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August 31, 2021

 

For most small businesses, this is not the best of times, many have shut down their businesses while many are still indecisive on whether to call it quit or keep struggling. However, there is always a way out when the going gets tough. In order to survive and avoid bankruptcy, there are several things small businesses can do.



1. Take advantage of government programs

Businesses with fewer than 500 employees can apply for a loan through the Paycheck Protection Program, which was instituted in the Coronavirus Aid, Relief and Economic Security Act.

The PPP already has approved 860,000 applications for $210 billion of loans. Borrowers can apply for forgiveness for any funds used for payroll costs, mortgage, interest, rent and utilities over an eight-week period.

“Everybody should be doing this,” said Bob Prosen, CEO of The Prosen Center for Business Advancement.

“Some banks won’t accept it if you aren’t already a business banking customer, but some will,” he said. “If they tell you no, shop around.”

Another option is applying for an Economic Injury Disaster Loan through the SBA. The agency has a list of relief programs on its website. 

Also, check with your state and town to see what loans and grants are offered locally.  



2. Renegotiate contracts

Take a look at your accounts payable. Gather all your vendor contracts, prioritize them, and then start negotiating things like reduced payments or extended terms, Prosen suggested.

While some may not agree, some will.

“Your suppliers certainly don’t want you to go out of business,” he said.

You can also work with your landlord to try to forgo rent payments for a set amount of time.



3. Collect any outstanding cash

On the flip side, reach out to those who owe you money and collect. If you were holding an invoice until work was finished, don’t; instead, bill for the portion that was completed.

You can also ask customers for prepayment of future activity, said Mills of Harvard Business School.

“The whole strategy is to stay liquid, so you could offer a discount on next year’s activity if people pay upfront,” she suggested.


 

4. Reduce staff costs

As painful as it is, you have to reduce your staff as much as possible, either through layoffs or furloughs, Prosen said.

Just make sure you handle it with care.

That’s something Karas, a restaurant owner had to do. He laid off one part-time bartender and a full-time bar back. 

For those who remain in your employ, make across-the-board “significant” pay cuts, Prosen added.



5. Increase productivity

Do as much work as is viable with the least amount of people.

Right now you’ll be better off working longer hours with a smaller group than less hours with a larger group, Prosen suggested.

You can also increase efficiency by working online.

Prior to the pandemic, many companies hadn’t made the move because they didn’t necessarily trust it, Prosen noted. In the traditional model, people can talk to each other in the office and know what people are doing. Now businesses have been forced to move to online platforms, but it has helped keep productivity high. 

 

 

6. Signature required

Make sure that you modify all of your signature approvals, no matter the size, so that only the owner can approve any spending, Prosen said.

This way, nothing will be spent that you don’t know about.



7. Look past the pandemic

During this time, remember to treat your customers well so that they stick around once things get better.

“For those current customers, you are going to provide exceptional service. More than you have ever provided before,” Prosen said.

Communicate the status of your business and offer helpful hints. You can also ask those consumers for referrals.

Karas has embraced this idea by providing a free 2-oz bottle of hand sanitizer along with the purchase of spirits from the distiller. The business has also taken to social media to get the word out that they are still open and selling their products for curbside pickup.


The bottom line

The good news is that at some point, business will resume, Mills said. It’s just unknown when that will happen.

“The critical thing is to make sure that you can reduce expenses, reduce the cash outflows, work with all your suppliers and creditors, and see if you can maintain a solvent business, because if we don’t have our small businesses, our economy will be much harder to restart,” she said.








SOURCE: CNBC