Uncertainty can often equal difficult times for small businesses. When it comes to the current pandemic and market crisis, for a lot of people, this feels as uncertain as it gets.
If you’re like many small business owners, you might not even know where to start when it comes to weathering this kind of storm. That’s why we brought in an expert to share some tips to help with small business management and pivoting during a financial crisis.
Tom Sylvester is the author, business consultant, podcaster, and small business expert at TomandAriana.com. He and his wife recently wrote Lifestyle Builders, a book designed to help you build and manage a business you love.
We sat down with him to learn from his personal experience during this current crisis and the past recession. He offers guidance that you won’t want to miss on how to keep your small business thriving amidst a financial crisis.
Problems Small Businesses Face in a Financial Crisis
In the midst of a financial crisis, it can feel like there are myriad problems. Tom says there are several main issues that small businesses are facing due to the current financial crisis. Depending on the exact nature of your business and your location, you may find yourself impacted by some or all of these.
Limited or Suspended Operations
In some cases, your ability to conduct business can be severely limited. With this pandemic, in particular, small businesses that operated in retail locations may be operating under limited hours or may have been shut down temporarily. Depending on where your business operates, you might find that you cannot conduct business at this time.
Shifts in Customer Base
Even if your business remains open, you might find yourself losing customers. It isn’t due to anything that your small business did or didn’t do. It is simply the nature of customer behavior during a financial crisis. In times of uncertainty, even people who have the means to spend are more motivated to save their money.
Losing Business Revenue
Limited business and reduced customers create a third problem for small businesses. Any financial crisis brings about cash struggles and this one is no different. Many small businesses are having to address losing business revenue.
Recently, Tom has talked to a lot of small business owners who feel like they are a month or less from shuttering due to the fact that they don’t have cash on hand and so little cash is coming in.
The Importance of Pivoting
As a small business owner in a financial crisis, you are probably faced with the prospect of losing business revenue. That means that you need to find ways to preserve and extend any revenue that is coming in. To do that, pivoting is critical.
The first thing that any small business needs to do when it comes to pivoting is to say relevant. Tom says that in a financial crisis like the current one, you can’t worry about last month. What we were doing a month ago or even a week ago isn’t what we are doing currently. Instead, focus on the challenges that people are facing now and look for ways to help them solve them. Finding new ways to solve problems that your existing customer base is having is the hallmark of smart small business management.
Another aspect of pivoting involves shifting your customer base. As an entrepreneur, you are a problem solver and an innovator. What challenges exist today that didn’t exist in the past? Tom says that you want to consider how you can use your expertise and small business experiences to solve problems for new audiences. That might be looking at products, platforms, and more.
To learn more about shifting to different platforms like Instagram to support your brand, click here.
Managing Expenses in a Financial Crisis
Managing expenses is a key part of small business management. Understanding your expenses during a financial crisis is critical. Tom understands that you may not want to look at your numbers with a critical eye during a crisis, but you have to. He says that now is the time to review your checking account and business credit card account line by line.
If you find yourself losing business revenue, you need to extend your runway. You might be tempted to slash every expense. Tom says that isn’t effective.
Instead, you want to focus on eliminating the non-essentials. If there are expenses that are directly related to you running your business and making a return on investment, keep those. However, other things like subscriptions, technology, and possibly even some staff, might need to be reduced or temporarily eliminated. The goal is to maximize the cash you have on hand and the cash you have coming in to stay in business as long as possible.
Click here to learn more about return on investments and focusing your efforts as a content creator and brand.
Tom’s Personal Experience
Tom manages multiple small businesses. Because his businesses are so varied, he can speak to the many ways that a financial crisis might impact small business owners.
His real estate business is currently doing OK, though he knows that may not be the case for long. In fact, it was the last recession that offered Tom a chance to get involved in real estate. Additionally, his liquor store is enjoying wild success right now.
When it comes to business coaching, however, he has already experienced the importance of pivoting firsthand. Now that so many of his current and former clients have been hit by this pandemic season, he is positioning himself in a way where he can help others navigate the crisis. He wants to have a positive impact in a new way for his clients as he helps them find ways to survive and thrive during this difficult time.
Advice for FinConners in This Financial Crisis
Tom sees this financial crisis as an opportunity for people in the FinCon community to shine. This is a chance to guide their audience through a difficult situation and to showcase their expertise.
Tom offers a scenario of someone who has previously relied on public speaking to generate income for their small business. If you are a public speaker who focuses on live sessions and keynotes, ask yourself how you can shift online. Explore virtual summits and smaller virtual events.
As a personal finance expert, FinConners can support their audiences in many ways. In the current financial crisis, people are home more and may find themselves with more time than their previous schedules allowed. This means that you can create content to guide people through the financial crisis. Look for ways to contribute your expertise and your authority. Growing your rapport during a financial crisis can help you expand your audience and improve their lives.
Click here for more tips on how to turn your audience in a legion of loyal fans from Mr. MMM himself.
How We Can Prepare for the Next Recession
As a small business owner, you can take advantage of this current financial crisis to prepare for the next one. While our businesses may never be fully recession-proof, there are two main ways to prepare.
Tom says it is critical to understand what is going on right now and look for future opportunities. This could be an opportunity to make a financial move. It might also be a chance to anticipate the needs of your audience and innovate more.
Another way to prepare for the next financial crisis is to take note of how your small business is doing now. Tom says you want to ask yourself what you are doing well and what you could have done better. Once you have answers to both of those questions, make sure to act on them. He stresses the value of taking lessons into the future. For many small business owners, this is a reminder to be better in tune with your business finances.
While we often reflect on things with the benefit of hindsight, Tom emphasizes, though, that no one could have predicted this. That is why it is so crucial to try to have more cash on hand as we move out of this financial crisis and prepare for the next one. Of course, it varies by business and amount of expenses, but generally, having 3-6 months of cash on hand can help mitigate some of these problems, at least in the short term.
Final Thoughts on Thriving as a Small Business Owner During a Financial Crisis
A financial crisis is a time of uncertainty for everyone. Small business owners are often hit especially hard. However, a financial crisis does not necessarily mean the shuttering of your business. In fact, leaning into pivoting is part of small business management.
As a small business owner, you are an innovator by nature. Focus on taking steps to minimize expenses now while addressing the needs of your customers. As difficult as it will be, by doing this, you are laying the foundation to both survive and thrive as a small business owner.
What steps are you taking to help your business thrive during this financial crisis?
Please let us know in the comments below.
Thanks so much for having me on. Such a relevant discussion and a lot of useful tips.
If anyone has any questions on navigating this time as a business owner, leave a comment below with what question or support you need.
Such a pleasure to speak with you again Tom. Thank you for helping us see through the fog!