Business Survival during COVID-19 - REDUCING EXPENSES
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 businesspeople that took the survival tips seriously will be the ones standing and ready to cash in on their solid preparation.
The first thing when everything slows down or when trying to maintain the way you have been doing business, you have to reduce the outflow of cash. Cash is king during this time as possible opportunities may arise that you need to jump on.
A. Reduce and slow down outflows of cash.
The first step is to cut or reduce your monthly cash outflows (expenses).
1. Reduce your monthly rent.
Call your landlord and negotiate a lower monthly rent. Sign a longer-term lease in exchange for the lower rent if you have to. Your landlord is running a business too, and they would rather have you stay at a lower rent, than to have the space be vacant for months. Point out that it’s better for both of you if they lower your rent or give you a few months to catch up. It is important to get all agreements in writing. A simple email detailing the agreement will suffice.
2. Get a furlough on or disconnect your utilities.
Consider all your utilities like water, power, Internet, and phones. Call or contact new servicers and see if you may be given a big discount compared to your regular bill (even if it’s just for the first year). The front line sales reps will often have unadvertised discounts they can only offer new customers. All you have to do is ask for them. Once you know how much you can save by switching, you can have a benchmark for your savings. Call your vendors and ask what kind of assistance they can offer a small business looking to stay afloat. Let them know you’re willing to switch vendors if they cannot offer any help. Get them to match the offer so you don’t actually have to go through the trouble of switching.
This will help you to keep the utilities on for your business but if all else fails and the bills cannot be paid, it is better to get disconnected for now so as not to lose all your cash in expenses that are not helping in the income generation.
3. Cut wasteful discretionary spending.
These are the cable, music, newspaper and magazine subscriptions that were a nice perk during the high-revenue years, but now will simply be wasteful spending if not properly utilized. If you have employees that you need to rally around the company’s survival, you could switch these subscriptions for family plans to share with employees that are stuck at home.
4. Lease rather than buy. (Or buy used.)
Need a new van or machinery? Lease it instead of buying. You will end up paying more in the long run, but in a down market, it’s all about cash flow. If your business runs out of cash in 6 months, it won’t matter that you paid less for that desk by paying the full amount up front. When survival is the issue at hand, you unfortunately won’t have the luxury of doing things the “optimal” way. It might also be worth the effort to find more options of getting your equipment and further. In this economy, there may be plenty leasing companies willing to do any business they can.
5. Pay payables later.
Call your vendors and get better terms. For example, you may be able to get 60-day terms instead of 30-day terms. Having cash on hand for an extra 30 days may be crucial in your survival.
While you have your vendors on the phone, and especially if they won’t extend your terms, see if they will give you a small discount for paying early. 1-2% off for paying within 10 days is a typical example. Consider using a credit card to further extend your payables.
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.