Money Moves During the Pandemic Recession

The 2020 recession did not come to play. If these last few months of the pandemic have showed us anything, sis, it’s that things are always changing. COVID-19 and stay-at-home orders have impacted everyone, but Black-owned micro businesses like yours and mine have probably been hit hardest of all. Financial experts have already identified this as a major recession. 

So how can you and your small business weather this storm? Now more than ever, it’s time to think about budget and cash flow. Plan ahead, so that when recession hits you’ll be as prepared as possible. 

When planning your budget and cash flow in such uncertain times, your first goal is to calculate your runway (that is, the time it will take from the current moment until your startup goes out of business, assuming that revenue and expenses remain constant). Ask yourself the following questions:

• How much money do you have now, and how much do you have still coming in?
  
• How much loss in contracts, clients, and revenue can you expect?
  
• What creative options do you have for revenue and emergency funding?
  
• What costs can you cut or delay?
  
• Taking these things into account, how long can your business last in its current state?
  

Once you’ve answered these questions about your runway, use these 5 strategies to plan for budgeting and cash flow in such difficult times.  

1. Work with your accountant or a finance strategist

A good accountant can help your business with everything from compliance to bookkeeping, while a finance strategist can advise you on business or personal finances.

Right now, working with these kinds of professionals can help you gain a clearer sense of the financial state of your business. Clarify how much cash you have on hand and what expenses you still need to pay. Identify the cuts and rank the payments you’ll need to make to stay afloat, and prioritize which ones need to be addressed first. Review and revise your overall budget, or create one now if you didn’t already have one in place. Find and plug any “leaks,” or those places where money is sliding away – whether through being wasted or by getting left on the table. 

2. Reach out to clients and key stakeholders

Clients, of course, are those who pay for your products or services, and it’s important to think of them during this time: will they be willing and able to continue purchasing from you, if they’re being hit by the same recession? However, it’s also critical to think of your key stakeholders, or anyone with a stake in your business. How have your suppliers, creditors, and the greater community also been impacted, and how will this affect your business too? Honestly, the best way to find out is to reach out to these folks. 

Ask your clients and stakeholders how they have been impacted by the recession, and see if there is anything you can feasibly do. (This doesn’t mean giving away your labor for free, but it does mean showing that you have a stake in their well-being as much as they have a stake in yours!) Negotiate payment deferments and pauses in payment plans, if possible, and strategize how contracts or services can be resumed, in different forms if necessary. Calculate some of your shared losses together, and think about what the future of your community might look like following the current recession. 

3. Communicate with creditors and debtors

As a small business owner, you’ll have money that you owe and money that other people owe you – that’s just the long and short of it! But now is the time to communicate especially clearly with both sides, since everyone in business will be scrambling to get the money they need to survive the recession too. 

With your creditors, or the people you own money to, be realistic and document all communications. Buy time if you can: negotiate deferments and pauses in your own payment plans, and plan out how you will continue to make payments going forward. Consider which services your business *needs* in order to move forward, and prioritize payments on those. 

With your own debtors, or the people who owe you money, be patient but firm. Work with debtors to negotiate deferments and pauses as needed, but do not cancel debts entirely. Ensure that debtors see you are willing to work with them in meeting their needs, so that they continue to purchase from you once the recession has ended. 

4. Identify Alternate Sources of Revenue

Small businesses have many options for new revenue streams, and although a recession can make trying out such options a little more dicey, it is definitely worth a shot. In broad terms, alternate sources of revenue can mean either changing up your own business or else working to shore up the existing business. Or a bit of both!

Some ways of altering your business include brainstorming new product and service offerings, moving offerings online to reach a more global audience, or creating an online-only component of the business, such as a webinar or training series. Some means of supporting your existing business include applying for grants or low-interest emergency loans. Whichever route you decide to go, create a schedule and goals for yourself. For instance, try applying for a new grant every week or holding a product brainstorming meeting with the relevant teams each Friday while the recession lasts. 

Also, be sure to create and keep a growing list of grants and emergency funding. There are a ton out there. Make a commitment to apply for at least one grant every couple of days. If you have received federal PPP funds, remember they are loans. Unless you apply for forgiveness, you will have to pay this money back. Even after applying for forgiveness, you must meet strict (and ever changing) guidelines to get your loan forgiven. Click here to watch the replay of our Masterclass on PPP Forgiveness.

5. Talk to an HR specialist

As long as your business has even a few employees, you need human resources (HR), and many small businesses wisely choose to outsource some of this HR workload. However, when your business needs have changed to keep up with the recession, then your employees’ workloads will probably change as well. So, talking to someone who specializes in this area can be a real help. 

Working with an HR specialist, calculate your new need for work-hours. With other changes in your business, such as the move online or any new offerings, do you need to reduce or increase the hours your employees work? Also, create an employee communications plan informing people of any changes and develop policies for reductions or overtime. Perhaps most importantly of all, weigh your options for furloughs versus layoffs, so you can balance employees’ well-being with your business’s survival as best as possible.  

Recessions are challenging, sis, but if you follow these steps and think critically about the future of your business, you’ll greatly improve your chances for staying afloat!