In the early stages of COVID-19, many small business owners were facing dire circumstances. A survey from Goldman Sachs reported 51% of small business owners could function for zero to three months during the quarantine. The survey underscored the pressures facing many small businesses that might have enough cash to weather a slowdown, but not a complete stoppage. The challenges for Idaho businesses remain as the state reopens.
By July, all states implemented some measures to allow businesses to reopen in stages. As of July 1, Idaho remained in Stage IV of the reopening plan, which is the last of the stages that reopened the remaining types of businesses. Social distancing and sanitization rules are still in place, but the government now allows employees to return to work, lifts strong recommendations for telecommuting, and allows certain levels of gatherings.
During this stage, Idaho small business owners should take stock of their company’s prospects in the “new normal” economy that is still dictated by COVID-19. Of course, before diving into finances, every owner should first be certain their company adheres to the best practices for distancing, cleaning and other protocols that help mitigate the virus’ spread.
Estimate results during uncertainty
Even with most restrictions lifting for small businesses, challenges remain. Some customers are still staying home and adjusting their preferences. Small business owners need to adapt quickly by shifting their product or service delivery models, allowing more employees to work at home and catering to the needs of concerned customers.
As economies stabilize, owners will have a better sense of their future revenues, which they can measure against salaries and other expenses. Now is the time to examine cash flows, inventory, accounts payable and payroll against the money coming in the door. Talk to suppliers or partners that owed money before the pandemic hit. Gauge their ability to pay and figure out if they can provide a portion of owed funds or if your business will take a loss. Some might already be underwater, so balance the time you might spent collecting funds versus focusing on your future revenue.
Look for cost cutting during the remainder of summer and into the fall. Review every expense and chop unnecessary or inflated costs to build up some cash. Do you have nonessential inventory on hand or rarely used equipment you can sell? On the staffing side, no one likes layoffs or reduced hours, but if that is necessary then you should hold honest discussions with the staff. Being upfront and fair with staff will pay off in terms of your perception around town and in case you need to hire good talent when the economy recovers fully.
To gauge your local community’s prospects, talk to other entrepreneurs and owners to see how they’re doing. Start building a forecast with several outcomes, from an optimistic one that assumes full recovery by January to a more pessimistic scenario with limited lockdowns and other restrictions. This is imperfect science, but forecasting is very helpful for managing inventory, staff, and getting a sense of the business’ health.
Use and understand government programs
While building a financial model for the business, you can also investigate the options for governmental help. The Idaho Department of Commerce offers a number of resources, including request procedures for supplies of personal protective equipment and grant information.
On the staffing side, you should understand the implications for the Families First Coronavirus Response Act, which includes mandates for family leave and paid sick leave. There are exceptions to these rules, so read the regulations closely to stay in compliance.
The well-known Paycheck Protection Program sent hundreds of billions in funds in two rounds. The program was extended multiple times and now features an extended forgiveness or covered period through the end of 2020. Small business owners should strongly consider the program, as it’s offered with no fees and provides much needed relief for salary payments.
Regulations and new offerings change, both at the Idaho state level and with the federal government, so try to stay informed and talk with other owners about the latest developments.
Check your pivot
During the early stages of the pandemic, stories abounded of businesses pivoting their models. Gin makers turned into hand sanitizer shops. Hockey equipment companies started building face shields. These were great examples of companies helping out, but these were not typically sustainable models going forward.
With Idaho in Stage IV of economic reopening, there’s a shift away from business pivots to looking ahead to how companies fit into the new climate. Restaurant sales are rising, which gives them a chance to gauge weekly orders and cash flow. Professional small businesses such as accountant and law practices by now have a sense of the success of Zoom meetings or client’s willingness to meet in person.
Now is an ideal time to look at partnerships to pool resources, cut costs, and survive into 2021. The crisis also brings opportunity for small businesses that can shift the ways they serve customers, while also encouraging social distancing and good company citizenship.
Idahoan small business owners that managed through the initial quarantine stages must move on from a “survival” stage to a “reset.” Now’s the time to assess finances, gauge the pulse of the customer, use government help and look to the future with renewed optimism.
Carson Lappetito is the president of Sunwest Bank.