Business Survival during COVID-19 - INCREASING PRODUCTIVITY
As the COVID-19 pandemic grows right before our very eyes, it is very necessary for businesses especially “small” businesses, entrepreneurs and gig workers to take some drastic steps to make sure that their doors stay open and services continue to be offered. If your business depends on physical contact with people like salons, massage parlors or gyms; the doors may be closed for now, but it is important to stay optimistic that this will pass as soon as it started.
At Ntare Consulting, we believe and have been telling all our clients and friends that as the world stays in place to avoid the spread of COVID-19, there is a worldwide economic slowdown that is affecting EVERYONE. The idea is that once this cloud lifts, the business world is going to jump into action and there will be a huge demand for services; more jobs will be offered and governments around the world will be working tirelessly to reignite their economies. Those smart business people that took the survival tips seriously will be the ones standing and ready to cash in on their solid preparation.
The following suggestions are almost common-sense measures that every savvy business person should be taking into account. All the recommendations may not fit every business but please pick and choose any and all that apply to you and your business. Good luck, remain optimistic but stay active.
People are often the most expensive part of running a small business. Of course, employees are also the source of much of the value of your business. Slashing costs while boosting employee productivity is not easy to pull off. However, businesses that manage it are the ones that will survive.
Here’s how you can be one of those businesses.
1. Cut once, cut deep, and do it sooner than later.
Layoffs suck, but sometimes they’re essential to your company’s survival. If you do have to lay off employees, make sure you cut deep enough so you don’t have to do it again in another month. If you make a shallow cut and tell the remaining employees there may be more to come, everyone will be scared for their job and productivity will definitely be on the low end. A jittery team is not an effective team.
If your business has hit a brick wall, one can initiate a furlough where your employees will be forced into an unpaid leave of absence. This is obviously a horrible position to be in but paying your employees with no income will eventually kill the business to which they cannot return. It is a tough one, but someone has to make that decision.
If you foresee the bottom of the barrel coming in the near future, do it sooner rather than later. That conversation will be painful, but getting it over with soon has a couple of big benefits:
You can afford to offer a bigger severance package. By reducing your payroll expense, a bigger package can help your employees stay afloat before they can file for unemployment benefits.
The remaining employees can stop worrying and everyone can get back to working on keeping the company going.
2. Reduce hours before reducing salaries.
If you cut someone’s salary by 10% but ask them to work the same number of hours, they will resent their lower hourly wage and will (subconsciously or otherwise) reduce their productivity by the same amount or more. A better idea is to cut hours. You’ll save the same amount of cash but have a better chance of retaining the same level of productivity from your employees. Overtime pay is a good place to start — you’re paying 1.5x or 2x for those hours. Cutting your store hours (closing 30 minutes earlier) is another option that could mean one less employee you have to layoff. Customers may not even notice your new hours.
3. Cut your own salary.
You must cut (or even eliminate) your own salary before you cut your employees’ salaries. If they don’t see that you’re sacrificing more than they are, it won’t matter that you’ve saved 20% in employee salaries — you’ll see a 50% reduction in productivity. That means you’ll actually be paying more for those employees because of the reduced productivity.
4. Get everyone on the same page.
Be open with your employees. Cultivate an attitude of “we’re going to weather this situation together.” Go ahead and show them the books (or at least an overview) so they can see that ugly chart of dwindling (or heaven forbid, negative) cashflow. Don’t be afraid to say “we all need to be 10% more efficient and 10% more productive (i.e.., make 10% more while spending 10% less), or else none of us will have a job in a month or after the pandemic is declared over.” Just including them in the problem-solving process is often enough to motivate them to give that extra effort during tough times.
Keeping your business afloat during the current economic condition is difficult, but not impossible. Have realistic goals and plan for being in survival mode for perhaps 2 or more years (not just the next few months). Cut deeper than you think you need to because it will be worse if you have to go through this process again in a few months. Always look at cutting employees as the last resort to save your business and remain open for the foreseeable future.
Ntare Consulting is a consulting firm that works on financial management, government compliance, fiscal planning and business solutions for entities both in the US and Uganda. We are a full-service business solutions firm and we help start new and/or maintain your existing business. Our process is to get with you and understand your business needs to tailor a process that can help you at the lowest cost possible.