The partial re-opening of the economy will be music to the ears of business owners across the province. Many have been champing at the bit for business life to get back to normal. But before diving headfirst back into business operations, it is worth taking stock of where your business sits now and what it will take to keep it going over the coming months.
The level of disruption we have experienced at work and in our personal lives has been dramatic. It will be difficult, if not impossible, for anyone to know what normal will be like when they return to work. But one thing is certain; the new normal will not resemble what was normal a mere nine weeks ago. Business owners diving back in to work without careful consideration of these changes may find their losses increasing.
Your (Re) Starting Point
The re-opening of a business should include a few important steps, beginning with taking stock of your current financial reality so that you can have a clear picture of where you are starting.
In order to comply with new health & safety requirements, many businesses will have a number of new and on-going costs associated with re-opening that will need to form part of your financial forecast. Diminished capacity to accommodate clients and staff in a restaurant, retail space, factory or office, will put a significant dent in revenue.
To further complicate things, estimating customer demand will also be challenging. It’s not all bad news – just ask Robin Hood if COVID-19 has helped them sell more flour. But for every product selling out, there are many more that consumers are simply not permitted to purchase or that have fallen out of the consumer mindset as they ride out the virus. Even when the government permits businesses to re-open its uncertain how comfortable consumers will be in venturing out to shop or dine.
Part of your planning may be guess work, so it is important to run a few different financial scenarios, including the potential re-shuttering of businesses if there is a second wave of the virus. You will need to determine what cash you are going to need on-hand to get through the coming months. Your accounting software may already have a cash flow projection function. If not, BDC’s COVID-19 resources pages includes a 13-week and monthly cash flow projection tool that you can download.
Knowing at the outset how much cash you need in order to keep the doors open won’t make the months ahead easy, but it may make them easier to manage effectively. If a cash injection will be needed, now is the time to seek out financing through one of the government aid programs such as the Canada Emergency Wage Subsidy, Canada Emergency Commercial Rent Assistance or the Canada Emergency Business Account, or through other traditional and alternative lenders.
Cash flow strategies when re-opening
- Until there is a pattern in customer demand, it will be beneficial to maintain low inventory levels as part of your cash flow strategy.
- Prioritize large projects that tie directly to increased revenues and cash flow.
- Focus your time, energy, and available cash on your most profitable products and services. It may be beneficial to limit your range of good or services when you re-open to help meet demand and minimize your inventory.
- The stability of your supply chain will be play a big part of your road to profitability. What was once a highly profitable, easily accessible and dependable product line may no longer be the case.
- Every business is experiencing this crisis, so everything is negotiable. Talk to your clients, suppliers, landlord and business partners to see where changes to your commercial arrangements can improve your cash flow. For tips on how to speed up your accounts receivable see – Collecting What’s Owed: The Awkward Side Of Business.
Everyday at GGFL we are seeing the drive and determination of entrepreneurs at work. Business owners are adapting everything about their business and learning from each other. These changes range from developing new products, changing how a service is delivered and adapting internal operations to meet increased and new health & safety requirements.
Before setting off down this new road, taking the time to forecast what you are going to need to make it to the other side of this pandemic will help improve the chances of success.
