The COVID pandemic has wreaked havoc on our region’s economy and, especially, our small businesses.
Restricted movement, mandatory closing of many businesses, “social distancing” and other factors are contributing to an economic disaster of monumental proportions.
With his or her small businesses closed, the normal desire for the owner is to reopen and reestablish the business in the community, just like before. All too often, in the stressful aftermath of a crisis or disaster, a business owner will make decisions not knowing the options that are available, the factors to consider, and, most importantly, the consequences of the decision he or she is making.
Prior to making a decision, the small business owner needs to carefully, thoroughly and objectively analyze the current situation and the options that are available. Basically, there are three options for the owner of a business that is currently closed. These include: (a) reopen the business; (b) close the business and (c) sell or transfer the business. Determining which option to choose is among the harder decisions a small business owner will ever make.
As you are starting your analysis, here are five questions to answer which will assist in your decision-making process
- Is your business financially viable? Conduct an analysis of your balance sheet, income and profit and loss statements. What do they reveal about the current financial health of your business? Make some assumptions about what the future may hold for your business. Based on these assumptions, will you be able to generate the necessary sales and profits to enable you to take on additional debt, such as the Economic Injury Disaster and Paycheck Protection Program loans. If the answer is no, you will have to think long and hard.
- Are your customers still going to need you/be there? Will the goods and/or services your business sells still be viable in the “new normal” (whatever that will be)? Remembering that a large majority of your current and future customers have or will be furloughed, laid off, fired from their current employment, will they still have the disposable income, desire or need to spend their limited funds in your business? Will there be a demand for what you are currently selling?
- Do you have the necessary resources available? For retailers, the mix of inventory is critical. Some analysts predict that, following the pandemic, most customers will be focused on purchasing basic goods rather than higher-end or luxury products. It is recommended that, when reopening, 65% of your inventory fall in the basic category. Can your supply chain handle this, do you even want to consider doing this?
- What will be your Return on Investment (ROI)? Bottom line, will you be able to generate enough business, sales and profits to make your decision work. And finally,
- Are you happy in your business? Do you like what you are doing? Is it enjoyable or just drudge work?
While not all encompassing, the above questions are a good starting point for framing your thoughts process.
One thing to remember, there are resources available to help you with this. Organizations like the Small Business Development Center (SBDC), the Service Corps of Retired Executives (SCORE), among others provide free assistance. Chambers of Commerce provide information and tools that will prove useful. Your accountant, attorney, insurance agent and banker are also people who can advise you in this highly stressful time. Reach out and use them.
James T. Carroll, III
VP Small Business, Hampton Roads Chamber
Executive Director Hampton Roads Small Business Development Center, Inc.