By Brandon Martin
As the uncertainty surrounding the coronavirus pandemic continues to grow, some small businesses have already been forced to close their doors for good.
To help remaining small businesses decide their next move, the non-profit organization, SCORE, recently hosted a webinar to give guidance on planning in a time of uncertainty.
“Predicting the future is difficult but business owners are asked to do it all of the time,” SCORE mentor and presenter Suzanne McGrath said.
In the webinar entitled “Reopening & Staying Open: Using the last 60 days to prepare for what’s next,” McGrath presented an overview of the challenges facing businesses and how to plan to survive a potential second shutdown.
She said business owners are not only facing a host of professional questions but also personal crises that are “very emotional” and can “create depression and paralysis.”
While it is difficult to have advice for every individual situation, McGrath said that the goal of the webinar is to “create a framework for business owners to ask the right questions and figure out their own best way to move forward.”
McGrath said that August through September is a great time to start looking at how to move forward because more information is now known about the pandemic and how it affects businesses. Also, it’s typically a time that businesses “press the pedal” to try to meet fiscal goals in the fourth quarter.
The first step of the process, according to McGrath, is to review experience.
“You do have a lot of information already,” she said. “Review that information about the pandemic so far. How has it affected your business? Use that as your road map.”
Some questions that businesses should ask themselves at this point are:
*How has your business been impacted? Did you have to close?
*Was your staffing affected?
*How did your customers respond?
*If you closed and reopened, what percent of business came back?
*How was your industry affected and how did it react?
*What is your financial condition? To what extent have government loans or grants helped your financial situation?
*What is your personal situation? Is COVID-19 creating personal pressures that are impacting your ability to run your business?
Once these questions have been asked, McGrath said the next step is to extrapolate the future.
“You’ve probably already asked yourself many of these questions,” she said. “The goal is to review that information in one place to see what questions you haven’t asked yourself. You don’t want to guess but use your experience so far to see how it will affect what might happen in the future.”
At this point, business owners should ask:
*What is your best assessment/prediction of what will happen in the next 6-12 months?
*If business returns to normal now, in 6 months, or in 12 months, can you survive? If so, would you have to make any changes?
*Under all these scenarios: what sales/revenue volume do you have to have in order to survive?
*Can you manage any credit or lease payments you have now, or would those have to be modified? If so, how?
Once this self–examination has been done, McGrath said it is time to crunch the numbers.
“It’s great to have experience. It’s great to have a gut but it’s also great to have these validated by the numbers,” she added.
To help, McGrath said that business owners should have a 12-month projected Profit & Loss
To develop the P&L, McGrath said performance data over the past seven months can be used to estimate monthly expenses and revenue for the next 12 months.
“If you have been open over the last 60 days, use those numbers as a starting point,” she said. “They provide the most current data about how your business has fared during COVID.”
McGrath suggested breaking the P&L down into two six-month periods. The first period, August through January, will most likely see the greatest impacts from the pandemic, she said. The second period, February through July, could see improved conditions, but McGrath said it’s best to operate under the worse-case scenario that they won’t.
“The further out in time we go, the more difficult it is to predict with accuracy so consider running both scenarios,” she added.
Focusing on the first six months, McGrath said to use expense and revenue data from June and July as baseline numbers.
Then, “take into account how changes in the economy and lifestyle may impact your business over the next six months,” McGrath said.
“Are you now or are you likely to be hard hit and underperforming? Does COVID-19 create opportunities that you are or can take advantage of,” she asked, adding that some industries have already jumped on this approach, such as distilleries producing hand sanitizer.
The next step is to take any seasonal impacts into account over the next six months.
McGrath said to ask the following:
*If your business is usually impacted by the holiday season, how is that likely to be affected by COVID-19?
*What could you do now to take advantage of the holiday season?
*What would that do to your numbers?
After the first six months have been assessed, business owners should do the same for the next six–month period, according to McGrath, but she noted they also should take into account unique variables like a potential vaccine.
After the P&L has been developed, the next step is to strategize using the numbers.
“Once created, P&L can help you look for opportunities to improve profitability in the face of the pandemic,” McGrath said. “Consider every way you can cut costs and be creative.”
Potentially adding new revenue streams is also an option for entrepreneurs who have the skill set to branch out in their industry, according to McGrath.
“You could increase revenue through online activity. You could add products and services,” she said. “There is plenty of opportunity from the adversity.”
Specifically, for restaurants, McGrath said owners could create a subscription meal service, do kitchen rental, offer virtual cooking classes, or even package and sell their “secret sauce” if they have one.
Once the assessment has been complete, business owners will be left with a couple of options: Stay in business and try to ride out the crisis or make the decision to close — now or at a future time.
When making these decisions, McGrath said it would be beneficial to reach out to a SCORE mentor, or potentially a bankruptcy lawyer, to make an informed decision.