The reality is, businesses make mistakes everyday; however, during an economic downturn, internal slip ups can make or break a company. Avoiding mistakes becomes all the more crucial in a crisis. Small businesses across the globe are feeling the financial crunch from the coronavirus pandemic that produced forced shutdowns and reduced demand.
The disruption of business has made decision-making very difficult. With added pressure and uncertainty, there is more room for error. To get funding or even to stretch your day-to-day cash flow, companies will need to avoid some key missteps. Here are some mistakes that businesses should avoid at all costs during this unprecedented time.
1. Resisting a line of credit
Without the knowledge of how long this pandemic will wreak havoc across global supply chains, securing a line of credit could be the answer to eliminate or assuage uncertainty in the upcoming months. Without sufficient capital behind a business, it is more likely to fail.
2. Ignoring a new revenue stream
Think of ways to find a temporary revenue boost and allocate funds in places that will truly make a difference. Can you distribute your products by using a delivery service to make the user experience more convenient and streamlined? Can you move your sales online? Can you sublet some of your excess office space to another company looking for working space?
3. Rely on one key customer
Putting all of your eggs in one basket has always had a negative connotation. Relying on one key customer is extremely high risk. While it is important to keep in touch with your core clientele, it is equally important to continue to acquire new customers, too and drive value to their bottom line.
4. Keep the same inventory volume
Audit your inventory management strategy and double down on products that are most lucrative. Get rid of inventory that has reduced demand and is taking up shelf space.
5. Cost Expansions
Avoid adding new products or cost expansions that will further burden your bottom line. Today’s climate forces businesses to operate as lean as possible. Investing in goods and services you believe will turn a profit is too high risk in the current business climate. Be as agile and lean as possible.
6. Historically, many businesses reduce advertising and promotional expenditures rather than slash fixed costs during hard times.
Studies show that businesses who maintain or increase ad outlays during slowdowns wind up outselling competitors who cut back. Marketers can boost sales and market share, even if the industry in which they compete is in a slump by tailoring messaging and advertising to respond to the volatile economic climate. With much of the country working out of the comfort of their own homes, social media marketing is particularly effective right now.
Make no mistake, this economic downturn is not down time. This is an opportune time to take measures that could introduce more efficiency into the workplace and generate more revenue in the future. Prior to COVID-19, the small business economy was intact and strong. With the goal in mind to return the economy to its previous state, businesses can find temporary makeshift means to secure working capital and stay afloat in the volatile, but temporary economic state.