When the deadly coronavirus (COVID-19) first broke out in Wuhan, the Chinese healthcare and other authorities didn’t have the comfort of advanced cognizance. It was a new virus indeed. The initial strategies of the Chinese authorities to curb the virus from spreading rapidly were ineffective that would become the worst global pandemic ever, engulfing thousands of lives worldwide. Authorities and governments across the world are imposing several restrictions like lockdown and curfew for enacting “social distancing” to delay the spread of this highly contagious virus.
The situation is very grim and traumatic for small businesses. NSBA reported that about half of the business owners are worried about the expected economic downturn and impact on business financial stability.
“There is a great deal of confusion among small business owners about what we can and should be doing as employers”, says Marc Amato, NSBA 2020 Board Chair.
The Potential Impact Of COVID-19 On Small Businesses
As a consequence, businesses around the world are being adversely affected. This has considerably raised the stress of the business owners, especially small and medium-sized enterprises.
They’re uncertain about their future. “COVID-19 outbreak is likely to put most small businesses on life support system”, says Karen G. Mills, a senior fellow at Harvard Business School.
He further adds, “Small businesses that are attempting to weather the COVID-19 pandemic will face a heavy financial blow, even heavier than what they faced during the recession that occurred more than a decade ago.”
Because consumers prefer to stay at home to delay the spread of the virus, we can experience small businesses scaling down and some of them are closing temporarily. Daily cash flow is the lifeblood for many of these small businesses.
It is the most important activity that they need to happen for the successful running of their enterprises. But in the absence of daily cash flow, many small businesses in the worst affected countries will soon have to cut down their staff to minimize the operational expense or shut down for good.
“Money in the door allows you to put money out the door,” Mill says.
Cash Flow Challenge
It’s very evident how important the daily cash flow is for small businesses, even in a good economy. As per the JPMorgan Chase Institute, the average small businesses have usually cash reserve of 27 days, while Main Street businesses have less than 20 days.
The experts in the public health departments forecast the COVID-19 outbreak won’t subside before a couple of months, subject to necessary measures have been taken to slow down the spread, many small businesses may not survive this prolonged crisis.
Cash-Strapped Even In The Best Of Times
The data shown below is as per 2016.
Most small businesses will need interest-free or very low-interest-rate loans for paying their staff, purchasing raw material and other equipment for the uninterrupted functioning of their businesses for the lockdown period. Gradually, after the lockdown is relieved, customers will come out from their homes and resume their buying habits.
“If small businesses can stay solvent, then we have a greater chance for recovery after the virus threat subsides,” Mills says.
According to new research carried out by the National Small Business Association, about 77% of small business owners are worried about the financial impact of the COVID-19 outbreak.
While about 50% of the 950 respondents said that the consumer demands have drastically gone down, and 33% of people surveyed were experiencing supply chain disruptions. Over 50% of them presume that the US is on the verge of a recession, may sink during the next year.
• 77% of small business owners are worried about the financial impact of COVID-1954% presume that the US economy will fall into recession during the next 12 months.
• 49% of owners say that consumer demand is low.
How Can Small Businesses Survive The COVID-19?
Undoubtedly, this is unprecedentedly hard times for small business owners across the globe. In the recessions — 1982, 2000, and 2008, funding for such businesses dried up, causing the situation even worse.
In the current COVID-19 outbreak, while state, federal, and local lawmakers are considering to offer additional aids, financial experts recommend small business owners to:
i. Look For Private Sector Programs And Fintech Products
Facebook, in its announcement, has said to offer $100 mn in grants to small businesses. It’s a sigh of relief for them. While, fintech companies like Fundbox and Kabbage, which are specialized in lending loans to small businesses, also mulling over the ways to support them.
ii. Apply For Administration Loan
Administration loan will go a long way to survive this pandemic. Apart from the disaster loans, some state governments have started offering aid packages to small businesses. Remember that the disaster loans apply to businesses in the emergency declared states.
iii. Review And Renegotiate Terms Of Contracts
Don’t leave a stone unturned, don’t leave any possibility untouched to survive this hard time. If you operate your business from a rented property, ask the landlord for some time to pay the rent.
You can even request your lending financial institutions to temporarily defer EMI and interest payments on the outstanding debt. These smaller steps can help you a lot to extend the impact of the financial crunch.
iv. Conserve Cash
Small businesses usually don’t die for a lack of innovative ideas but a lack of cash. Cash is king — make a note of it. So what you need to do is find out the ways to conserve cash — the early you act the safer your financial health will be.
v. Pamper Those Surviving Customers
No matter how the situation is, there will still some customers with enough purchasing capacity. Don’t let them go! Service them as never before. You already have ample access capacity in terms of staff and other things relevant to your business.
It’s time to make them lifelong customers by letting them feel special. Thank them for being your valued customers.
vi. Laying Off Your Staff
It’s the ugliest thing but you have to live in reality. How long can you keep your staff in this hard time? Your staffs are awesome, they are great assets, they are talented and honest but if your business isn’t generating revenue and there’s no hope of revenue soon, you’ve to be realistic. You have to say to them “Good Bye”.
Looking For Pro-Tips To Protect Your Business During The Coronavirus Outbreak?
As the coronavirus outbreak continues to batter businesses, business experts at Designhill have shared several tips to keep your business healthy as a horse. Here’s the best advice on how to protect your business and stay well-prepared for a coronavirus outbreak.
Get Survival Tips For Businesses
Like any other thing in life, this hard time too will pass someday. But it’s very difficult to say how the market will look like once the COVID-19 is subsided and normalcy is resumed. But if you’re flexible and alert enough to take necessary measures to safeguard your business, it will be a great opportunity for you to flourish post-pandemic. Small businesses are a part of the very fabric of our society. Days matter a lot in this critical situation. If they’re lost, our communities will look quite different. So stay alert, be positive and put your efforts as mentioned above. If you know any other ways that can help small businesses survive the COVID-19 outbreak, comment below.