Messaging and Thoughts on the COVID-19 Crisis
Currently, the IECE team – which includes our community-based programs such as the Women’s Business Center (WBC), Small Business Development Center (SBDC) and the State Trade Expansion Program (STEP) – are on the front lines in San Bernardino and Riverside Counties, dealing with the issues facing local small business owners and entrepreneurs. Through our extensive counseling, training, and mentoring programs we are helping local businesses navigate this difficult time. What follows is summary of some of the messaging we have implemented for business owners and civic leaders. Note that this does not include our general messaging where we are disseminating information about the SBA stimulus loan programs such PPP and EIDL and how to be prepared to take advantage of those programs.
On Supporting Local Small Businesses in General
- Undoubtedly, COVID-19 is a health crisis but we also have to recognize the extreme damage to many Inland Empire small businesses. The COVID-19 pandemic has taken the wind out of a burgeoning economy; many small business owners and entrepreneurs have told us they were on track to have their best year ever. It will take extensive time, effort and resources to bring small businesses that can recover back to sustainability. We can all do our part by buying local – take the time to buy something from a local small business as often as you are able. If you know business owners that need help connect them to resources such as the programs of IECE: IE & CV WBCs, IESBDC and STEP.
Considerations for Local Consumers and Small Business Owners
- As both consumers and small business owners, as part of the recovery and rebuilding process, we need to get ready for a new normal.
- For consumers, one thing the COVID-19 crisis has done is point out how critical local small businesses are. They provide a valuable service and/or product in our communities, are often a social “hub” for the community, and are generally the largest employer in our communities. We need to be prepared to shop locally more frequently, to be willing to pay a premium in return for the convenience, the relationship we can form with the business, and supporting the local economy. These are the businesses that we can actually have a relationship with. How many of us can speak with the owner of Amazon? Exactly. However, we can form a relationship with the owner and the employees of our local firms. They also support our schools, students, community events through both funding and volunteerism. In return, the community needs to embrace them more.
- For small business owners, they need to find ways to provide more value and better service to customers – they need to get closer to their customers. For many local firms, this crisis has exposed that they often do a poor job of staying connected with many of their customers and are behind the times when it comes to technology. That means active social media presence, apps, building customer communication lists, etc. Actively creating and managing a relationship with their customers is paramount to being an integral part of their consumer experience.
- Most people that fly on an airline do not know that every plane has an amount of fuel to safely reach its destination, plus a couple of alternative airfields should there be an emergency. Small businesses need to think similarly by having a contingency fund. When I work with startup clients, a part of the financial pro-forma is a contingency line – we treat it just like an operating expense and their pricing model needs to sustain this. Granted, the COVID-19 is an extraordinary situation, but having a contingency fund is necessary for any small business. If the business model cannot support this, then fundamentally it will not be a sustainable business. Whether it is the economy, competition, seasonal changes, etc., there will always be situations that arise that will require businesses to operate on their “reserve fuel.”
Thoughts Specifically for Small Business Owners
Business Survival Strategies - There are several important strategies that small businesses can use to see it through these difficult economic times:
- Keep a close watch on cash flow – The difference between surviving and going under when times are tough depends in large part on understanding cash flow. Your cash flow statements are important because cash is the lifeblood of any business. It is vital that a business owner plans and understands the status of the business’s cash flow. Also remember when calculating cash flow that cash does not necessarily equal income; one of the most important aspects of analyzing your cash flow is to make sure there is enough cash to operate your business. To do this you need to carefully monitor your cash flow.
- Limit Credit to Customers. Cap the amount of credit you are willing to extend. Get partial payment for services upfront and bill upon completion of phases of a large project.
- Review and Revise Your Collection Policy. If you normally wait two months before calling a delinquent customer, accelerate the time to call--the longer you wait, the less likely it is that you will collect the money.
- Look Into a Working Line of Credit. Having the line of credit in place will help you if things sour or great opportunities happen and you want to act quickly. A line of credit is sound borrowing--you only pay interest on the money you take from the line.
- Reevaluate Your Space. If you are not utilizing it effectively, consider subleasing a portion if your lease allows you to do it. By bringing in rent, you have reduced your rental cost.
- Employ Energy Conservation Initiatives. With the cost of fuel and electricity high, all conservation measures can save you money.
- Comparison Shop Your Insurance Policies. Many small business owners routinely renew policies annually rather than shopping around for better deals.
- Manage Payroll. Think long and hard before laying off employees. The economic downturn is temporary, and it will be very costly to find and train new employees needed when business is booming again.
- Maximize Referrals. Ask existing customers for referrals. Offer them some reward, such as discounts on their future purchase for giving you referrals.
- Get Feedback. Now is an ideal time to find out what you are doing right or wrong by asking your customers.
- Work on Retention. Your existing customers are cheaper to market to. Ask yourself, how will I increase sales without adding one NEW customer?
- Meet with Advisors. Where do you see your business in three years? What will it take to get there? What can you do now to make it happen? Meet with your accountant to strategize your tax planning for the rest of the year.
- Revisit Your Business Plan. If you started out with a written plan to guide you, it is time to take another look. It may be that your initial business model is no longer viable in today's marketplace.
- Stay Optimistic. Prepare your business to take advantage of opportunities that will surely present themselves soon.
- Sole Proprietorships and Partnerships. Creditors can look to your personal assets--your home, your car, and your savings--to satisfy their claims.
- Limited Liability Companies and Corporations. Creditors can only satisfy their claims from business assets; your personal assets may be protected. If your personal assets are currently vulnerable, consider meeting with your Business Attorney to discuss changing your form of entity.
- Timing is a strategy in and of itself for international traders! Developing international markets takes time, usually twice as much as domestic markets. Oftentimes it is 12 months before an exporter begins to see a positive return for their efforts. The coronavirus crisis is expected to cut global trade by 13% to 32% this year, which will likely be more severe than our domestic downturn. However, as previous shocks have shown, trade declines very rapidly but recovers very strongly shortly thereafter. While it might seem counterintuitive, now would be the optimal time to start your export effort, the dollar is very strong, and the global economic crisis is hitting trade hard. We will soon be at the bottom of the market – which is the optimal time to position for the rebound.
- Looking for growth? E-Commerce is experiencing unprecedented global growth from 10.4% of global retail sales in 2017 to 14.2% of global retail sales or $3.5 trillion in 2019. The recent stay-at-home orders, social distancing, and nearly complete shut-down of travel due to the novel coronavirus outbreak is likely to have accelerated the adoption all forms of e-commerce globally, which has been cannibalizing traditional brick and mortar. The fastest growing segment of e-retail is Cross Border E-Commerce (CBEC), whereby consumers can purchase products directly from suppliers in other countries is expected to grow to nearly $1.5 trillion in 2022, with most of the demand coming from China.
Thoughts for our civic leaders (many of these are focused on forward looking approaches – as part of the recovery and rebuilding we need to rethink our approach to supporting local small businesses and entrepreneurs)
- One of the things the COVID-19 crisis is exposing about our economy – at the national, state and local levels, is that our “leadership” is actually getting in the way of innovation and business growth. We do not advocate lack of regulation; to the contrary, we advocate that as part of the recovery and rebuilding process that we be more mindful of the role of government in our economy and in particular, how state and local government can be part of the process of building a strong and sustainable economy.
- For the Inland Empire, an incredible part of our economic success is built on the local small businesses and entrepreneurs – their success and health is our success and health. Can we as regional leaders create a new blueprint for how you support an innovative, small business economy? Can we learn to lead, which will often mean that we need to get out of the way?
- In some ways, local, county and state governments compete with each other for jobs. They do this by offering start-up incentives and taking steps to create a “business-friendly” environment. These steps include tax credits, worker training, zoning changes, low-interest loans, infrastructure improvements and help with fast tracking licensing and permitting. Make it easy to connect with local government and simplify licensing processes, if necessary.
- Can our local leaders work to adjust zoning codes to reduce business costs? Can they help facilitate walkable business districts? Simplify local regulations for starting new businesses? Engage and support more programs like IECE that are on the “front lines” every day working with startups and existing businesses in the community?
- Every community (working with IECE as we are now pitching this to several communities) should have a business visitation program. The local leadership should be out twice per month meeting with local business owners to hear their concerns. Create a small business advisory council that can provide you with real time economic input on the conditions and challenges that your local businesses face.
- Consider your infrastructure – are your business districts attractive? Clean? Well lit? Enough parking? Good signage?
- Help businesses raise money. Find creative ways to support small business, through emergency funds, CDBG, etc. Chicago introduced a campaign called Seed Chicago to help Chicago businesses create Kickstarter fund-raising campaigns and curates them on a special Kickstarter landing page. The program was developed by a not-for-profit economic development organization chaired by Mayor Rahm Emanuel called World Business Chicago. The program provides tips on how businesses can better meet their fund-raising goals and get the word out about their Kickstarter campaigns. Participating small businesses raised more than $154,000 in 2013 and beer maker Miller Coors kicked in an additional $50,000 distributed between companies that met their goal.