Last updated: 3/27/2020
Note: This post will be continually updated as additional resources become available.
What to focus on right now
Keeping your business alive should be your main focus right now. You’ll be making difficult trade-off decisions. As a leader, you’ll be faced with many difficult decisions. The difference with the decisions you’re making today is that you’re having to make them very quickly in reaction to rapidly changing dynamics in the economy.
Your goal should be to maximize cash during the crisis. This means taking a hard look at how much cash you have today and expect to have a week from now, a month from now, etc.
What to expect for revenue and cash flow
Expect that your cash inflows from customers may be delayed while they react to what’s happening in the economy. Be transparent with your customers. Let them know your current situation and ask if they would be willing to prepay you for future services or purchase a giftcard to use when you’re able to reopen. With this expectation in mind, consider how much time you have at your current expense level to keep your business in operation.
You should try to minimize expenses to a point where you have enough cash for at least 3 months, and ideally much longer (Source: MIT).
Search online and talk to other business owners. You might always learn something new and creative that you can apply to your business to increase revenue and reduce expenses.
Managing revenue and cash
It is most important to see how you can still have revenue and how to keep and increase your cash.
- Record all current and future expected revenue
- Stay in touch with your customers and provide the highest level of service and quality products.
- Send invoices more frequently and early rather than all at once. This helps you as you would have money coming in more frequently and also helps your customer as they are trying to manage their month to month expenses too.
- Try to collect on any past due invoices. If some of those customers have financial issues too, give them some percentage off if they pay you sooner than later.
- Make it easy for customers to pay. Accepting any form of payment (cash, credit card, check, etc.) is better than limiting to a specific form. Keep in mind that many people have a preferred method of payment.
- Looking at loan and borrowing options. Make sure you understand all the terms of the loan. Keep in mind that a loan won’t fix any business problems that are causing cash flow issues, so be smart on the reasons for taking on a loan.
- If you have employees, meet with them and see if they have any ideas on how to boost revenue.
- Sell anything that is not essential to your business.
Managing & reducing expenses
At this level of crisis, you should consider delaying non-strategic investments, including any investments to expand capacity or operations. If you have employees, you should consider whether your company can withstand a prolonged revenue decline. This is the time that you have to make some difficult decisions.
- Record all current and future expenses
- Negotiate with your vendors and companies you have a contract with. Remember that many of them are in a similar situation and are willing to negotiate payments or timing of payments. Be transparent with them and ask them for discounts and payment options
- Prioritize expenses and only keep those expenses that are essential in keeping your operations and help you generate revenue.
- Consider reducing marketing expenses. Your marketing may have reduced effectiveness right now and the return on your marketing spend may be too low.
- If you have a loan, reach out to your lender and see if they’re willing to restructure the loan.
- If you pay rent, talk to your landlord to see if they’re willing to reduce rents. If you need a loan, then there are new funding options available for you.
- Reducing employee and contractor expenses. You should first consider whether an employee is absolutely critical to your business. If they are, then you may hold off on the decision for a few weeks while you wait to see what happens with the economy. This is completely dependent on the amount of cash you have in the bank. If you can’t wait, then you should first offer a salary reduction to your most valuable employees to see if they’re willing to take a modest reduction. If your business isn’t capable of generating income right now, then furloughing most employees is probably your only option to reduce your cash outflows to a point where your business can withstand a prolonged closure. The employees who have been laid off will be able to apply for unemployment, enabling the government to step in and provide financial support to them.