay even more in-the-know.
Run a stress test
Once you have a solid grasp on your financials, Einstein recommends running a stress test. A stress test helps you predict what your finances will look like when your business’s income or costs change. If you typically do a certain amount in sales, measure how your business will be impacted if that figure drops by 10 percent, 20 percent, and even 50 percent. How would that loss impact your cash flow? What steps can you take to keep your finances steady if revenue declines
Make contingency plans
Since the economy is shifting quickly, Einstein advises that business owners plan for a few economic scenarios, so you know how long business can thrive in different situations. If the economy turns, you’ll be able to bounce back faster. When it comes to COVID-19, think about how you can continue to serve your clients or customers digitally or with less in-person contact. Don’t be afraid to get creative — many businesses have found that some of their services can be conducted remotely.
Also, putting strategies in place to protect your business from fraud is more important than ever before. Unfortunately, cyber criminals are eager to prey on people during this stressful and unpredictable time. It’s important to have a strong security and fraud awareness culture embedded within the company.
Talk to your banker
If you need help making a plan for the future, your banker can help you navigate relief options or advise you on a financial plan that works best for your business. If you don’t have a banker you work with consistently, Einstein recommends reaching out to a branch manager at the bank where you do your personal or small business banking.
Editor’s note: This article was written by our partners at U.S. Bank.
U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.
Credit products are offered by U.S. Bank National Association. Equal Housing Lender. Deposit products are offered by U.S. Bank National Association. Member FDIC.
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