The current COVID-19 pandemic has not only jeopardized our health, but also our finances – especially when it comes to owners of small businesses. We have all witnessed economic crises before, but this comes as a reminder that they can affect everyone and that no business is safe.
In such difficult economic times, small businesses don’t have the reserves to help them survive, which makes them particularly vulnerable. Nevertheless, some business practices can not only help you overcome but also thrive in these circumstances. It’s all about increasing competitiveness, so let’s take a look at how to achieve this.
Act, but Not on Gossip
The worst you can do as a small business owner is to sit still and play dead until the crisis is over. It’s reasonable that the sudden change of situation can make you bewildered, but you need to take action or things will get far worse quickly. Nonetheless, your decision mustn’t be affected by fear or uncertainty – you should act based on current reality, not some gossip prognosis for the future. So restrain your imagination, filter out the facts from the fiction, and act on them.
Cash Flow: Vendors, Inventory, Loans
Steady cash flow is what keeps businesses running. Expenses are an integral part of the business existence, but harder times will cause struggles to maintain cash flow. This is why you need to be aware of your expenses and income and to be diligent in the way you spend money.
If you’re using vendors in any area of your business such as distribution, labelling, packaging, etc., this is the time to perform a price comparison. This will certainly lead to greater savings since there’s also a lot of competition between vendors waging war to attract new customers and clients.
The next thing to look at is your inventory costs which can certainly be reduced without sacrificing either the quality or service provided. Look for drop-shipping alternatives, sourcing items elsewhere at a better price, cutting down on any excessive orders.
Lastly, keep in mind that small business loans will become scarce, so make sure you keep a healthy credit score to increase your chances to borrow the funds to keep your business afloat.
Pay Attention to Currencies
This is often the neglected part of cash flow management, so it deserves special attention. If you’re trading abroad, there’s an additional risk of the crisis influencing the currency exchange rate. This makes it difficult to predict your earnings while refusing to agree on figures when making deals puts you at a disadvantage. The solution may lie in automated trading programs, but, first of all, in paying close attention to currencies. This is not that hard since “there is a wealth of information available, either at your local library, bookstore, or online, to bring even the most inexperienced to a certain level of understanding”, as seen on toponlineforexbrokers.com.
Customers: Retain the Existing & Look for New
It’s mandatory not to allow the crisis to affect your customer service. Now is not the time to lose customers, so you need to cement your relationship with each one you have. They’re also going through hard times, so the best way to retain them is to show your appreciation through referral incentives, loyalty cards, one-time price reductions, etc.
Of course, retaining the existing customers is not enough to increase competitiveness – you need to work on expanding your customer base. There are a lot of potential customers out there buying precisely what you’re selling, just not from you. So you need to conduct competitive research and lure your competition’s customers with better prices, better quality, or better service – whatever it takes to become their first choice.
Review for Effectiveness
More customers mean greater demand, so you need to streamline your operations to maintain product or service quality while reducing production expenses. In other words, review procedures for effectiveness: reduce your overhead by sharing resources such as payroll or administrative work with other entrepreneurs, find areas that you can structure differently and areas you can combine into one.
Diversify with Focus
A bad economy is not a situation where you can keep doing the same thing, you need to be prepared to diversify and try out new things to attract more customers. Nevertheless, “new” doesn’t mean “completely different” – the point is not to simply add other services or products. This could end up as a waste of money and time, taking it away from what you do best, which could even damage your reputation. You need to diversify with focus on your core business, doing what you do best and meeting the customers’ changing needs at the same time.
Time to Invest
It may sound illogical, but the investment is crucial in times of crisis. Many small business owners eliminate their marketing budget or cut it to the bone, but this is the time when you need marketing the most. The trick is to help restless consumers change their buying decisions to find your services or products and choose them over the competition. So, rather than cutting back on marketing, step up your efforts: upgrade technology, train the staff, spruce up your corporate image and website – anything you can do to impress.
Investing in yourself is equally important. Acquire new skills through online seminars, coaching, mentoring, training, books, etc. And, most importantly, when the crisis is over, take a step back and learn from the experience.
As you can see, there are a lot of things every small business owner can do to increase competitiveness in a bad economy. After all, every crisis is a perfect opportunity to see clearly what’s working and what isn’t, then reflect on these and make the right, informed changes that will drive your business forward into the future.