As a business owner, you know that at some point a “financial storm” will hit—whether it’s a pandemic, recession or a personal crisis. To mitigate the damage there are a few strategies you can employ in advance to ensure you can survive and maybe even thrive on the other side.
Common challenges
For most business owners, the biggest challenge is determining how to shift operations to make it through the crisis, especially if it’s their first time facing this level of upheaval.
Some common questions business owners should be asking are:
- How do we continue to generate sales?
- Are there new sales channels that we can take advantage of?
- How do we manage staffing levels?
- How can we optimize our cash flow and working capital?
- How long can we survive before we run out of cash?
- Should we remain in operation?
Decisions must be made quickly in response to a crisis, but there’s also the additional challenge of ensuring that your business is ready to jump back into full swing when the crisis subsides.
Creating an action plan
The most positive approach is to seek opportunities. If your existing sales channels are no longer viable, there may be opportunities to diversify and grow as a result of the crisis. Try looking at operations from a different perspective to determine if there is a way to operate that hasn’t been done before.
Forecasting and budgeting future cash flows can ensure the business remains operational. Work closely with your accounting team to build an accurate cash flow statement that will help determine which expenses can be eliminated and when a cash-crunch might occur.
Another important area is maintaining open communication with your partners—landlords, suppliers, customers and financial institutions. There could be an opportunity to negotiate terms and conditions with these partners that allow for some financial flexibility or relief. Keep in mind that everyone could be experiencing similar financial restraints, so you need to negotiate terms that work for all parties.
Getting creative
Most crises force businesses to innovate at high-speed. As businesses learn to adapt, you may find opportunities for efficiencies in the future. During COVID-19, many organizations quickly mobilized their employees to work from home to adhere to physical distancing guidelines and bolstered their digital communications and marketing to better engage with consumers. Both actions will undoubtedly prove beneficial for businesses as they look forward.
We also know how important it is to continue to think about engaging our teams and trying to find ways to connect. Humans are social creatures and when face-to-face interaction is taken away, we can get depressed and unmotivated. Trying to maintain some sense of normalcy during the crisis might mean bringing teams together virtually for team meetings, social gatherings and virtual coffees. When your employees feel connected, heard and valued during a crisis, they will, in turn, be happier and more productive.
Before a storm hits
Have a business continuity plan (BCP) in place. A BCP outlines the potential impact of disaster situations, creates policies to respond to them and helps businesses recover quickly so they can return to normal. The plan should have clear objectives and execution tactics to both prevent and recover from potential threats.
Another important area to plan for is emergency funding. Figure out what level of emergency funds are adequate and easily accessible if a financial storm hits. Sometimes businesses may have access to credit before a crisis but gaining access to these funds during a crisis can prove more difficult. If you don’t have an emergency fund, start somewhere. It’s often challenging for businesses to put aside a little bit of “just-in-case” cash when things are going well, as the preference is usually to invest back into the business. Take a balanced approach, and, where possible, put aside a little bit of cash into an emergency fund.
Make sure that you build a team of professionals. This could include a commercial banker, accountant, lawyer and insurance advisor. They will not only help you prepare for any financial storms but can be a beacon of light while the storm is happening. Don’t be afraid to reach out to other business connections who may have the experience you can learn from.
Here is a great local resource to ensure Kamloops businesses stay connected and informed during this time.
Crises come in many different forms—and not all will impact the global economy. By being prepared and working together, we can ensure that our local businesses come out of these financial storms ready to grow and thrive.
Valley First is a premier provider of banking, investment and insurance services for residents and businesses in the Okanagan, Similkameen and Thompson valleys.
As a division of First West Credit Union, BC's third-largest credit union with 50 branches throughout the province, Valley First brings innovative products, an extensive branch network, and local decision making to the banking experience.
For more information on Valley First, visit www.valleyfirst.com.
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