Mindful Business Spending During COVID-19
In early 2020, there were those who thought the COVID-19 crisis would blow over relatively quickly. Individuals and businesses alike might have to dip into their savings a bit, but then things would be back to normal just in time for the summer boom.
Needless to say, that’s not how things have shaken out. As of August 2020, the COVID-19 pandemic has shown no signs of abating in this country, and businesses are starting to really feel the pain of disrupted supply lines and reduced demand.
We don’t know how long it will be before everything seems normal again, but in the meantime, businesses can’t ignore the crisis anymore. You need to adapt to what might be the new normal, and that means becoming much stricter with business spending. Here’s where to start.
Walk a Careful Line
There’s a thin line during any down economy between conservative spending and crippling your future business. When you make cuts, you’ll need to think about how easily you’ll be able to recover from those cuts when things pick back up.
Layoffs are a classic example. Many companies look straight to payroll in a crisis, and this one has been no different — but cutting employees is a band-aid fix at best. When your business ramps back up, you’ll need to hire people back to fill those roles, and they probably won’t be the same people, which means you’ll need to train and educate them. That takes time and resources, too. Laying people off should be a last resort.
There is a sort of halfway option to consider here — furloughing your employees. A furlough is a mandatory leave of absence, after which the employee is expected to return to work. It can also refer to a reduced schedule, after which the employee will resume full-time work. To avoid compromising your employees eligibility for benefits, make sure to continue paying them on a salary basis. In some cases, furloughed employees can still collect unemployment benefits to help cover the hours not worked.
Another near-last resort is selling assets like property or equipment. You might be able to get some cash from it now, but you’ll likely have to pay more to replace it later. If it’s not costing you a significant amount to maintain, hang on to your material assets.
Put a Hold On Spending
Now’s the time to really cut back on day-to-day spending that can really add up over time. Business lunches, bringing food into the office, traveling to meetings, conferences, office supplies, and so on all have to go. The silver lining of this particular crisis is that travel and commuting are all but non-existent in an effort to quell the spread of the virus, so it should be easy to avoid those areas.
Your budget will have to adjust to the “new normal,” too. We’ve been in this crisis for a few months now, so you should be able to see what your new revenue numbers look like and plan around them. That might mean canceling software subscriptions, reducing insurance coverage, or any other expenses you can cut. Don’t blow through your savings hoping that your revenues will bounce back next week, hunker down for the long haul.
Stick to What You’re Good At
Times like these are when meticulous analytics come in handy. Go through your products and marketing channels to find your “cash cows” — the ones with the best ROI in your catalog — and really lean into those. If that’s as narrow a spectrum as one or two SKUs that you advertise on Facebook, then so be it. A positive ROI is a positive ROI, so take advantage of whichever parts of your business are the most profitable and put the rest on the back burner. Now’s not the time to be pouring money into R&D or risky marketing outreach efforts, it’s time to play it safe.
Evaluate Your Priorities
Since you don’t have money to throw around, you’ll have to prioritize. What’s your business’ primary focus? Is it to gain better awareness in the marketplace? To take on new clients? To increase conversions or efficiency? Whatever your main goals are, put those front and center and think about whether every dollar you spend is helping you move in that direction.
Talk to a Source You Can Trust
At First Western Trust, we’ve been handling the ins and outs of small business management in our communities for years. We know that communities rely on small businesses, and we’ll do whatever we can to help you get through these uncertain times.
We pride ourselves on taking a holistic, tailored approach to your business finances. We won’t pigeonhole you like a larger bank might — we’ll take a look at every aspect of your business finances, goals, and priorities and help you create a plan that will get you through this crisis and out the other side. If you’re ready to start taking your business finances seriously, get in touch today.