The COVID-19 outbreak and governments’ responses are hitting small businesses particularly hard, making many companies carry out a financial check up on their current situation. Many businesses have been forced to close their doors, and even those that can remain open may find sales or foot traffic lagging due to restrictive reopening guidelines and consumers cutting spending.
While the impacts of coronavirus on small businesses is unique, there are still lessons to be learned from the past. We spoke with small businesses owners who survived the last financial crisis, the Great Recession, to get their take on how to keep going today.
The resources available to small businesses can change daily. Before diving into the advice from other business owners, we wanted to share information hubs that you can check for updates on the latest local, state, and federal resources:
We’ve also created guides to the Paycheck Protection Program (PPP), personal financial resources, and all the small business financial assistance options available right now. Also look for industry-specific resources on your industry associations’ websites, or by connecting with fellow business owners in your industry.
To help business owners put those resources to work and see their business through the pandemic, we also reached out to several small business owners who’ve been through previous recessions or who have coached small business owners. Here’s what they had to share.
Jay Fleischman, a lawyer representing people with student loans and other consumer debts, has experienced multiple ups and downs. In 2001, he had a rapidly growing law firm in New York City.
“September 11 was my first day in the office after two weeks of overseeing construction of a new 4,000 square-foot space,” says Fleischman. “Within two months, I’d laid off the entire staff and spent years rebuilding . . . . I was back on my feet just in time for the Great Recession, which created a different sort of problem.”
Fleischman’s business could have benefitted from the Great Recession, as he helps people who struggle with debt. In spite of working 90- to 100-hour weeks, he didn’t have the resources to meet the demand and lost out on opportunities.
He shares several important lessons, starting with acknowledging that every business has good times and bad, and neither will last forever. For today’s small business owners, Fleischman suggests being up front with creditors and vendors if you’re struggling.
“Be realistic when negotiating a resolution to financial challenges,” says Fleischman. “It’s always best to under-promise and over-deliver on your obligations because you don’t want to risk squandering the trust others have for you.”
For many business owners, asking for help can be difficult. Often, they’ve built the business from the ground up and take pride in being a provider.
Tracey Bissett agrees with Fleischman that asking for concessions can be a good idea. She runs Bissett Financial Fitness Inc., offering financial coaching for small businesses that have up to $2 million in annual sales.
“Everyone you owe money to is figuring out what they can do and what they can offer customers. You shouldn’t feel bad—you should feel like they’re expecting you,” says Bissett. “In my experience, banks want to work with you. They don’t want to write off entire portfolios.”
Before starting her own company, Bissett worked in commercial lending and risk management for 16 years. She was in risk management at TD Bank during the 2008 recession.
Bissett helps her clients figure out how to cut expenses and get concessions from vendors and creditors. Lowering interest rates or insurance premiums, temporarily pausing payments, or renting out part of your physical space can all help cash flow.
She’s offering similar advice to businesses that are thriving in the pandemic, such as those that offer essential products and services. “If you qualify for government programs, you should be applying,” says Bissett. “You may need the extra support to help with the growth.”
In addition to being a licensed CPA for more than 20 years, Debbie Todd offers personal and small business coaching. Like Bissett, she has clients from different industries who have been affected in various ways and struggling with irregular income budgets.
In her coaching strategy sessions with clients, Todd has seen how people are taking a creative approach to alter their business and strategy during the shutdown.
There is a fencing and landscaping business that continues to help clients with design and then sells them materials so they can DIY the project. “They’ve become more of a consultant and are selling a whole lot more material,” says Todd. A paint company is doing drive-by assessments to start the planning process for clients. They’re getting through the most time-consuming part of their projects now and lining up work for when they can go out and paint later. And a hairdresser who’s offering one-on-one video tutorials to help teach people how to cut their own hair.
Consider how you might be able to create your own online or socially distant income streams or how to start projects and sign up clients now to line up work for later. These new ideas may wind up becoming a permanent fixture of your business.
While business owners are focused on dealing with short-term issues, it’s still wise to keep the big picture in mind. “Thinking about your next year or two while you’re working today is key,” says Todd. “How is social distancing and wearing masks playing a role in your business over the coming months or years?”
But Bissett suggests looking back at pre-pandemic times before digging in deeper right now. “Consider how your business was doing six months ago,” she says. “If you weren’t doing okay then, taking on new debt might not be right. You could potentially start a new business and do better.”
If you’ve got the resources to weather the storm, you may want to take a cautious approach as you rebuild your business. “Maximize your flexibility by hiring people who are more likely to be able to change roles if necessary,” suggests Fleischman. “Cross-train new employees, document your processes, and do everything possible to make it easier for your business to grow and shrink as needed.”
Tip: Make sure you pay off debt before the next recession.
Where you live and the type of business you run makes a huge difference in how the pandemic is affecting you. However, we all facing a recession and change in our normal way of life. We leave you with a few final words of wisdom from our three small business owners and coaches.
Fleischman: “Running a business is like a successful marriage. It’s not always going to be easy, and there’s a lot of work involved. Remind yourself of the reason you started this journey, and keep moving forward.”
Bissett: “Two things I know to be true: strong companies in any industry can weather any storm. And companies that are proactive and trying to solve problems do better. A lesson I learned from 2008 is the importance of managing cash flow. Having cash reserves on hand and not being overextended is good advice all the time.”
Todd: “In 2008, we thought we had a good economy, but the underlying strength wasn’t there. In this case, I think the underlying strength was there, but we had to put a big lid on it. For my clients, the current reality of not being able to work toward their goals is a frustration. But they’re happy to know that they have something. It’s a hiccup but not a systemic problem.”