Sadly, many small businesses will fail over the coming weeks. To increase their company’s chance of survival, there are three critical steps that small business owners must take.
Continue to Slow Down the Outflow
The first step is to continue to find ways to slow down the outflow of cash. You’ve probably made some initial cuts, but there is always more that can be trimmed.
Look carefully at all expenditures and cut any that do not directly impact your ability to generate revenues, and generate revenues now. Most entrepreneurs think that many of their expenditures are an investment in their future growth. We need to recalibrate our thinking. Growth is likely a long way off for most small businesses.
Most economic forecasts are seeing a very slow recovery when it does happen, and there is a lot of uncertainty about when that recovery may begin. We may see a short-term bounce when things start to open up again, but it may only be temporary. Be cautious about opening up your spending again!
The V-shaped bounce-back is most likely not going to happen. Think of cash as a finite resource that needs to be preserved. This is no time to be timid when it comes to cutting costs!
Anything for a Buck
The second step is to find ways to bring in short-term revenues. Remember during start-up when you would do anything for a buck? Get back to that mentality. Don’t worry about strategy. Don’t worry that you might send confusing messages to your customers. They are likely in survival mode, too. There will be time to get back to honing your strategy later. Now it is all about cash!
What’s Next?
The third step, once your cash flow is stabilized, is to think about what will be next for your business. Be ready to accept a very different future for your business than you had in mind just a few short weeks ago.
Consumers and businesses will behave very differently over the coming months and even years. Don’t be in denial about what you are seeing. Savings will become a national obsession in the coming years. Anytime we have a severe economic shock, people come out of it with a much more conservative approach to managing their money.
The fear of coronavirus may ease once there is a treatment or vaccine, but our collective psyche is likely to be altered for many years.
What we are going through is not just changing our economy, it is changing our culture and our society. Be ready to think differently about your value proposition and be ready to act boldly!
Cash is King
The moral of the story is simple. Cash is king! In fact, cash is king, queen, emperor, and president for life! This is not a new truism. However, it is now the most important principle in business.
I agree with everything here, and it’s so important for businesses to know financial advice like this! I have already noticed so many small businesses (and now large businesses with this Neiman Marcus news I heard today about them filing for bankruptcy!) I especially think it’s important for such businesses to go to that “anything for a buck” mentality because obviously at this point for any business it is sadly no longer about progressing and growing and doing new things but rather focus on staying afloat and not running out of cash or worse. It’s also interesting to think about how these businesses will change within the next few years because I know I haven’t really thought about how businesses will be handling their financial situations post-quarantine. I have noticed almost every store I have seen on social media (mostly clothing stores) is doing some sort of sale, some as big as buy one get one 50% off sitewide. With sales like this, it’s hard to pinpoint how it’ll affect these small businesses in the long-run. Part of me knows it will theoretically lead to more people purchasing things from these stores which leads to more money, but on the other hand, more customers are trying to save money so in actuality are people really going to be buying more and to what extent are these stores lowering their costs too much where they are just losing more business? It is honestly insane how businesses of all kind whether its large corporations or local shops will have to change the way they operate and think about money within the next few years.
I think you have made many great points in this article. It is going to be very interesting to see what is to come. I agree with your opinion about how this pandemic will change the way we spend money and what we are comfortable having in our savings account. I also agree with you on how as small business owners we need to revert to our start up mentalities and most importantly remember cash is king. It is hard to sacrifice so much of what you have built to go right back to the hustle but sacrifice makes for a better survival and your hard work will be nothing without it.
I think it will be interesting how severely Coronavirus has affected the economy once it finally comes to an end. It has already taken a major hit, and as of right now the end of it is still in question. I agree that during this time it is vital for businesses to cut down as much cash outflow as they can as we don’t know yet when business will be back to “normal”. My biggest fear as pointed out in the post is the short-term bounce giving people false hope. There is no denying that despite what may be a small spike at the beginning, it will take a long time to fully recover from this. I also think it is important for businesses to earning an income anyway they can, as well as preparing for the new normal that will follow this pandemic.
Unfortunately, yes, many businesses will fail due to the current health crisis. Auditing your money and your time (both as a business owner and consumer) are vital for survival. Adjusting the expense side of the break-even equation is crucial during this time however, I’m afraid businesses will also incur increased expenses due to changes in industry standards and policies, i.e. cleaning, food preparation and handling of money, making it that much harder to conduct business. Business owners adjusting to mental and social changes in our culture will be interesting to watch. Being open-minded to changing your original idea, will tell a vital story about who you are as an individual, and as an entrepreneur.
It is so hard to see how many small businesses are struggling during this time. I think that you made a great point that the coronavirus has not only already drastically affected our economy and culture, but it will also have a strong affect in the future even when “normal life” picks back up again. Many people are going to be a lot more careful when it comes to spending money, as you said how “savings will become a national obsession in the coming years.” The affect that this money-saving will have on consumers will have an impact on business in years to come.
I completely agree with your three steps to building a more stable and successful business in times like these. For starters, minimizing outflow of cash and cutting costs will help generate greater profit. A good example of companies following the second step, “anything for a buck”, is food delivery companies (like DoorDash and UberEats) foregoing delivery fees and charges in order to keep customers using the applications. Furthermore, other retailers (such as clothing stores and book stores) are offering discounted prices on items or storewide to promote online shopping in order to make up for lost in-person revenue. I also agree that the fear of the coronavirus will continue for years post-vaccine, as many businessmen will try to alter their ways in preparation for another pandemic or possible recession.
This was an interesting, brief read, as an outsider reading about the struggle that so many small business owners are facing now. I’m lucky enough to be a student (as much as I hate the abrupt change to online schooling), because I am not currently seeking a career but am also more or less capable of learning in the environment I am in. Of course, I know a great many students do not have the privilege of a safe home, steady finances, etc. to be quarantined in.
I would be interested to see society’s psychological effects, in reference to your advice in “Anything for a Buck,” of this very mindset. Of course, it has certainly felt like these hard times call for desperate measures, but I worry that “send[ing] confusing messages to your customers” might play into the dog-eat-dog mentality. Often, I think of the scene in “It’s a Wonderful Life,” when all the characters want to withdraw the money they have in the bank; which ends up perpetuating the financial chaos in the town. (Not a great example, but it’s equally tough for me to keep a level-head and not compare the present to dystopian society’s or other sci-fi stories.)
Again, I recognize this advice is for those that seriously need it, but I wonder/hope there is a way for those businesses that aren’t wholly going under, to take the reins and maintain a semblance of similar composure pre-pandemic. For society’s sake, of course our psyche will be impacted in shockwaves (and is currently undergoing the response to such a bizarre scenario). But I would hope that the companies that are staying afloat can continue to find innovative ways to decrease this knee-jerk reactive fear because it seems mostly conducive to the economic downturns. It’s tough, obviously, as an owner and consumer; to truly comprehend what tomorrow will bring.
I will also add that this blog-site is super cool, and I have had a great time being in your class! It’s not too common, to find a professor that allows multiple perspectives to be heard in a respectful environment (nonetheless!). Thank you for giving us all more ground to stand on, in terms of business and autonomy as we go into adulthood.
This season of life for entrepreneurs seems to require, above all else, a requiem to the foundations of bootstrapping. It all boils down to the reality that cash is king. We are all so focus on “getting back to normalcy” that our thoughts are too often limited to the short term, and this is not a bad thing. Figuring out how to increase cash flow and finding opportunities to “make a buck” may make or break a small business. However, we must also turn our attention to the long-term implications of a pandemic. Just as you wrote, in the coming years we will see an obsession with saving; people and businesses will want to create a large cushion to fall back on. Although there are long- term upsides to this mentality, it will vastly shape the markets we have come to find predictable. Consumers may be less likely to engage with premium products, or perhaps they will seek them out to ensure endurability. What we must always remember is right now, we don’t know, and we cannot know. These steps to survival highlight this and provide a tentative path towards the light at the end of the tunnel.
I never thought of COVID-19 as changing more than our economy until reading this article. Like stated, it is changing our culture and will not be forgotten by any of us living through it. Thinking that most businesses are going through the same thing is stressful and confusing. This would be a great article to read as a new entrepreneur, a little guidance can go a long way. Cash flow is very important right now I know a lot of business owners are trying to keep some. Entrepreneurs are constantly adjusting operations and cutting expenses to maintain positive cash flow while following the statewide mandate. I could definitely see people be more conservative with their money, when in a state of crisis we all want to save our money in case anything worse happens and we never know when this pandemic will end.
You have a lot of great points here. All I hear around my house is how the world isn’t going to be the same after this pandemic, which I think is true. The world that was before COVID-19 will not be the same when we can leave our houses again. I liked the point about what you said about switching the mentality to do “anything for a buck.” Entrepreneurship is a process that can change any day and having to be optimistic about the outcome, even though you might have to take a few steps backwards. Backwards isn’t always a bad thing, it might just be a way to a better path for a better business. Seeing the world again after this pandemic is definitely something I have never witnessed before and it will be interesting to see the economic impact or if this will be the time entrepreneurs will be able to bounce back.
When you say cash is king, are you talking about cash-flow or saving cash? You talked about the importance of optimizing cash-flow for businesses and then mentioned the public shifting towards a financially conservative mindset, but didn’t offer your opinion on whether or not saving is the right thing to be doing. Though I personally don’t have much in terms of wealth, with the Federal Reserve printing as much money as they are right now, if I did, I wouldn’t be holding it in cash. Would you agree that your money is better off being invested in real-estate or businesses (not stock)?
When it comes to individuals, families, and small businesses, there may not be a massive pool of cash that needs to be invested in fear of cash devaluation. So, is cash devaluation something that those people need to be afraid of? If so, where are some good places to put your cash?
All good questions. Honest economists tell us that nobody knows how to answer these questions in today’s conditions because we have no data to model what we are going through from any times past.
Cash is the life blood for entrepreneurs in any conditions, however. Entrepreneurs need to focus on cash flow and cash reserves. Cash is not an investment — it is a critical resource. It is not an either/or when it comes to startups or real estate. It should be an “and” in your portfolio. Cash allows entrepreneurs to weather storms like this one, fund their own growth, and most importantly, sleep a little better at night!
You are absolutely right- cash is KING! It’s crazy to think that just months ago we were talking in class about how the economy goes through cycles. This pandemic has definitely proven to add fuel to that economic cycle and unfortunately everyone is scrambling in the dark. These are the early stages, leaving so much unknown. I like how you mentioned, “Don’t worry about strategy. Don’t worry that you might send confusing messages to your customers. They are likely in survival mode, too.“ This is so true; we are ALL trying to survive. As a consumer who has already seen the transition of businesses around me, like restaurants going the extra mile for that extra buck they’ve proven the initial mentality is back. I have a feeling though that this will serve longer than we expected. I am amazed at how fast the country has been able to come together and acknowledge the fact that many of these businesses need our help and our dollars. There has been a gigantic shift not just in our economy, but like you mentioned, even in our culture and society. I’m am eager to see how WE as people change the way we invest, buy, and sell.
This a particularly hard time for small businesses indeed. These business owners need tips like this to keep their business afloat. Especially, the Small Business association running out of funding. The Federal government seems to swoop in for the rescue of large corporations and franchises but is leaving the small businesses out to dry. It’s absurd since these small businesses are such an important part of the economy. I am guessing the nearly 30 percent of all small businesses will fail and an even higher percentage of restaurants. I think you are right, in the future there will be a shift in the Small business realm as we will see new restrictions and consumer savings. Thanks, Corona.
This a particularly hard time for small businesses indeed. These business owners need tips like this to keep their business afloat. Especially, the Small Business association running out of funding. The Federal government seems to swoop in for the rescue of large corporations and franchises but is leaving the small businesses out to dry. It’s absurd since these small businesses are such an important part of the economy. I am guessing the nearly 30 percent of all small businesses will fail and an even higher percentage of restaurants. I think you are right, in the future there will be a shift in the Small business realm as we will see new restrictions and consumer savings. Thanks, Corona.
The idea that you should cut as much as you can in regards to spending seems simple, but I imagine that an entrepreneur faced with this task may struggle. Although they may have the idea that the things they are spending money on will help business in the long run, you point out that until you are actually generating a profit, you should wait on other expenditures. Once you have a steady profit coming in you can embark on other avenues within your business, but you should really make cash flow your main priority before you decide to expand.
Dr.Cornwall, this article is such a great tool to use for my financials in the near future upon graduations so thank you for this. Slowing down the outputs of your cashflow is very important to bring an increase in the input. I love the anything for a buck part of this article because that is so true weve all been there working for anything for a buck. Cash is really everything in todays world and will forever be changed due to this economy we are having right now.
Hey professor – per usual, you are correct. Cash truly is king. Looking back in hindsight, I am very impressed by how spot on some of the your predictions were about small businesses failing, and how the remedy to that will be to find a way to bring in short-term revenues. At the end of the day, when things get bad, cash is the only thing that matters!
These three steps are important during any stage of business. You should always be prepared to revert back to survival practices no matter the current environment and above all else, monitor cash flow.