Financial survival has been top of mind for many business owners since the first lockdowns were declared in March of 2020. Almost 40% of Canadian entrepreneurs are now trying to balance rebuilding their financial health against business needs

How to manage your finances to ensure the continuity of your business?

Here are few cashflow strategies that will help your business survive during time of economic downturn or catastrophic events such as COVID-19.

1. Agility is key

Business owners who are agile can pivot their operations and optimize their sales reducing the impact of the economic slowdown.

2. Lower expenses

Lowering expenditures to reflect reduced revenue can help businesses break even and keep their doors open.

3. Operate safely

Your customers need to be protected and feel safe to do business with you. Your employees must have a safe work environment. Ensure your communications are clearly marked for customers and your employees are well trained.

4. Curtail unnecessary spending

Watching your margins during any reduced revenue period is critical. COVID-19 in a way, has been a live exercise in business survival. Stay on top of accounts receivables and manage your payables to the latest date possible. Negotiate longer payable terms where possible e.g. ask to move from 30 days to 60 days.

5. Plan ahead

OK, this one seems common sense although, when your busy fighting fires it’s easy to get caught up in the “right now.” Some of those fires are showing up because you didn’t plan far enough ahead. Get in front of your problems and forecast further out.

What’s Your Business Interruption Strategy?

Many years ago, we had a 120 seat cafe/restaurant with a liquor license that was extremely successful. Literally a line at the door. So busy in fact, I slept on a cot in the back (closed at 2 am and opened at 8 am) during our 1st year.

When the sun is shinning you’re not thinking about umbrellas!

~ David Aaron

It was August, our busiest month of the year and construction had began in the parking lot to remove an old building to make way for additional parking. The construction company accidentally cut the water main flooding the parking lot. The entire parking lot was closed off and torn up. They piled mounds of pavement, stone and dirt right in front of our business. You actually couldn’t see our business. Sales revenue in August was normally $80-90,000…we did $6,000!

The landlord provided a $1,700 credit towards our lease and do you think that made any difference? We never considered planning for such an event. We had 16 employees, perishable food inventories and just like that disaster!

Planning for the worst case scenario

1. Break-Even Analysis

Add up all your fixed expenses such are lease, salaries, communications, interest and principal payments on loans. Then, divide this by the margin you earn on each sale (usually a percentage).

If you think your business might not earn break-even levels, you may have to consider cutting your expenses to the strict bare minimum. Consider temporarily removing products/services which are unlikely to break-even during this period.

2. Do some “Spring Cleaning”

Time to sell anything you haven’t used a long time and will unlikely ever use it. Such things as, equipment & vehicles. Cash is king here! Examine where you can get short-term financing.

3. Renegotiate fixed costs

For our restaurant, we negotiated with the landlord to reduce the lease over a several months and increase the lease payment during our higher business volume. Examine if this is possible with your business. Heating & Air conditioning is one are to consider. Adjusting the temperature by 1-2 degrees over time reduce your energy bill. While it may be a little uncomfortable, the alternative is far worse.

4. Change Your Pricing

Modify your pricing on items with the highest margin to increase the margin. One example in our restaurant was, in the winter strawberries are very expensive comparative to the summer. We increased our price for a top selling menu item by a nominal amount and removed strawberries from the menu. Instant boom to our bottom line.

5. Flexible Working Arrangements

Can you work from home or move to a co-working space to transform fixed rental costs into variable costs. Can any employees work from home?

6. Pay attention to giving out credit

Scrutinize new clients on their credit worthiness. When sales volume is low you don’t want to take on a delinquent new client. Also keep a closer eye on customers who are falling behind with their bills. Ask for a partial payment to mitigate a larger delinquency – receiving some cash during these times is better than none at all.

7. Establish and maintain strong credit

“But I don’t need credit right now.” Establishing lines of credit is essential in business. Even General Electric ran out of credit during the 2008 financial crisis. Using credit during normal business cycles is good financial management. Having access to credit during economic contraction is critical to business sustainability.

8. Death by a thousand cuts

Pay attention to the small almost invisible expenses. They can add up to quite a bit:

• Subscription services for social media platforms. LinkedI n is $100 per month for Sales Navigator. Perhaps a pause on this and similar accounts is necessary
• Paid advertising – if you have modified your product/services discontinue ads which are promoting those items
• Data charges – If business volume is low do you need to have the highest data package?
• Infrastructure costs – During COVID-19 you’ve been paying for infrastructure to support a business at 80-110% volume when in fact you may have been at 20%. You need pivot quickly to reduce these costs.

“Most people who fall sick with COVID-19 will experience mild to moderate symptoms and recover without special treatment” ~ who.in

In January 2020 we heard a virus was emerging from China and soon after people tested positive for Covid-19 also known as Coronavirus. In fact, the first presumptive case reported in Ontario (and Canada) was a man in his 50s, who came from Wuhan, China and begins self-isolating. His wife becomes the second case and begins self-isolating the following day. The man’s illness is officially confirmed two days later.

On February 26, Ontario had 5 confirmed cases of the Coronavirus and people appeared to be unconcerned. We were told to wash our hands frequently, that the seasonal flu virus affected more people each year.

Until this point, most people had a growing concern of the Coronavirus but not panicked until… March 12, 2020, when Doug Ford, Ontario’s premier announced that publicly funded schools across the province will be closed for two weeks following March break. While announcing the decision, the Ontario premier also tells families to: 

travel and have fun

~Premier Doug Ford

When you’re told “have fun” nothing to worry about here, oh and by the way, we’re closing school for 2 weeks, that’s code for “full-blown pandemonium!” I was immediately reminded of the nuclear bomb drills we did at school as a child. Absolute panic and fear of what was to come.

Do you remember in March the frantic race to the grocery store, not to purchase Vitamin C but rolls and rolls of toilet paper. People’s greatest fear was not getting sick but not being able to wipe their butts! Seriously, people waited 2 hours in line to pay $40 for 12 rolls of toilet paper. Stockpiling toilet paper, Kleenex, baby wipes & sanitizers.

People began saying “stock up on everything. It’s going to be bad, they’re going to close everything.” It was Friday, March 13 my wife and I were grocery shopping as we do every Friday. While I’m not deeply superstitious, it was “Friday the 13th” after all. The grocery store is usually buzzing on Friday but this was crazy!

There was no meat as you can see and yes no toilet paper or sanitizer anywhere. From this moment on we lived in a different world. This was straight out of a science fiction movie.

Restrictions followed with businesses being closed, wearing a face mask, sanitizing your hands and, working from home. The government issued economic relief cheques to those who qualified and a huge swath of people were unqualified.

The peak of confirmed active daily cases of Covid-19 in Ontario was on April 23/24 with 640 infected people. Contrast that to the highest number of daily confirmed cases of 1,015 on October 15, 2020.

The difference between March and November is we really didn’t know what we were facing and how to deal with Coronavirus. We didn’t know anything about it and in fact the WHO’s direction on what to do changed several times. I’m not placing blame on anyone. We forget these are very difficult things to figure out and in fairness to the doctors and scientists, a great many people had to get sick first in order to determine how it attacks the body.

Case statuses

Despite this people figured out how to survive and live amongst a virus that was and is very deadly for a certain group of people.

The chart above illustrates the number of active & resolved coronavirus cases and deaths. Covid-19 is very dangerous for people with compromised health conditions and the elderly as noted above. The majority of deaths occurred between ages 60-99.

Coronavirus is gender neutral

Geographical hot spots

The majority of cases are in Toronto and the Peel region. So what does this mean? There are 14.5 million people in Ontario with 2.9 million residing in Toronto. For a great many people Coronavirus has not been a problem. I don’t want to appear dismissive about this. Coronavirus has killed over 10,000 people in Canada.

The majority of cases (77.3%) and deaths (92.4%) have been reported by Ontario and Quebec.

Progression of cases over time

Back to the question of living with the Coronavirus outbreak. While the number of Active cases has gone up dramatically since September the number of deaths has not increased at the same rate. At the beginning of the outbreak, we were extremely unprepared and vulnerable. The province has done an excellent job of educating everyone on how to protect those who are most at risk of contracting the Coronavirus.

Coronavirus Deaths

Coronavirus New Cases

What is significant about the graphs above, is the contrast between new cases in November being nearly double the new cases at the highest point in April when the province was locked down. At the peak of new daily cases (640) on April 24, there were 50 deaths as compared to October 31 with 1,014 new daily cases and 9 deaths.

What this tells me is we understand how to live with the Coronavirus, how to protect ourselves and the people we love without the province being in lockdown. Everywhere I’ve gone in the GTA people are doing there part to keep safe:

• Wearing a face mask
• Sanitizing their hands, even the items they purchase
• Utilizing hands-free door openers
• Maintaining separation of at least 2 metres
• Avoiding unnecessary travel
• Learning how to work with digital products to conduct business

People have decided they can continue to work and to be social in a safe way. They have the tools, knowledge, and experience to move forward with their life without endangering others, especially those among us who are most vulnerable.

When changes occur in consumer trends and needs, it can be a good time for small business owners to alter or pivot their operations to better serve customers and the core values of their business. You’re probably not surprised to hear that new research shows COVID-19 has impacted consumer behavior. According to McKinsey, consumer behavior will continue to evolve with the long-lasting impact from the pandemic. This means that small businesses that can adapt in response to the changing needs of consumers have the best chance for survival.

What is a pivot in business?

When a small business owner makes dramatic changes to their original business focus, it’s referred to as pivoting a business. This usually includes a change in the business model, altering what the business does to earn a profit. For example, a restaurant may begin offering pickup or delivery options, or a gym may add online classes to their existing in-person membership offering.

Small businesses that can adapt in response to changing market needs have the best chance for survival. The Harvard Business Review called adaptability the new competitive advantage in 2011. A recent study released by Advantage | ForbesBooks found that the adaptability quotient (AQ) of a business plays a critical role in its ability to survive.

When to pivot in business

To determine whether you should pivot your business, you’ll need to identify your business’s core competencies, conduct market research and complete a competitive analysis. Follow these steps to determine whether and how you should pivot.

Step #1: Identify your business’s core competencies.

Consider what gives your business a competitive advantage. Core competencies are typically difficult to duplicate, allowing you to serve your customers in unique ways. The Balance Small Business notes that successful businesses tend to have more than one core competency. Some examples include quality, customer service, value, innovation and marketing.

Step #2: Anticipate and forecast market needs and emerging trends.

This is an important step in determining the long-term viability of your business. CB Insights found that 42% of startups fail because their business does not serve a market need. A market need refers to a functional or emotional need or desire of your target audience.

Step #3: Know your customers.

Successful small businesses can identify what people want or need and then create products or services that meet those wants and needs. As consumer preferences change, businesses must adapt their offerings to stay relevant and continue to earn revenue.

1. Market research — This involves gathering and analyzing information related to consumer needs and preferences. Conducting market research can help you determine existing and emerging needs and the viability of your business in its current state. It can also help you start thinking through ideas for pivoting. To get started, here are a few questions to get you moving in the right direction:
   • Is there a desire for your product or service?
   • How many people would be interested in what you’re offering?
   • Where do your customers live? Can your business reach those customers?
   • How many similar options are already available to consumers?
   • What do consumers pay for similar options?
     
2. Emerging trends — These can include market responses to technological advances as well as major national or global events, such as an economic downturn or pandemic. There are many resources you can use to discover trends, including:
   • Google Trends: Find topics people are searching for online. Discover upward or downward trends that could relate to customer needs.
   • McKinsey & Company: Access insights related to issues in business and management.
   • Forbes: Find stories on marketing trends, along with advice for entrepreneurs.
   • Mintel Trends: Discover research on trends impacting all industries and within select industries, such as beauty or food and drink
   • Small Business Trends provides a larger list of resources.

Step #4: Know your competition.

A competitive analysis allows you to learn from businesses competing for your potential customers. By identifying your competitors’ strengths, you can pinpoint your business’s unique strengths. Identifying your business’s unique competitive advantage will help you determine the need to pivot your business. Small Business Trends provides a great resource detailing various methods and tools to complete a competitive analysis.
  
Conducting market research and competitive analysis can help you formulate ideas for pivoting your business. Pivoting your business does not mean you need to give up on your company’s core values — the guiding principles and beliefs that help you and your employees work toward a common goal.

Develop a “pivot plan” for future success.

Finally, develop a plan to pivot. Changing market trends may suggest a need for a short-term or long-term pivot.

• Many small businesses have made short-term pivots during the COVID-19 pandemic. Distilleries are using their resources to create hand sanitizer. Restaurants are offering takeout and delivery options.
• Economic and market trends can create long-term impacts on consumer needs and wants. A long-term pivot serves the lasting needs and wants of your target market. For example, a retailer with physical stores may pivot to selling exclusively online.
• A strategic plan will help you implement a pivot. A strategic plan documents your future vision for your business. It details your business’s current state, desired future state and a plan for how you’ll evolve your business over time to land at your desired future state. For more information, visit SCORE’s guide on how to craft a strategic plan.

Adaptation is necessary for business survival, and the ideas for pivoting your business should be supported by your core competencies. You can stay true to the business you’ve built with the values you’ve built it on while also pivoting your business to ensure long-term success.

Due to the COVID-19 pandemic, small business owners are limited in connecting with customers in person. Because we live in a digital world, there are still many ways you can stay connected to your customers through COVID-19 and inspire loyalty for years to come. Here are ways you can remain connected:

Be consistent

Ensure that you’re communicating to customers any changes in your business:

• Update your website with contact information, business hours, and what you are or are not offering currently
• Send emails about your products and any business updates, being careful not to bombard customers’ inboxes with too many messages
• Share on social media frequently, especially positive messages that will help people take their minds off the pandemic
• Keep communication open; it will help customers to know what is going on and how they can still support your business

Be transparent

If you’re having difficulty making deliveries on time or have many items that are out of stock, be proactive and let your customers know right away. Even if you don’t have the perfect solution to these problems, your customers will appreciate the upfront honesty.

Communicate your values

68 percent of consumers are motivated to be loyal if they know that a brand shares the same values as them.

Is your business donating supplies to those in need? Are you assisting employees during this difficult time? Share that information with your customers so they know you align with their beliefs. It will create a strong community of customers with a sense of belonging.

Additionally, if you have spent your marketing time and dollars on growing your online audience, now is the perfect time to leverage your role as an influencer and direct your followers to meaningful causes. Some social media sites, such as Facebook, allow you to collect donations, and most nonprofit organizations will provide simple ways to coordinate with their own fundraising efforts.

Get creative with your offerings

Now more than ever, businesses must think differently about their products and services. To make sales now and ensure that customers will come back post-pandemic, offer:

• Gift cards, which provides you with immediate cash and gives customers a way to show their support (be sure to review all state laws to ensure compliance)
• Discounts, especially for long-term purchases; gyms can offer a discount for memberships starting after the virus has passed, or retail stores can give free or discounted shipping for online orders

If you offer a service that can be accessed virtually, offer this through live or recorded videos. For example:

• If you’re a personal trainer, consider conducting workout classes through platforms such as Google Hangouts or Zoom
• If your business exclusively sells products, think of ways you can still offer something of value, even if it’s free
• If you run a flower shop, you could host an Instagram Live session teaching your followers about floral arrangements
• If you’re a salon owner, you could post a video for customers who dye their hair, showing how to do in-home root touch-ups

Remember, thinking creatively and continuing to provide customers with valuable content right now can help ensure they’ll return to your business in person when the coronavirus is quelled.

Many small-business owners of restaurants are adapting to the COVID-19 outbreak restrictions by starting to offer delivery service to their customers. Some restaurateurs simply find themselves greatly increasing the frequency of their customer deliveries. Whichever is your case, we want to give suggestions you know how to keep your employees and business safe as you quickly evolve the way you operate.

First things first. Are you ready for delivery?

It’s easy to take orders by phone, of course, but it’s also easy to take them online. We suggest you explore the many point-of-sale (POS) services that allow small-business owners to quickly facilitate online orders. Then, if you haven’t already, close your dining rooms and prevent employees who are not needed from entering your physical location. Limiting access this way will enhance your ability to increase your curbside pickup and delivery services.

Set up employees for delivery success

Before allowing employees to make deliveries, make sure they have adequate driving experience, a valid driver’s license and a vehicle in safe operating condition. We suggest you:

• Check the driver’s motor vehicle record to ensure they have no DUIs, no major violations and no more than three minor violations and accidents in the past three years.
• If an employee is driving their own vehicle, make sure the vehicle is owned by the employee or a parent, you might ask to see the vehicle registration card
• Request a copy of the employee’s insurance card for the vehicle and check for the appropriate limits for bodily injury and for property damage
• Verify that the vehicle is in good working condition, via a copy of a valid inspection report from an inspection/repair/service facility where this is required

Make sure your delivery team follows safe driving policies

Here’s a checklist when training employees. Key points:

• Make it clear that distracted driving is not OK; employees should avoid making or receiving phone calls, texting or browsing the internet while their vehicle is moving
• Encourage your drivers to set up navigation systems before leaving for deliveries
• Drivers should be familiar with defensive driving strategies; follow local, provincial and federal traffic laws; and wear their seat belts

Safe driving is more important than on-time deliveries

Your driver’s safety is paramount. Avoiding on-time delivery guarantees: Set reasonable delivery time frames. Do not establish on-time guarantee as these can lead to speeding and unsafe driving.

Two more important safety procedures to remember

You can help keep your drivers safe by checking to make sure each order is legitimate by using a phone with caller ID and looking for suspicious orders. Keep a record of each order and remind your drivers often to maintain awareness of their personal safety at all times when delivering. Take extra precautions, too, when delivering alcohol. Follow provincial, and local liquor laws and make sure the individual receiving alcohol is the legal age to drink.

As a result of the pandemic, many businesses have had to adjust their way of thinking when it comes to working remotely. Larger companies have the technology, flexibility and overall resources to have their employees transition quickly to a work-from-home, remote setup. For small businesses that don’t have a history of managers and employees working from home, the “new normal” may pose more of a challenge.

Working in the age of COVID-19

This new way of working presents many challenges, such as distractions from children at home, lack of cohesion with team members, and an increased chance of miscommunication. But there are things you can do as a small-business owner:

• Equip teams with the right technology
• Manage remote employees by communicating often and with transparency
• Maintain engagement and help with productivity by creating opportunities for social interactions

Equip your team with the right tools

One of the most important ways to stay productive and connected while teams are working remotely is to have the right technology. This includes project management tracking, messaging apps and videoconferencing apps. These tools allow managers and employees to stay on the same page no matter where they are. Here are a few resources you can access:

• The Canadian Chamber of Commerce has a useful list of tools for chat and instant messaging, videoconferencing and project management
• Several technology companies are offering their services free during the COVID-19 pandemic; Inc. manages a list of marketing, cybersecurity, wellness and other resources

Communicate often and transparently

Communication is especially important because interactions are happening virtually, leaving more room for miscommunications. Ensure that you’re consistently communicating with your teams while working from home and getting feedback from them about what is working well and what is not. Here are a few tips to help:

• Sending out daily or weekly emails with updates or instant messages about projects can help employees to feel in the loop and know what is happening
• Set expectations for how often you will check in, and let employees know how much they should update you as well
• It’s important to communicate when you will be available and when you expect employees to be online
• Use other forms of communication —such as phone calls or video calls — instead of defaulting to only text-based communications
• If you would have talked to someone face-to-face about something while in the office, give them a call

Tips for managers to help maintain social interactions

Managers should provide more opportunities for spontaneous workplace conversations. Utilizing technology can help facilitate these conversations:

• Make time to connect with teams or even schedule online social time to have conversations with no agenda
• Encourage workers to connect virtually as they would in person
• Try an icebreaker during a team chat, such as:
  • “What’s one good thing that someone ready today?”
  • “What’s one way everyone is de-stressing right now?”
  • Implement a weekly virtual happy hour or team-building exercise to keep people connected

Working remotely can work

Nothing takes the place of interacting face-to-face with a co-worker. Hopefully, these ideas will help small-business owners feel better informed and prepared about how to manage their teams remotely during the pandemic. Plus, if a small-business owner decides to focus more on this “working remotely model” after the pandemic subsides, they’ll be well prepared.