The past year certainly hasn’t been easy for anyone. In fact, a recent report by CNBC reveals that more than 60% of businesses that opted to halt operations during the onslaught of the pandemic have decided to permanently shut down instead.
While there is notable progress regarding the development, production, and distribution of the vaccine, it’s still too early to say the pandemic is drawing to a close. Business owners need to fortify their contingency plan if they want to adapt to the new normal.
Don’t worry if you’ve failed to keep your business alive. Bear in mind that more than half of the SMBs in the country don’t even think they can continue operating for more than three months under the current conditions. There’s nothing to be ashamed of.
The first step to recovery is getting started, and we’re here to help you through the process. Keep reading for a full review of the most common challenges business owners faced during the pandemic were and how to structure a solid business contingency plan.
Top 10 Challenges Business Owners Faced This Pandemic
1. Emergency Cash Shortages
Most business owners will have at least three to six months’ worth of expenses saved up which they can use in case of emergencies. The only problem here is that these types of emergency funds were made for minor setbacks, not global-scale pandemics.
At the rate we’re going, there’s still no saying when things will return to normal. This leaves business owners in a pinch as most have already exhausted their emergency cash reserves on rent, utility bills, and taxes by this point. If their sales performance hasn’t improved yet, they’ll have no way to replenish the funds they’ve used.
2. Unpaid Business Loans
Many new business owners use bank loans to fund their startups. This allows entrepreneurs to start their desired business right away even if they didn’t have sufficient capital to do so yet. One just has to subtract monthly payments from business profits until he/she fully pays off the loan.
This is an efficient strategy and is fairly simple to execute. However, the same can’t be said for those who decided to apply for a business loan and fund their new venture at around the start of 2020.
Unsuspecting entrepreneurs who got approved for a loan may have trouble meeting monthly payments since the pandemic is preventing most businesses from operating at full capacity. Considering that even established businesses are barely making ends meet, it’s understandable why startups would have trouble paying off their debt.
If the loan is backed by collateral, then one might be able to walk away scot-free as long as they surrender the asset backing the loan. This isn’t the ideal situation. However, you’ll at least be able to remove any debt liabilities that can be used against you.
Perhaps the worst situation here is if you applied for an unsecured loan and are now forced to make monthly payments even if the startup has already shut down. In cases like these, the business owner should prioritize securing the necessary repayment funds. Consider setting your business contingency plan aside for now.
3. Adjusting to Physical Distancing Guidelines
Whether a business will be able to adjust to physical distancing guidelines depends on a case-by-case basis. For example, e-commerce stores/SaaS brands that simply charge recurring payments for their products and services can easily adjust to the new normal since their business primarily operates online.
On the other hand, those who run nightclubs, cabaret clubs, and bars might have a hard time adjusting. Considering these are always jam-packed, physical distancing guidelines will be impossible to observe. Plus, take note that many states actually prohibit these types of high-risk establishments from operating in the meantime.
4. Employee Retention
Downsizing is never easy. Even if it is for the betterment of the company, the idea of laying off—or even furloughing—some of your most valuable, trusted employees is heartbreaking. There’s also the fact that everyone needs a stable source of income during this pandemic, so none of your employees can afford to lose their job right now.
Unfortunately, employee downsizing is one of the most common, efficient ways businesses stayed alive during the pandemic. It’s a tough yet necessary decision you have to make.
The best you can do for the employees you’re letting go of is to give them their full month’s pay and the necessary bonuses. You can also volunteer to serve as a reference on their resume.
Pro Tip: If any of your entrepreneur friends are also struggling and in need of an extra set of hands to keep the business alive, try referring some of the employees you plan to lay off.
5. Broken Supply Chain
Many online/brick-and-mortar businesses ship their products, equipment, and tools from Chinese sources. Chinese made products are often more cost-efficient. However, with the travel bans and restrictions following the pandemic, shipping goods from China—or any other country for that matter—has been put to a halt for quite a few months.
The only workaround here is to find a local supplier who can temporarily cater to your needs in the meantime. Prices may not be as low so you might not be able to make much profit, but at least you’ll be able to keep your business running while waiting for the travel restrictions to ease up.
6. Shipping and Logistics Delays
Not all air and sea freight forwarders can operate at full capacity yet. This means e-commerce stores that cater to a global audience might not be able to ship products and goods as quickly and efficiently as they used to.
A temporary fix to this issue is to appeal to your customers. Explicitly state on your website that due to the COVID-19 pandemic, there might be some delays with the shipping and delivery of orders.
7. Work and Personal Issues Mixing Together
Dealing with the stress of keeping your family safe from the virus and the pressure of maintaining a struggling business is no easy matter. It’s easy to understand why many entrepreneurs experience anxiety breakdowns and panic attacks.
Business owners under pressure must remember to keep calm and take the necessary breaks needed to restore mental health. A stressed, congested mind will not be able to produce bright ideas. Forcing the body and mind to go beyond what it is capable of will do more harm than good, trust us.
8. Fear of Getting Infected
Some entrepreneurs are on the fence about whether they should continue daily operations or not out of fear of catching the virus. This especially applies to those who run high-risk businesses such as spas, clinics, bars, and restaurants. Being able to keep your new venture alive amidst the pandemic is great, but you should never sacrifice your health just to do so.
9. High Cost of Cleaning and Sanitation Supplies
Regularly stocking up on bleach, disinfecting alcohol, hand sanitizers, hand washing soap, wet wipes, and toilet paper can pile up quite a huge bill in the long run. These are necessary expenses. However, new businesses already struggling to make ends meet might not be able to invest in these products anymore.
10. Regaining Public Trust
Gaining public trust is especially important for those who run brick-and-mortar businesses. You need to ensure customers that you run a clean and virus-free shop that’s safe to patronize amidst the pandemic.
Remember: Nobody wants to catch the virus. If your establishment is filled with maskless customers and crew walking around with dirty, unsanitized hands, then attracting both new and repeat customers will be quite a challenge.
Bouncing Back from the Pandemic
Here are some helpful tips to help business owners bounce back from their losses:
Overhaul Your Business Contingency Plan
Do not stay fixated on your losses. The key to building a successful business despite the ongoing pandemic is adaptability. Focus on coming up with a new, overhauled contingency plan to help your business not just survive, but thrive this year.
Don’t Overthink Things
Carefulness is a very crucial trait every business owner must have. However, one’s carefulness must not lead to overthinking and an “analysis paralysis.” Failing to take action caused by overthinking produces the same results as not addressing your issues in the first place: absolutely nothing.
Refocus Your Business Goals
The goal of business has always been the same: to provide solutions. Now, that there’s a pandemic, you have to understand that the public’s needs and demands may have shifted. Take time to reassess your business goals to determine whether they still address your customers’ needs or not. Don’t be afraid to steer your business toward a new direction.
American SMBs and the pandemic
How business owners are adapting to the ongoing pandemic varies on a case-by-case basis. For example, 51% of surveyed business owners feel they won’t be able to continue operating for more than three months. Meanwhile, a small 13% have confidence in their business contingency plan.
Business contingency amidst the pandemic
An SHRM survey reveals that 52% of their surveyed SMBs feel they’ll be out of business in six months if the situation does not improve any time soon. Furthermore, the majority of these businesses have only been able to survive by laying off and furloughing employees
Business vulnerability to the pandemic
Data reveals that the businesses at most risk of shutting down this pandemic are small to medium enterprises with limited financial resources and cash flow.
How did your business cope with the pandemic this past year? Share your experience with us in the comments section below!