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Preparing for Shutdown with Five Tips

Five Ways Small Businesses Can Prepare for Another Shutdown

August 17, 2021/in Operations, Risk Management/by Brandon Wyson

According to the CDC, the Delta variant of COVID-19 is responsible for 93% of cases in the United States for the two-week period beginning on July 31 which is up from 83% as recorded for the previous two-week period. Even as vaccination rates increase, medical experts from the CDC advise that even vaccinated Americans should return to wearing masks indoors in Delta hotspots like New York City and Miami.

Mounting uncertainty about the Delta variant and COVID-19’s future has led to parallel concerns that restrictions may rise once more and paralyze small businesses in a way similar to early 2020. Even as in-person commerce is turning up, small businesses would be wise to prepare a contingency plan. Kapitus has collected five general tips for small businesses to keep in mind and help stay on top of another potential shutdown.

 

Track Hyperlocal Hotspots

Medical experts from Yale Medicine advise that the Delta variant and COVID-19 cases from now onward will largely affect the unvaccinated. As the United State’s vaccine rates remain uneven there is an increased chance of extremely localized viral breeding grounds otherwise known as hyperlocal hotspots. COVID-19 is likely to affect some communities severely and possibly skip whole other communities because of vaccination rates. It is imperative that small businesses be aware if they are in CDC or WHO-determined hyperlocal hotspots as unvaccinated patrons could be at risk inside your offices or stores.

If your business is inside a hyperlocal hotspot your first step should be to reevaluate your mask guidelines. It is common for small businesses, especially those with open-air facilities, to mark their facilities as ‘mask optional,’ but per CDC guidelines, even vaccinated Americans should wear masks. Consider also stepping up your signage to double down on social distancing requirements.

To see if your local neighborhood is at risk of becoming a hyperlocal hotspot for COVID-19 keep a close eye on both CDC resources as well as your local government’s neighborhood profiles.

 

Make Operational Adjustments (Again)

This tip may sound silly to small businesses already facing labor and supply shortages but even businesses seeing a commercial uptick should take that growth in stride and be certain to not overinvest in the face of potential future shortfalls. Small business owners showed incredible resourcefulness when facing the initial challenges of COVID-19 making many unforeseen operational changes that strengthened their business for the better.  Doubling down on these strategies, while incorporating a few new areas, can help you to create an emergency plan to manage operational costs.   Some areas to consider include: 

Operating Hours & Work Weeks

If you are a merchant, how long are you open daily?  Do you know which business hours typically bring in the best revenue? Consider adjusting hours to match the times of the week where you tend to see the most traffic.  If you manage an office, do you need a 5-7 day work week?  Do your employees need to be in the office or can you get them quickly moved to a work-from-home situation? Are there any daily tasks your business can complete with automation? When reevaluating your operational costs, your goal should be to run your business as lean as possible so that in the case of a shutdown you can swiftly tone down operations.

Social Media and Customer Communication

Find creative ways your business can leverage social media to both further your communication with customers and maybe even open up new revenue streams. Recording product unveilings on Facebook or Youtube live streams is a great way to get your customers involved from home. If your business does have to shut down or alter hours, use social media and your company’s website to keep customers informed and involved.

Build and Maintain a Safety Net

If your business hasn’t already, put additional money aside in an emergency or contingency fund separate from general savings. The COVID-19 pandemic has been anything but predictable and those businesses who maintained a healthy amount of emergency funds fared the best. Maintaining an emergency savings account may also help put you and your employees into a better mindset. Being prepared for an emergency often translates to being even more prepared for daily operations which will only go on to help your business.

 

Be Intimately Familiar with Your Suppliers

Keep in extremely close contact with your suppliers and vendors. The patchwork nature of modern COVID-19 outbreaks may lead to factory closures even if your own business can keep their doors open. Be certain that someone on your team is in regular contact with your largest suppliers so you can beat stopgaps and delays before they affect business.

The COVID-19 pandemic showed small businesses that relationships with multiple vendors is another “new normal” in the face of supply line shortcomings and regular supply and demand spikes. Operating your business in that new normal requires extensive flexibility in both the front and back of house. One of the best ways to proactively insulate your business from supplier shortcomings is to maintain parallel relationships for the same raw materials. Also, if you have an existing supplier who maintains more than 50% of your incoming supplies, it is imperative that your business find alternative means to maintain those supplies even just as insurance. In the same way that paying into various insurances and protections insulates your business from unexpected disasters, maintaining parallel supplier relationships functions in the same way.

 

Maintain Regular Communication with Staff and Customers

How strong are your communication lines with staff and regular customers? It pays to be upfront and detailed about your COVID-19 and Delta variant contingency plans.

Regarding your staff, be certain that your front of house staff isn’t left unaware of your COVID-19 plans as leaving questioning customers with an ‘I’m not sure’ is anything but reassuring. No matter if your staff is remote or not, set up a live meeting where employees can comfortably ask questions and you can lay out key details about the path ahead. Be as specific as possible and include “if, then” scenarios in the case of heightened restrictions or full shutdowns.

As for customers, consider your existing outreach programs like email newsletters and blogs and see what you can do to step up the personalization of your content. Another valuable resource is an FAQ page with specific details about your businesses plans and prevention strategies going into Q3 and Q4 of 2021. Throughout all your customer outreach it is essential that you are as honest and straightforward as possible. No one is certain that shutdowns are imminent, and the patchwork nature of Delta variant outbreaks means that those shutdowns may be targeted and local. Your communications with customers should reassure that your business is prepared for any outcome and that your team will do everything possible to maintain service.

 

Forgo Expansion for Savings and Invest in Good Labor

The last few months’ uptick in commerce in the United States may lead small business owners to consider reinvesting their new-found cash into upgrades and improvements they skipped out on during 2020 but the time is likely not right for most businesses.

The only sound investment small business owners should consider in the face of Delta variant surges are in good labor. Be certain that you can continue paying your staff competitive and fair wages in the face of continued American concerns about returning to the office. Keeping your staff enthusiastic and invested in your business is the best way to insulate yourself from a type of shutdown COVID-19 has little to do with: labor shortages. Give your staff as much flexibility and as many options as you can bear, and they will respond with passion and a genuine interest in their work.

 

Final Delta Considerations

Beyond masks, tests, and vaccines a key weapon in the small business owner’s arsenal against COVID-19 is information. Keep a close eye on both the CDC and your local government’s stances on your immediate area’s risk for Delta variant surges and outbreaks. Use that information to fuel your decisions as to what extent your business should open to the public. No one is certain how small businesses will fare over the remainder of 2021 but the businesses most likely to survive are those who prepare for any scenario.

 

https://kapitus.com/wp-content/uploads/iStock-1258025082.jpg 1648 2200 Brandon Wyson https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Brandon Wyson2021-08-17 22:16:592022-08-17 11:52:16Five Ways Small Businesses Can Prepare for Another Shutdown
Life-saving measures for small businesses on the brink of closure

Life-Saving Measures for Small Businesses on the Brink of Closure

October 12, 2020/in Operations, Risk Management/by E. Napoletano

No matter what part of the country you’re in, you have small business-owning neighbors struggling to keep the lights on. With erratic reopening plans, caseloads that still won’t decline, and the need for social distancing until there’s a widely-available vaccine, countless businesses have been hit hard.  But what can be done?  Are there any life-saving measures for small businesses on the brink of closure?

If you’re a business owner in this situation, you could find enough relief to keep your doors open and critical staff employed using one (or all) of the options below.

Review Your Expenses

While you might have already done this back in March, it might be time to review your expenses again.

Instead of eyeing luxury expenses this time around, put an eye toward ways to discontinue some low-margin services and supplies until traffic gets back to pre-pandemic levels again. This could mean paring-down your menu, hiring a delivery person instead of subcontracting to meal delivery services, liquidating inventory at a deep discount to reduce warehouse space, or even limiting workdays to the most profitable days and hours.

When evaluating expenses to cut, don’t think of these expenses as permanently on the chopping block. Instead, you can bring them back and build back up when life and revenue pick up speed once again.

Get Creative With Payment Arrangements

If you’re strapped for cash, your vendors may be as well. Reach out to your accounts payable and start a conversation about mutually-beneficial payment arrangements.

For example, if you can promise $X toward your invoice every two weeks, that’s better for your vendor than zero dollars. Your vendor gets a predictable cash flow, and you get a reasonable payment arrangement.

If you and a vendor do mutual business (they invoice you and you invoice them), set up a call for an invoice review. Explore creative options like applying their invoice for $1000 to your invoice for $800. You’ll still owe them $200, but it’s a lot better than $1000. This is a simple solution that often slips through the cracks because your AP and AR systems might not communicate with one another.

Explore SBA Loan Options

While the Paycheck Protection Program is no longer offered, there are three other SBA loan options you can explore for a much-needed cash infusion:

  • Economic Injury Disaster Loan (EIDL): If you’re experiencing a loss of revenue due to COVID-19, you could be eligible. Terms are 3.75% interest (fixed) for up to 30 years with no pre-payment penalty. You can even defer payments for up to one year (but interest will still accrue).
  • SBA Express Bridge Loan: If you have an existing relationship with an SBA lender, you may qualify for a loan up to $25,000. These loans can be regular term loans or bridge the gap between today and approval for your EIDL Loan. You just need to reach out to your existing SBA lender to inquire.
  • SBA Debt Relief: If you have an existing SBA loan and have trouble making payments due to COVID-related financial hardship, this program can bring you relief. Eligible loans include “7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020” per the SBA. If you qualify, the SBA will pay any principal, interest, and fees on your loan for six months.

Have a Candid Conversation with Your Bank

Finally, it could pay to sit down and have a candid conversation with your bank. Your bank doesn’t want to lose your business or see you default on lines of credit or other loans. You could find they’re willing to work with you if they know your full financial picture.

There aren’t any guarantees that your bank could come through with funds or reprieves from payments due.  But, if you don’t start the conversation, you’ll never know what’s possible.

Have any other tips or advice on life-saving measures for small businesses?  Let us know.

https://kapitus.com/wp-content/uploads/life-saving-measures-for-small-business-on-the-brink-of-closure-2200.jpg 1466 2200 E. Napoletano https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png E. Napoletano2020-10-12 15:51:282022-04-07 17:27:01Life-Saving Measures for Small Businesses on the Brink of Closure
Covid Business Partnerships

Banding Together: How Businesses are Joining Forces in the Age of COVID-19

September 10, 2020/in Operations, Risk Management/by E. Napoletano

While some businesses have re-imagined their revenue models due to shelter-in-place orders and unpredictable reopening rules, other businesses are joining forces to revamp their revenue streams by pursuing partnerships.

Sometimes, the boost your business needs is right in your backyard. It just takes some creative thinking to identify, explore, and establish partnerships that can benefit both sides of the relationship.

Opening a Window

Filip Duz’s company, Giraffe Window Cleaners, services roughly 1900 square miles in the Dallas-Fort Worth metroplex. When mandatory closures and COVID-related business restrictions set in, he knew he’d have to find revenue sources beyond his regular income stream. 

Instead of working directly with homeowners as he typically has, Duz formed an alliance with several real estate agents.

“From my past dealings with real estate agents and home stagers, I knew that real estate agents place a big focus on making a home look great before selling,” he says. “Naturally, clean windows are a part of making a home look presentable for selling, so a partnership made sense to me.”

To get his partnerships started, Duz located a list of the top 1000 realtors in his metro area. From there, he sent text messages and made cold calls, introducing himself, and asking if the agents needed help cleaning the windows on homes their brokerages had listed for sale. 

The plan worked gangbusters for Duz and his partner agents. 

“When a realtor needs to prepare a home for a showing, they reach out to us to schedule a window cleaning,” he says. “This benefits us because it provides a steady flow of work for our crews. The real estate agency benefits from having a reliable partner that provides consistent, high-quality window cleaning at a moment’s notice.”

Doubling Down on a One-Stop-Shop

As a gutter and window cleaning service in Austin, Texas, Full Color Cleaners owner Benjamin Nguyen knew his team always had an eye for identifying their customers’ needs.

“When we perform any one of our exterior cleaning services, we’d usually discover things that are broken or damaged and needs a specialist to come fix it,” says Nguyen. “We’d only ever pointed it out to the customer, and they would go out and search for a specialist themselves unless we had family or friends specializing in those services.”

But this year was unexpected with the pandemic and many businesses in the Austin area struggling. Instead of just pointing out things that might need to be fixed, Nguyen and his team started to call service providers they had relationships with to help their clients fix what needed fixing.

Nguyen started his outreach for potential partners with business owners he’d networked with in the past. Knowing they needed to add multiple services to their partnerships, Nguyen reached out to fellow local Austin-area businesses, including those offering roofing, pest control, landscaping, and plumbing.

“The outreach process is quite fun because small business owners are always thrilled and happy to talk about their business,” he says. “That really helped us build a good relationship with them from the start.”

Now, Nguyen’s business – and those he partners with – all get a referral fee when they refer customers. His customers get the satisfaction of knowing Nguyen’s team is bringing solutions to their problems. Full Color Cleaners has built up a robust set of local business alliances that will continue to power a new revenue stream even through reopening and beyond.

“It comes full circle, everyone helping out each other,” says Nguyen.

Planting Seeds for Growth

Farmers have been hit particularly hard, first during the trade war of 2019, and now the pandemic of 2020. Farm Lease Pro, an online marketplace where farmers and landowners connect to lease farmland, recognized the need their customers had to find ways to bring in revenue when COVID caused slowdowns in the supply chain. 

“Each day, many older farmers are retiring, and trying to figure out how to monetize the equity they have built up in their land over decades,” says Madison Woodward, founder of Farm Lease Pro. “The property taxes are high, and the maintenance bills keep coming while income is down.”

Woodward was actively looking for ways Farm Lease Pro could add value to their cash-strapped clients during these difficult times. He reached out to a similar marketplace, HLRBO (Hunting Lease Rental By Owner), to explore a partnership idea. Both farm and hunting leases are an avenue for landowners to generate income off their land while providing hunters and farmers the ability to use land that they might not be able to purchase outright.

“Farm Lease Pro has a large user base of landowners making money off of farm leases, while HLRBO has many landowners who are earning revenue from hunting leases,” says Woodward. “We joined together to provide landowners with another opportunity to monetize their land without selling it, while also helping farmers and hunters find the land they are looking for.”

Now, both Farm Lease Pro and HLRBO have an uptick in business, and both farmers and landowners are enjoying revenue from previously untapped revenue streams.

Whatever your line of work, there’s always a creative partnership waiting to help you and a potential partner grow your business. It doesn’t take a challenging economy to see that a strategic plan for businesses joining together can help every member of an alliance reap new rewards.

https://kapitus.com/wp-content/uploads/Banding-together-how-businesses-are-partnering-in-the-age-of-covid.jpg 1324 2200 E. Napoletano https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png E. Napoletano2020-09-10 15:41:082022-08-02 18:09:51Banding Together: How Businesses are Joining Forces in the Age of COVID-19
Preventative Measures for Small Businesses To Take During COVID-19

Preventative Measures for Small Businesses To Take During COVID-19

March 11, 2020/in Operations, Risk Management/by Wil Rivera

With COVID-19 having broad impacts on the global economy, you might be wondering if there are preventative measures for small businesses to take to protect themselves and their customers during these uncertain times.

Indeed there are. Below you’ll find actionable steps that businesses operating in a wide array of industries can take to secure services, put customers at ease, and stay nimble as new information becomes available.

Bolster Inventory

One of the most important preventative measures small businesses can take during these earlier stages of the COVID-19 disruption is to bolster their inventory.

It’s time to examine your current purchasing practices. Pay special attention to your overseas suppliers that may be impacted by export delays. You’ll likely want to increase orders from a typical 30-day supply to a 60- or 90-day supply, especially for your most popular inventory. If you find suppliers challenged to meet your increased quantities, don’t be shy about exploring alternative suppliers. At the very least, you’ll establish new supplier relationships and lay the groundwork for securing operations during current and future market disruptions.

You’ll also want to take steps to bolster your internal inventory for things like office and cleaning supplies. Consider increasing your orders for your daily consumables. Purchases like copier/printer paper, shipping supplies, and in-office consumables like paper towels and toilet paper can all be stored. Whether supply chains get disrupted for these items or not, you’ll use them regardless.

Establish In-Office Protocols

Major consumer-facing businesses have made a proactive practice out of sharing their preventative measures with the public. Whether it’s an airline sharing aircraft disinfectant procedures or your local fitness club letting customers in on their cleaning methods, your customers and employees will appreciate your procedural transparency.

Let the people you rely on most to keep your business running know that you’re taking their health and safety seriously. Here are some tips for safety measures small businesses like yours can take to reassure your team and customers:

  • Office/store cleaning: Consider an email or in-store signage letting customers know your daily and overnight disinfectant procedures. Offer hand sanitizer pumps or wipes if you have shopping baskets or carts. Add additional wipes at checkout/customer service areas. Place paper towels instead of reusable fabric hand towels in all public restrooms.
  • Examine return policies: Explore whether you need to make adjustments to return timelines to accommodate a customer’s desire to limit public exposure. Also, examine how you’ll process returned items and sanitation procedures for returns if necessary.
  • Employee measures: If you haven’t already, now’s a perfect time for an all-hands meeting to discuss COVID-19, its impacts, and safety measures your company is taking. Ensure employees have a plentiful supply of disinfectant products like wipes, soap, and hand sanitizer. Establish a firm sick policy and consider a permanent adjustment to your paid sick leave time.
  • Leverage technology: Consider limiting employee travel (even out and about in town) to avoid unnecessary exposure. Implement digital meeting tools like videoconferencing to continue collaboration during times of limited mobility.

Using the tips above, you can both reassure customers and employees as well as continue business operations responsibly.

Stay Up-To-Date

New information comes out each day about the impacts of COVID-19. One of the most important preventative measures for small businesses is an ongoing commitment to awareness.

Establish a point person or team within your company to stay up-to-date on the latest news. This includes information about new cases, travel recommendations, safety suggestions, and more. The following sites can provide reliable, authoritative information on COVID-19:

  • The Centers for Disease Control (CDC) COVID-19 website
  • The CDC “latest updates” page
  • The World Health Organization (WHO) rolling updates page
  • The County of Los Angeles Department of Public Health COVID-19 information page (includes guidance documents for specific businesses in several industries)

Depending on how COVID-19 affects your region, you might consider closing your business for some time to prevent disease transmission. While not an easy decision, it could be a necessary one for safety. Always consider whether a temporary closure of your physical location(s) could benefit public health and make contingency plans for key employees to work remotely during times of potential closure.

With so much news coming out each day about COVID-19, it’s natural to feel a bit flummoxed. However, a bit of planning, a generous amount of communication, and some common-sense safety measures can make your team and customers feel more secure during unsettling times.

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https://kapitus.com/wp-content/uploads/2020/03/iStock-1130574252-scaled-1-scaled.jpg 1707 2560 Wil Rivera https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Wil Rivera2020-03-11 16:58:592022-04-07 17:29:14Preventative Measures for Small Businesses To Take During COVID-19
How Customer Service Can Help Small Businesses Survive A Potential Slowdown

How Customer Service Can Help Small Businesses Survive A Potential Slowdown

March 10, 2020/in Operations, Risk Management/by Wil Rivera

Customer service might be the key that helps many service-oriented SMBs survive slow supply chains caused by COVID-19.

Read more
https://kapitus.com/wp-content/uploads/2020/03/iStock-1176842719-scaled-1-scaled.jpg 1707 2560 Wil Rivera https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Wil Rivera2020-03-10 14:52:002022-08-09 20:31:13How Customer Service Can Help Small Businesses Survive A Potential Slowdown
coronavirus supply chain disruption

Supply Chain Disruption: Managing Impact from COVID-19

March 9, 2020/in Operations, Risk Management/by Wil Rivera

U.S.-based SMBs account for roughly one-third of all imports into the country. Supply chain disruption during the COVID-19 era proves to be a critical threat to operations and profitability.

However, means do exist for businesses to mitigate the impact of these market disruptions. Simultaneously, businesses can create improved supply chain protocols to manage such disruptions.

Below, you’ll find insights from Suuchi Ramesh, founder and CEO at Suuchi Inc. and Albert Goldson, Executive Director at The Cerulean Council. Their tips can help your business navigate the current landscape. They can help you chart a path forward to improve you and your business’ resilience in any market.

Immediate Impacts of COVID-19 on Supply Chain

What can SMBs expect to experience as COVID-19 extends its reach across the globe? “The immediate impact will be robust customer demand for current inventory,” says Goldson. Businesses will stockpile inventory, which means suppliers could experience accelerated inventory sell-through. While the initial cash flow could be considerable, there are impending downsides.

Increased demand will cascade into multiple supply chain disruptions. Businesses might find themselves caught between depleted inventory and extensive replenishment delays due to indefinite lead times from overseas suppliers. Goldson states that companies could experience a cash flow squeeze due to uncertain lead times.

Ramesh anticipates that U.S.-based businesses will turn an eye toward risk and shift to an emphasis on local-for-local supply chains. “With more local control, businesses will have a better way to combat macro-economic variables.” Businesses are beginning to consider the impact COVID-19 might have on different areas of their supply chain. Ramesh advises companies to hedge their risks against disruptions from all suppliers.

“Today, it’s the east, but it really could be anywhere across the globe,” she says.

Four Tips for Managing Supply Chain Disruption

The following tips can help businesses to hedge risks and mitigate cash flow disruptions due to COVID-related delays.

Focus on Digital Systems

A supply chain is only as good as its communication protocols. That’s why Ramesh says businesses should consider investing in digital systems to improve communication in their supply chains.

“For companies who are primarily communicating by email or phone calls, when things like COVID-19 happen, communication comes to a halt,” says Ramesh. “If you have a system that connects your entire supply chain, it provides continued communication when something like this happens.”

Diversify Your Supply Chain

Now’s the time to diversify suppliers and initiate outreach to other potential suppliers. When businesses can develop a base of multiple supplier countries, they can still course-correct when one global supply center is affected. While new suppliers might seem to be a short-term solution, Ramesh considers alternative sourcing to ultimately be a long-term play.

“For brands that are lethargic or just don’t have the resources to think about multiple sourcing partners, it’s natural to procrastinate if there are no immediate risks,” she says. “When you’re forced to search for a short-term alternative, if successful, it can turn into a long-term opportunity.”

Goldson advocates for businesses using this time to establish multiple alternative suppliers.

“Even if you already have a secondary source, establish a third source,” says Goldson. “The world economy is entering a period of high risk and uncertainty, and the more options you have, the better you can weather the storm.”

“Stress Test” New Suppliers

Businesses can identify new suppliers and engage in entry-level transactions. Therefore, it’s critical to ensure new partners can meet demands under extreme conditions. Goldson advises that companies occasionally “stress test” suppliers by giving secondary suppliers a larger than usual order to see if they can handle the demand.

“It’s counter-intuitive, but think of how you test your car’s air-conditioner in the winter to make sure it’s running okay after months of non-use,” he says. These stress tests can help businesses identify maximum orders per supplier and create fulfillment strategies for a wide array of supply chain disruptions.

Focus on Compliance and Sustainability

As you put stress test protocols in place, Ramesh advocates for businesses to find a newfound focus on compliance and sustainability. “A disaster like COVID-19 is one thing, but you want to ensure that if any type of similar issue has impacted a partner, they have the procedures, resources, and steps in place to combat the issue and a digital system to record it all,” she says.

Have open and frank conversations with suppliers about current market disruptions. Ask them how their businesses are making adjustments to prevent future slowdowns on their end. Communicating about compliance and sustainable business practices across varied market conditions will ultimately strengthen the relationship between customer and supplier for the long term.

You now have four tips to help you shore-up supply chain disruption in the wake of COVID-19.

By diversifying your supply chain and investing in better communication across the board, you’ll be prepared to withstand market variances both now and in the future.

https://kapitus.com/wp-content/uploads/2020/03/iStock-1156716095-scaled-1-scaled.jpg 1707 2560 Wil Rivera https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Wil Rivera2020-03-09 14:45:432022-04-07 17:59:43Supply Chain Disruption: Managing Impact from COVID-19
protecting your cash flow during the coronavirus outbreak

Tips for Protecting Cash Flow During COVID-19 Market Disruptions

March 6, 2020/in Operations, Risk Management/by Wil Rivera

COVID-19, so far, has had far-reaching impacts on global trade. Your business could be one of the many curious about protecting cash flow during the current COVID-19 market disruption.

U.S.-based small and mid-sized businesses import one-third of all U.S. imports according to census data from 2016. Since exports from areas impacted by the coronavirus are already happening, businesses face a variety of challenges. Lower stock levels, missing components, and top-selling products could be in dwindling supply – all of which decrease cash flow.

If your business stands to endure a slowdown on account of COVID-19, you can still keep operations above water while trade turmoil settles down. Below you’ll find multiple strategies for protecting cash flow, taking an inside-out approach starting with business operations.

Analyze AP/AR

While it’s likely already part of your periodic financial review strategy, now’s the time to take a deep dive into accounting as the first strategy for protecting cash flow. Both accounts receivable (AR) and accounts payable (AP) might be due for a strategy shift. Both can also help bring much-needed cash in-house or keep cash-on-hand for a bit longer than usual.

  • AP: Look for subscription-based vendors and consider suspending service on non-essential office supplies and services. Reach out to vendors and leverage your good payment history to negotiate early pay discounts or extended due dates for a defined period of time.
  • AR: Extend early pay discounts to customers with timely payment histories. For past due receivables, consider establishing payment plans or discounting invoices to bring that cash on board.

Keep in mind that your customers and vendors might also be experiencing effects from the COVID-19 market disruptions. The strategies above can help keep cash flow steady and prevent the need to reduce headcount. You might also find that you build new goodwill with those on the other end of your AP/AR efforts, as they’re likely looking for cost-saving and improved cash flow measures right now as well.

Explore Bridge Funding

While COVID-19 won’t be around forever, just how long it will be around for remains unknown. That’s why today is an ideal time to explore bridge funding options as a strategy for protecting cash flow.

On-demand funding tools like a business line of credit can help you tap funds as needed and fill in cash flow gaps. You can also explore purchase order financing if you need to switch-up suppliers during lean cash flow times.

More conventional bridge funding solutions like business loans can help fund operations for the long-haul. Many loans offer flexible terms where payment frequency adjusts to meet your cash flow, which could be advantageous in the COVID-19 business environment.

Invite Solutions to Protect Your Cash Flow

Transparency is key during turbulent business times. That’s why it’s critical to bring your entire team up to speed on how it’s anticipated that COVID-19 will impact the business. Once your team is up to speed, invite them to contribute to conversations surrounding protecting cash flow.

For many small and mid-sized businesses, departments/employees can get unintentionally siloed. There’s reduced visibility to how other departments/employees manage day-to-day operations. Management might also have reduced visibility to how each department/employee could help keep operations going during periods of reduced sales or diminished supply.

Create a call for ideas. Encourage employees to cross-collaborate on solutions. Explore ways to dig deeper into your existing customer base versus a focus on new customer acquisition.

A commitment to transparency and collaboration can help surface efforts that could incrementally improve your cash flow. You also might discover a greater sense of team ownership in the company’s day-to-day operations and new initiatives that will boost business well beyond the days of COVID-19.

You now have three strategies for protecting cash flow during the COVID-19 market disruption, all originating from inside your company. The best part about all of these strategies is that they’re not just for times where a health concern is complicating your supply chain. Rather, they’re enduring strategies that all businesses can use year-round to keep operations lean. You could maintain a well-cultivated talent roster and deepen employee participation in the company’s short- and long-term goals.

 

Copyright 2021 • Kapitus • All Rights Reserved
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information about the coronavirus

Coronavirus (COVID-19): What Small Business Owners Need to Know

March 5, 2020/in Operations, Risk Management/by Wil Rivera

It’s nearly impossible to tune into the news these days without hearing a mention of coronavirus. Also known as COVID-19, this disease outbreak is wreaking havoc across the globe. You might be wondering what you most need to know about the outbreak as a small business owner.

This article will get you quickly up to speed on COVID-19. Learn what it is; how it’s transmitted. Read about the ways the virus could impact your business–and where to go for timely and reliable information.

What is coronavirus (COVID-19) and how is it transmitted?

According to the Centers for Disease Control (CDC), the current coronavirus (COVID-19) outbreak began in China in 2019. Coronaviruses are a family of viruses that occur in humans and animals alike. The current strain, however, hasn’t been seen before. There is no current vaccine available, and as it’s a virus, antibiotics aren’t effective in treating someone infected with COVID-19. Current antiviral drugs, like those used to manage the flu, are ineffective against COVID-19.

Experts estimate that COVID-19, like the flu, is transmitted by person-to-person contact. The two most common methods of contact are close contact (people within six feet of one another) and through respiratory droplets in the air from sneezing or coughing.

How could coronavirus impact my business?

COVID-19 could impact businesses from two directions: from outside and within.

Outside factors that could affect your daily business operations include:

  • Supply chain: Businesses that rely on overseas manufacturing or component sourcing could experience significant delays that impact fulfillment timelines.
  • Foot traffic: If an outbreak occurs in your city, brick and mortar businesses could see a significant slow in foot traffic, impacting revenue.

The virus could also impact factors within your company, including:

  • Remote work needs: If an outbreak happens locally or within your company, you might need to shift operations so that employees work remotely to prevent the likelihood of disease transmission.
  • Revenue decline: Revenue disruptions from supply chain issues or local outbreaks could impact cash flow, which could impact payroll and create challenges maintaining headcount.

While the above impacts might not have been on your list of goals for 2020, awareness puts you one step ahead. You can be proactive instead of reactive.

What can my business do to protect its customers and employees?

One of the most critical actions that businesses can take at present is to establish a stringent hygiene policy companywide. The tips outlined below might seem like common sense; however, in a fast-paced business world where staffing is sometimes lean to keep costs down, these measures often fall by the wayside.

Here are the most important actions the CDC currently recommends that businesses take:

  • Sick policy: Employees who are sick should stay home to reduce the risk of disease transmission. Sick employees should not return to work until they’ve been fever-free for at least 24 hours.
  • Enforce hygiene etiquette: Employees should wash their hands with soap and water (hot or cold). Hand sanitizer should also be made available, though it is currently in short supply. Make employees aware of cough and sneeze etiquette.
  • Cancel non-essential business travel: Shift to video meetings and remote collaboration methods to avoid exposing employees to potentially infected travelers.
  • Enact environmental cleaning: For SMBs with physical work locations, work with your janitorial service or those assigned to cleaning duties to implement additional sanitation procedures.

Think of ways that your business can play an active role in preventing the transmission of COVID-19. Maintaining a clean workplace and enforcing sick policies can go a long way to protecting your workforce and customers.

Where can I find accurate and timely updates?

Now, you’ll want to keep up-to-date on news about the virus as it comes available. Here’s what you can do to continue informing yourself and staying in-tune with the news.

Where can you turn for trusted information?

First, bookmark the CDC COVID-19 website. This site is a regularly-updated destination for scientifically-verified information on the outbreak and current concerns.

Next, have a look at the World Health Organization’s “mythbusters” page on the outbreak. The information here counters several dubious myths floating around about the virus and can help save you some needless panicking.

Finally, always consider the source of information. Misinformation about the disease is already rampant. The two sites above will have the most up-to-date and accurate information from medical and scientific experts. Your business is hard enough to run each day. You deserve reliable information to help guide you through adverse situations like the current coronavirus.

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https://kapitus.com/wp-content/uploads/2020/03/iStock-1135911892-scaled-1-scaled.jpg 1660 2560 Wil Rivera https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Wil Rivera2020-03-05 17:39:182022-04-07 18:00:46Coronavirus (COVID-19): What Small Business Owners Need to Know
Red light as Kapitus discusses the warning signs of an upcoming recession.

Recession Indicators Are Here – Should You Borrow for Your Small Business Now?

August 29, 2019/in Operations, Risk Management/by Dawn Reiss

It’s time to start preparing. The stock market’s most well-known recession indicator—the inverted yield-curve—indicates there’s trouble ahead. This is especially the case for small businesses that are trying to get financing before a recession hits.

That’s because an inverted yield curve typically implies, as CNN Business’ Julia Chatterley states, investors are getting paid better to lend money for a shorter period of time (a two-year Treasury note) than a longer period of time (such as the 10-year Treasury), even though the opposite is usually true since a longer-term investment typically are riskier and pay out better returns.

Right now the opposite is happening. Spreads are between the 10-year Treasury yield, which is typically a benchmark, trading under it’s two-year Treasury counterpart. That’s created a 30-year rate under 2 percent. Its lowest level since 2007.

For many in the investing sector, as well as businesses across the U.S., that means major warning bells sounding an alarm that a recession is pending.

To better prepare, here’s what Howard A. Tullman, executive director of Ed Kaplan Family Institute for Innovation and Tech Entrepreneurship at Illinois Institute of Technology in Chicago, suggests doing when it comes to preparing your small business and financing before a recession hits.

 

Consider Increasing Your Credit Line.

Many small businesses were hindered by their inability to secure bank credit before the financial crisis of 2008. In the years following the recovery, access to credit and lending to small business lagged behind, according to the National Federation of Independent Businesses.

A survey done by The Federal Reserve of Senior Loan Officers found credit standards for small-business borrowers increasingly squeezed through October 2008.

That’s why having the right access to capital is essential for the long-term survival of any business. As is maintaining the proper amount of funding and cash flow.

It’s important to be strategic about it.

While some business owners many borrow to increase their cash flow, Tullman says don’t borrow in order to finance speculative expansions or new undertakings in this type of economy.

Instead, be smarter, more prudent about what you do.

Tullman recommends small business owners rely on “real cash” that is available; but also consider increasing their credit line, Tullman says, “especially if there’s no cost in doing so.”

 

Slow Down Payments as Part of Cash Flow Plan

Slowing down payments isn’t something most business owners like to do. But sometimes being more strategic with how you manage your cash flow can make a big difference.

It’s important not to mismanage strategic relationships that can be key, especially during a recession.

“If you can defer or slow down your outbound cash payments on debts you owe without jeopardizing the long-term relationship, then that’s a wise plan, Tullman says.

“Big businesses make slow paying a part of their cash flow management all the time. Small businesses shouldn’t be too proud to do the same thing.”

 

Increase You Cash in Reserve

When it comes to creating an emergency fund, more is always better. As a recession approaches, owners should think about their cash flows and the amount of money they hold in reserve. Unfortunately, one size doesn’t fit all.

“There is no simple rule of thumb. It all depends on the type of business and the size of the business as well as the nature of the typical cash flow,” Tullman says.

Since we might be going into a tough economy, it makes sense to have 3 to 6 months of payroll and payroll taxes in reserve, says Tullman. You should also shoot for 3 months in reserve of what your other payables are based on an average month.

SCORE, a volunteer network of business mentors recommends looking at your monthly cash flow report to provide historical and seasonal perspective, determine the cash received from sales versus the cash that was spent for your “net burn rate.”

Then determine how much cash you plan to use in the next 12 to 15 months. Create a financial forecast or look at the financial section of your business plan if you’re a start-up.

 

Defer Discretionary Expenses, Focus on Retention

For now, consider deferring discretionary expenses, Tullman says. Especially ones related to marketing and new customer acquisition costs.

Instead focus on retaining customers. Tullman says too many businesses take their current customers for granted. That retention is important and “a lot better investment in tough times than trying to recruit new customers,” he says.

Instead commit resources and people to getting the job done to ensure your current clients are happy.”

Move immediately to protect and secure the people presently in the boat–existing customers are the most accessible, nearest to reach, and hopefully the easiest to hang on to,” Tullman says.

That means anticipating your customers’ needs so you are being proactive instead of reactive. Focus on customer quality and loyalty, not merely quantity, Tullman says, to build up the right clientel.

“The smartest business builders will tell you that not all customers are equal in value or importance. Even if they’re not ‘bad’ customers,” Tullman says.

Then when the recession hits, “hunkering down and making plans to hang on to the customers you have is the smartest option right now,” Tullman says.

Other Advice – Lock-in Rates When the Interest Rates Are Lower

When the Federal Reserve lowers interest rates, as they did in July, it’s usually an indicator the economy is leaning towards a recession. That’s because interest rates are usually raised when the economy is improving. When the economy is slowing down, the Fed cuts interest rates.  This is to encourage borrowing in the hopes of spurring on the economy.

“The best time to borrow long-term money is when the Fed stops aggressively lowering rates; however, this is not easy to time, because it can take many months to attract a private lender, and banks are not always willing to commit to long-term loans at low rates when they expect rates to rise in the near future,” says Victoria Duff of the Houston Chronicle.

https://kapitus.com/wp-content/uploads/2019/08/recession-indicators-are-here-should-you-borrow-for-your-business-now.jpg 1467 2200 Dawn Reiss https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Dawn Reiss2019-08-29 12:20:072022-04-07 18:10:21Recession Indicators Are Here – Should You Borrow for Your Small Business Now?
how-to-stress-test-your-small-business

How to Stress Test Your Small Business

March 12, 2019/in Operations, Risk Management/by Bernadette Abel
In the banking world, advisors often talk about stress-testing portfolios — determining the effect of different scenarios on an individual’s or business’s holdings. The same should be done for a small business.

How prepared are you if the economy changes, and you need to dip into your reserves? How will you manage your cash flow? Do you, as a small business, have the resources to survive heavy losses if the worst-case scenario happens?

Here are six ways to help stress-test your business if there is a downturn in the economy.

1. Solicit advice from key advisors.

Do you have an advisory board or a brain trust of reliable partners? SCORE, a nonprofit that is a resource partner of the U.S. Small Business Administration, offers a network of volunteers including retired C-suite executives, who can help mentor.

Find your local chapter, which is typically done on a county by county basis, and attend a workshop or listen to a live or recorded webinar.

You can search for a SCORE mentor online or have the local chapter pair you with an expert who can help mentor you on your business goals. Some mentors bring in additional mentors to help with various aspects of your business, such as preparing for a potential downturn.

2. Create a plan for worst-case scenarios.

One of the more effective ways to prepare for a sluggish economy is to forecast trends. Look at what a dramatic drop in sales or a dramatic uptick in expenses might do to your business. Ask yourself what would happen if you lost a major vendor, product or service. What might this loss do to your company? Then decide where you could trim expenses, potentially increase profits or diversify your client-base.

3. Identify all your best customers.

Not all customers are created equally. That’s because some are more profitable than others. Once you’ve pinpointed who your best customers are, begin nurturing those relationships by continually adding value for them. Build brand loyalty for them by making sure it’s easy for them to do businesses with you. If a change in the economy affects your business, loyal, high-value customers may help sustain you until the market changes.

4. Review your financial cushioning.

Although the general recommendation for businesses has been six months, Hal Shelton, a SCORE mentor and angel investor says to look at how much you cash you need. Ask yourself these key questions:

  • How much cash have you been using?

Look at your “net burn rate,” the rate at which you spend your cash holdings. For example, if you are bringing in $10,000 but you are spending $4,000 in expenses, your net burn rate is $6,000

  • How much cash do you plan on using in the next 12-to-15 months?

Be conservative, but look at your monthly budget or the financial forecast in your business plan. Separately, look at actual cash expenditures as well as the cash in (sales) and cash out (expenditures).

  • What stage is your business?

If you’re a start-up, or ramping up your business and going to have big expenditures, that’s different than being in the middle of a more-established place.

  • How long will it take you to get more cash?

For many businesses, this is an unknown factor. Getting a loan from a bank, if they are willing to lend, can take several months. It usually takes at least a month to find a bank who might be willing to lend money and another month to fill out the paperwork. That’s contingent on already having a bank-ready business plan and an already established relationship.Shelton says pitching and presenting to potential angel investors takes significantly longer, usually at least six months or possibly nine months to a year.

5. Consider your borrowing options.

You don’t want to have to borrow money when you desperately need it. You want to borrow money before you anticipate you might need it, or at least have a good enough financial footing to be able to secure a line of credit or a business loan. Stephen L. Nelson a CPA in Redmond, Washington, offers some tips on how to forecast 12 months out using excel workbooks.

Shelton’s advice is to “Seek cash when you are in a position to explore options and negotiate from strength.” Then ask yourself: Can you still operate if your funding disappears?

6. Consider alternative funding options.

Besides traditional term loans, you may consider opening a business credit card or a business line of credit. There’s also equipment financing and grants for small business owners. If you have less than perfect credit or if you need money quickly as a business owner, a short-term loan may you be your best option.

By stress-testing your business’s finances and proactively planning now, you may help mitigate potential problems down the line.

https://kapitus.com/wp-content/uploads/2019/03/how-to-stress-test-your-small-business.jpg 1353 2200 Bernadette Abel https://kapitus.com/wp-content/uploads/Kapitus_Logo_white-2-300x81-1-e1615929624763.png Bernadette Abel2019-03-12 07:45:592022-05-11 20:56:24How to Stress Test Your Small Business
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