5 practical tips for business owners
Though cases of COVID-19 were already evident in China and around Europe in early 2020, closures in North America were still abrupt and their length unexpected. It goes without saying, but this prolonged closure continues to cause significant challenges for businesses in nearly every industry, with no clear end in sight. Unfortunately, many companies have already closed, permanently laid off staff or made other cuts. Others were able to pivot and stabilize their operations, enduring hard lessons from the pandemic and emerging stronger and more resilient. Examining the efforts and changes made by these companies can help others manage their operations and better endure periods of unprecedented economic turmoil.
Cost cutting is not enough
Often, the knee-jerk response to a downturn is to immediately focus on lowering expenses such as payroll, eliminating planned improvements and other practices. While many organizations can certainly shrink their expenditures by reducing less essential items, making this the primary strategy can become counterintuitive. According to the Harvard Business Review, innovation and customer service often suffer when this method is employed and corporations that took this approach during the 2008 recession experienced lower profit and sales in the recovery period.
Tip: An alternate approach that’s proven popular during COVID-19 is to pivot from the core business to a more in-demand practice such as distributing PPE, consulting on industry changes and providing interim support to customers.
Remote work works
Prior to the pandemic, only a miniscule 5.2% of American employees worked solely from their home. Of course, this very quickly changed as countless workplaces shifted to remote work in late March. Because there was little time to prepare for this change, leaders may have worried about sustained productivity and deliverables. It turns out such concerns were not realized as one study found an incredible 47% increase in productivity due to COVID-19 remote work rules.
Tip: While this does not necessarily spell the end of physical workplaces, it does mean that certain misconceptions can be cleared: workers can indeed be trusted to operate without strict oversight. Providing more anonymity allows managers to use their time for more vital tasks and helps workers feel more empowered.
How much does your business have in operating cash flow right now? If you didn’t know the answer before the pandemic, you probably do now. This crisis has emphasized the importance of maintaining a healthy cash flow to handle unexpected expenses. Businesses are evaluating their budgets and seeing where cash flow is tied up. For example, outgoing paper checks can make up one quarter of a company’s overall expenses, which means they must leave a large amount of cash in their accounts to avoid overdraft.
Tip: A thorough review can reveal where capital can be freed,
Inventory & supply chain management
Global supply chain management is a convoluted and fragile construction. The most difficult part of the current situation is that nearly half of affected businesses had no plan in place to deal with a delay or stoppage. Why? Because many rely on a single supplier, often the cheapest, to keep costs down and partnerships simple. Yet this process, coupled with the fact that companies regularly keep low inventory, means that any delays – let alone the impact of a global pandemic – can grind a business to a screeching halt. Stocking additional product to circumvent future delays is an option, though not possible for those with perishable goods. Securing a backup supplier in another location will likely become a popular solution for many, though it will come with a cost.
Tip: Additional sourcing does not have to be an even split and a business can find additional partners for smaller amounts and increase orders if the primary manufacturer is delayed or otherwise unable to deliver. Experts recommend relying on a single supplier for no more than 75% of a product in addition to ensuring different locations for manufacturing and distribution.
It may be difficult to believe but some organizations are still without an online presence. Online accessibility is vital as the internet is the first source for finding suppliers and social media use sharply increased with COVID-19 closures. Additionally, these digital platforms allow businesses to be agile and communicate with customers rapidly and on a more personal level.
Tip: Some small businesses are using online platforms for the first time to generate sales as their regular operations are completely shut. Even industries that are nearly at a standstill, such as travel and tourism, are able to keep potential customers engaged with this low-cost method.
COVID-19 quickly upended regular life and led to widespread business disruptions. Unfortunately, this unprecedented environment has taught companies a number of vital lessons. By utilizing these practical tips, other organizations can help avoid errors and improve their outlook.