With COVID-19 resurging in Idaho, rising costs and the continued challenge to fill open positions, the next few months will be a critical time for small business owners. Although there are many unknowns, savvy entrepreneurs focus on things under their control. Taking the following steps could make a crucial difference in preparing your business to weather challenging times and emerge even stronger.
1. Streamline operations.
Because of rising costs and a shortage of workers, it’s important for your company to operate as efficiently as possible. The following items could help your business operate smoothly during lean times:
Automate tasks. Many small businesses save time and money by automating repetitive tasks such as billing, employee time tracking or e-commerce.
Know when to outsource. Doing everything in-house incurs an opportunity cost. Highly specialized tasks could distract your employees and make it harder for them to bring in new clients and revenue. The U.S. Small Business Administration (SBA) suggests evaluating outsourcing for manufacturing, shipping and logistics and marketing.
Optimize operating hours of your business. All retail companies — especially restaurants — should conduct a cost analysis of their operating hours. If staying open during certain hours costs more money than it generates, consider scaling back.
2. Reevaluate spending and build an emergency cash reserve.
When consumer spending surged after pandemic restrictions were lifted, many businesses increased their budgets to capitalize on growth. But as COVID cases rise, consider revaluating your spending and setting aside an emergency cash reserve.
For example, you might want to evaluate your marketing and end campaigns that aren’t justifying their financial investment. You could also evaluate the performance of your current vendors and renegotiate or exit contracts if you aren’t receiving promised value. Finally, consider pausing high-cost investments in your company, such as opening new locations or growing your workforce.
As you take these steps, it should become easier to build an emergency cash reserve — which is critical for small businesses, even in the best of times.
3. Forecast cash flow and identify financing options to overcome potential gaps.
It’s helpful to develop a cash flow forecast to outline how your company’s money circulates in and out during a specific time period. It’s recommended to have enough cash to cover between three to six months of operating expenses.
If your forecast indicates you may need additional cash, be proactive with identifying financing sources. You might want to apply for a U.S. SBA loan, which offers low collateral requirements, competitive interest rates and longer loan terms. It’s noteworthy that the popular SBA 7(a) loan may be used for working capital items that include inventory purchases, payroll and overhead expenses.
Even if you feel confident in your cashflow projections, remember that it’s better to have financing and not need it, than to need financing and not have it. The delta variant has been a wild card in our economy’s recovery — so it could be helpful to have additional financing sources.
4. Strategize with your banker before crunch time.
Your banker can bring fresh eyes to your company’s strategy and help identify ways to improve your financial performance. Skilled bankers understand the pressures of today’s business environment, but they can’t provide guidance or support if they’re left in the dark. Remember, your banker also serves as your advocate at your financial institution. Improving your banker relationship will make it easier for you to line up funding when needed.
Despite the challenges of the pandemic, Idaho business owners have proven to be adaptable and resilient. Entrepreneurs that prepare for the future are more likely to overcome obstacles and thrive during adverse circumstances.
— Stuart Williams is a Community Banking relationship manager with Zions Bank, a division of Zions Bancorporation, N.A. Member FDIC. He can be reached at email@example.com or 208-501-7526.