Best Practices for Working from Home
Starting a Business During the Pandemic
In the COVID-19 pandemic era, we are in, many businesses are feeling a non-medical symptom: the “Cash Pinch.” Revenue from sales is down, but expenses (and principal on loans) still need to be paid. In this blog, we will provide some tips to better manage your cash flow and sustain your business during the crisis.
Introduction to Cash Flow
Cash flow is exactly what it says – cash flows in, and cash flows out. During any period, you want the cash flowing in to be greater than the cash flowing out. This is called having “positive cash flow.” During the pandemic, the most common cash flow challenge for businesses has been sales have decreased but expenses have not. So cash out has exceeding cash in; that is “negative cash flow.”
Tips for Increasing Cash-In
You are not helpless. Consider these tips to increase your cash-in:
Sell in a new way.
It might be difficult to find a way to adapt at first, but as time passes, your business will continue to profit from this new way of selling. Get creative and begin thinking outside of the box!
- Take-out and delivery sales. The restaurant at my local golf course started this and they make customers aware of this with emails and online advertisements to reach customers.
- Phone orders curbside pick-up. My hardware store is doing this now. If you know what you're looking for, it's rather easy to pick up the phone and call to place an order. When ready, you do not even have to leave your car because an employee will bring it to you.
Offer discounts.
Sell online.
Tips for Decreasing Cash Out
Look at all the ways cash leaves your business.
- Ask for help from those you owe money. You may be surprised at what they will do to help.
- Negotiate reduced or extended payments with your suppliers.
- Ask your landlord for a rent-free period.
Call your bank.
Your bank may be offering payment holidays. Also, some utilitiy companies are suspending shut offs. You can stop paying those bills and not lose service.
Finally, eliminate any discretionary expenses. Stop paying for things such as subscriptions, dues, travel, etc., that are not essential to your business's survival.
Tips for Finding More Cash
If you have done all you can to increase cash in and decrease cash out and your cash flow is still negative, what can you do?
- This is not the financial crisis of 2008; lenders have money. Your bank can be truly helpful by approving a new loan or your increasing lines of credit on favorable terms.
- Many people start a business with their own money and personal loans or gifts from relatives and friends. Are you or are they in a position to help?
- Investigate special COVID-19 related funding programs at the federal, state, and local levels. (Federal funds through the Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP) have been exhausted for the most part as of this date. However, consider applying for EIDL, PPP, and state and local programs. Contact us for assistance.)
Be creative in managing your cash flow during this challenging time. You may emerge from the crisis with a better, more profitable business model!
The Duquesne University SBDC provides free business consulting for entrepreneurs in the Greater Pittsburgh area. Click here to request free consulting, or contact the SBDC for additional help and information.
Don Lodge is a Business Consultant at the Duquesne University Small Business Development Center (DUSBDC). He is also a certified business coach who has worked with over 100 small business clients since 2002. His areas of expertise include profitability improvement, effective sales techniques, and employee relations.
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