March 24, 2020
A plan for Small Businesses facing a financial crisis
Fortunately, small businesses facing a financial crisis have at least two natural advantages:
1. Being small allows you to react quickly to a crisis
2. As a small enterprise, you generally have a lower level of overhead compared to big global companies.
These two inherent small business advantages should give you the confidence you need to react quickly to the crisis with a well thought out plan that is executed properly in order to ride out the financial storm. There are basically three areas for you to focus on during a time of crisis:
1. Maintaining revenues and getting paid by customers
2. Maintaining the appropriate level of employees needed during the crisis with an eye out for staffing needs as you recover.
3. Controlling overhead. Naturally, at all times you want to minimize overhead which are fixed costs that are due regardless of sales volume. But during times of crisis, it is really important to be lean so you can operate during periods when there is very little cash inflow to cover business cash needs to pay fixed obligations.
Steps to follow for managing your business through a crisis:
1. Ensure Strong Leadership. Strong, highly visible leaders build strong cultures, rich in values. These values will not only serve as a foundation for your crisis planning initiative but, in the face of a crisis, they will determine how well your company responds.
2. Assemble a Crisis Management Team. This should include individuals from multiple disciplines within and outside your organization, to develop your crisis management plan.
3. Develop a Crisis Management Plan. Crisis plans should then be developed to detail the exact response needed for each possible situation.
4. Train your Employees. This step is essential. As they engage in their daily activities, they should have the training and background required to not only perform their jobs but to identify potential issues. They should also be empowered to bring issues to the attention of the business owner or key management team. In addition, your employees need to have a thorough understanding of their role in the face of a crisis.
5. Communicate Timely and Consistently. Your company’s viability is directly dependent on timely communications with internal and external stakeholders, beginning with problem acknowledgment and ending with air-tight solutions. Message consistency is also key. Differing messages damage business credibility and will stall the recovery process.
Action Items for Dealing with a Financial Crisis
You don’t need to fly solo during a time of crisis. Build a team. Build a plan. Execute!
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