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.

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.

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

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

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.