St. Louis small businesses are facing an unprecedented period of uncertainty due to economic conditions caused by the coronavirus. With an unpredictable revenue stream and workforce questions, small business executives are looking for answers.
And businesses need to act fast. Many small businesses only have enough resources on hand to last 45 days or less, said Gwendy Brown, vice president of research and policy at Opportunity Fund, which lends to entrepreneurs.
“Small business owners are much less financially prepared than most households,” Brown said.
According to Greg Pfueffer, Mueller Prost Partner, the biggest challenges stem from the supply chain and how adverse effects could hit Main Streets around the U.S.
“Many executives are worried that when the supply chain gets impacted, they are not going to be able to make the purchases that make the product, which impacts the workforce,” he said. “They want to know how to manage that.”
Pfeuffer, who has been with Mueller Prost for 23 years, recommends businesses develop several strategic plans for different time frames with unique sales projections.
He said to have a plan A, B and C, and project cash flow for each scenario. Along with those forecasts, they should include variables that are specific to their business. For example, Pfeuffer said, what does your company look like 90 days from now with only 75% of the sales budgeted? From there, executives can plan their next move.
Then, look for ways to manage expenses and cash flow, he said. That could mean stretching out schedules with vendors, cutting back on overtime costs, delaying capital improvements or reducing schedules by a few hours.
“The last resort is cutting workforce,” Pfeuffer said. “Look at all of your budgets and review ways to reduce or delay fixed costs.”
There are outside resources that businesses can consider for things such as access to capital, securing additional credit, and working with the U.S. Small Business Administration and other federal programs, Pfeuffer said. One program is the “research and experimentation tax credit,” in which small businesses can apply a credit against payroll tax liability for investing in innovation and improving processes.
“In order to survive, you are going to have to make difficult decisions, but part of that can be mitigated by expanding credit and having conversations with suppliers and venders,” Pfeuffer said.
Lastly, Pfeuffer advised companies look beyond the current economic situation and envision what a recovery might look like. He said businesses should be ready when the economy turns a corner.
Keep any eye on inventory and make sure you have some on hand for better times, he said. Ensure you aren’t overspending and wasting cash, but be strategic and prepare for future opportunities.
“Everyone is in the same boat,” he said. “There is strength in numbers for businesses, and many are experiencing the same challenges.”
Planning for Recovery
Greg suggests small businesses can mitigate the adverse effects of the coronavirus.
- Strategically plan out business scenarios and forecast for 30, 60 and 90 days.
- Look for ways to manage cash flow and costs using the forecasts
- Consider external assistance from federal and local sources
- Prepare for a turnaround without overspending
This article was initially written as an interview by Vince Brennan, Managing Editor of the St. Louis Business Journal on March 19, 2020.