COVID-19 has forced many to reevaluate their finances or completely change course with their business endeavors. While it’s certainly a difficult and complicated time for everyone, new startups and small businesses have been particularly hard hit as the pandemic rages on. Not only does this hurt entrepreneurs and business owners, but it also hurts the economy at large.
The primary issue that arises from COVID-19 quarantines and restrictions is the lack of cash flow. Prior to COVID-19, startups had the support of confident investors, small business loans, and generally steady revenue. However, over the course of 2020, many of these cash-streams changed or were cut off entirely. Investors lost confidence, small business loans became more difficult to attain, and revenue in many industries dropped substantially.
Thus, we want to examine a few ways that freelancers, entrepreneurs, and small business owners can evolve and rebuild their cashflow during this crisis. It’s vitally important that people have access to cash-on-hand during a time like this, as financial stability can even help stem the spread of the virus. So, let’s take a look at a few ways to maintain your cash flow during the COVID-19 pandemic:
Take on Temporary Debt
Taking on debt is generally not a good idea for businesses of any size, especially those with small revenue streams. However, given the current situation this might be more of a necessity. In order to maintain cash flow, professionals will need to invest in their business. If you don’t have enough cash to do so, you may need to a business credit card or lending institutions to help grow your brand.
It’s important to mention that it is only worth putting money into a business in distress if this involves changing the business model to adapt to the current constraints which Covid has forced upon us. Only then can a business get out of a debt hole. Consider building or strengthening an online presence, offering delivery, or adding to your value by extending services or products offered.
As you gain footing and your investments bring returns, pay down this debt and ultimately increase your cash flow. While this method does require taking on a certain degree of risk, the goal is for your business to evolve during a time when many small businesses simply have to shut their doors for good. Don’t be afraid to take on some debt now to increase your cash flow later on, but also realize the reality of when it’s time to throw in the towel.
Eliminate Non-Essential Overhead
Businesses of all sizes are trimming down non-essentials. Whether you’re a freelancer who decides to downgrade software subscriptions or a small business that moves its brick-and-mortar operations online, there are always creative solutions to reduce overhead. However, it’s important to note not to risk devaluing your business by trimming away too much. Firstly identify which expenses are truly expendable.
A non-essential expense is not just something that your business doesn’t need and can survive without. Perhaps with some creativity to fill the gaps leftover, a business will even grow and flourish. Look for costs that can be done without. By reducing your non-essential overhead, you automatically improve your cash flow going forward, without securing additional clients or revenue.
Offer Incentives to Customers and Clients
In most industries, competition is fierce. You need to find new ways to address consumer needs and bring in more clients. At a time when people are lacking cash and are less inclined to spend, offering discounts or similar incentives on your products and services is a great way to bring in and keep business. At the same time, it helps show that your brand is willing to help consumers at a time when they need it the most.
Incentives don’t have to take away from your bottom line, either. Finding incentives to attract new demographics and pivoting your business can lead to growth. For example, many distilleries and alcohol producers have shifted their business to produce hand sanitizer. Not only does this allow them to increase revenue in an entirely new market segment, but it also makes their brand look better in the context of a global pandemic. For many, this has led to more long-term clients and greater brand optics.
By following the tips above, any business professional can turn a tough situation into an opportunity. The most important takeaway is to ensure that a business can maintain its cash flow while weathering the storm. In doing so, there will be greater potential to grow once this crisis has subsided.
