Top Five Ways to Survive + Thrive Financially During Economic Uncertainty
Undoubtedly, there’s a lot of uncertainty and change happening around us. This volatility can make us feel like we should hold tight and be reactive to what happens. But times of crisis and economic uncertainty can create opportunities for us to accelerate changes that we needed or wanted to happen anyway.
Here are my top five ways to survive and thrive financially during economic uncertainty.
1. Assess Your Cash Flow
Cash flow is a common challenge for small businesses, even in good times; in economic uncertainty, it’s even more pronounced. What happens if your sales slow down? What if your customers can’t pay their bills? How will you continue to pay your employees? How will you pay your suppliers?
Consolidate as many liquid resources as possible. Then, project your cash flow and determine where you’ll need to take action. When your business is steady and predictable, a monthly projection is generally sufficient. But in a time of uncertainty or volatility, a weekly projection is necessary.
2. Analyze Your Sales Mix + Margins
Now, more than ever, it’s important to focus on your most relevant and profitable products and services. But first, you must understand your current reality in terms of sales mix and profit margins.
Sales mix is the relative proportion or ratio of a business's products that are sold.?Sales mix is important because a company's products or services usually have different degrees of profitability. You can also evaluate sales mix by customer, by industry, by distribution channel or by geography. This data is crucial; it will give you a clear picture of how your company really makes money.
3. Scrutinize Overhead
Perform a thorough review of your expenses. Then make the tough decisions. But be measured in your approach. Uncoordinated moves that target the wrong problems can cause panic and distraction in your business. We’ve already got enough of that going on! You certainly don’t want to make things worse.
Scrutinizing your expenses can be a tedious process. You must resist the urge to blindly cut expenses across the board. Use this as an opportunity to get a better handle on where your money is going and find ways to be more intentional and efficient.
4. Get Your Finances in Order
For most small business owners, financial management is not a passion. For some, it’s a dreadful administrative task, and for others, a mysterious set of processes and reports that seem like a waste of time and energy. Just like you can’t ignore things like marketing or leadership in your business, you can’t ignore financial management either.
Knowing your cash balance is not enough. You need accurate, relevant, and timely financial information to make decisions about your business. You need intentional, focused indicators to quickly tell you how things are going and where you are headed. You need your team to be engaged and empowered to grow the business along with you.
5. Talk to Your Lender
Financial statements reveal a lot about your business. Lenders use financial information to determine whether you will get the financing you need. So, you need to understand what your financial statements are saying about your business. You also need to know where you stand on any loan covenants and project your future credit needs. Then, be proactive in communicating with your lender about these topics.
At this point, we don’t know how long the economic impact of COVID-19 will last. But we do know it’s been over ten years since the recession in 2008, and economic cycles are inevitable. And even if the downturn is short-lived, these concepts are valuable and applicable any time; it usually takes an economic crisis before prioritizing them.
Find these tips useful? Learn more tricks on how to maximize the potential of your business through The Partnership’s Top Five series or through the Small Business Resources Hub.
You can count on The Partnership to continue to share accurate and fact-based updates as well. See more on COVID-19 here.