As we venture into November and the second wave of COVID is hitting Europe, lockdowns are entering back in force in many of the continent’s nations. For cash-strapped businesses, these coming weeks will be a critical time that may determine their survival. We have compiled below essential measures which can help ensure the survival of your business. For more information or help with the implementation of any of these points, contact us today.
Get cash
The most important step for surviving this lockdown is getting enough liquidity to meet required expenses during this time. Calculate your anticipated expenses – be generous: unmet costs often arise, so ensure that you have a 10-20% margin compared to your predictions. Further, the uncertainty as to the length of the lockdown means that businesses might stay shut for a while: make sure you think ahead to solutions for financing if the lockdowns were to be extended.
Apply for state funding, but don’t count on it
Most states will have some form of support in the form of loans or grants for small businesses that have been shut due to the lockdown. Take the required steps to apply for this funding but ensure that you have other sources of cash reading: as the first lockdown has shown, government benefits are often paid late or in incomplete increments, which may not match your business’ expenditures. Get creative with your financing: you could try crowdfunding if you have an enthusiastic customer base or even start offering equity. As a last resort, use your internal resources, though remember that most banks require a certain level of reserves as collateral for emergency lines of credit, should you need one.
Seek alternative sources of revenues and focus on profitable activities
Can you sell your products online? Do regulations allow you to stay open for takeaway or click-and-collect? Ensure you check the specifics of local policies and try to continue your activities as much as possible. However, keep in mind the additional costs you might incur by marketing your products in new ways – staying open may not be worth it if the overall expected profit is less than the cost of closing down for a month.
Control costs and renegotiate liabilities
Downsize as much as possible without compromising the future of your business. Furlough schemes, for example, are a good way to deal with a temporarily redundant workforce, saving on wages while allowing a prompt return to capacity when lockdown ends. Alternatively, you could try collaborating with local shops to purchase in bulk, which also greatly reduces costs. Try to renegotiate with creditors and suppliers any liabilities you have due during the lockdown. Entire supply chains are affected by the closures, so your stakeholders may be understanding and willing to postpone expenses. Remember, however, that the length of the lockdown is uncertain, so you may still be in difficulty meeting your liabilities in the medium-term.
Prepare
It should now be clear that lockdown-induced closures aren’t a short-term threat: as long as COVID isn’t contained, governments will be prone to take drastic measures to preserve the health of the population. Look to the long-run and take measures to increase your business’ resilience to future crises: rethink your supply chain (check our article about this on our blog), consider the source of your capital and the conditions attached to it, and go digital. The next decade is set to be filled with economic, social, and political uncertainties: prepare your business for success by anticipating future crises and consider your vulnerabilities.
Contact us today for assistance on any of these topics!
This article was written by SEPEC Consults SAS.