How to Adapt During COVID-19 and Plan for Future Business Crises
The global pandemic has been an eye-opener in a multitude of ways. As a business owner, how are you going to be proactive and prepared for the next crisis? It is integral to think about its future to sustain it. What can save you the time and energy to come up with instant solutions in a crisis? The answer is a well-thought-out “plan”.
The importance of “plans” in a crisis
Covid 19 has brought the effectiveness of having a plan to the forefront. Contingency plans can help you in avoiding extra struggles to support your business. As a business owner, your options will not be limited if you are prepared well.
“It’s a really good time for you to sit back and navigate the current situation. Then, you should reflect on the future and answer questions like, how can we do things more effectively and more efficiently?”
What are your immediate options in a crisis?
It is integral that you know your options when you land in an unfamiliar situation. In this way, you will be able to take immediate actions to row your financial boat out of the dark waters. Here are two options that are true business saviors:
Paycheck protection program
You can look at the SBA loans. Being backed up by the government can help you run your operations smoothly as you will be able to maintain the payrolls. In addition, you can get disaster assistance by availing of the “disaster loans”. Finally, there are dedicated covid-related loans in the current situation that can provide economic relief to your business if you expect a temporary loss in revenue.
Reduce Overheads
It’s time to try different lenses when you look at your budgets and operations. By reducing unnecessary overheads, you will be freeing up a lot of cash that you can use in emergencies. One example of this can be “virtual working”.
Suppose you have a surge month. Rather than working around people’s schedules and arranging several face-to-face meetings, it is better to have all of them on virtual platforms.
“Keeping up and learning new ways can help businesses operating more cost-effectively.”
How can businesses strategize for future crises?
The current crisis has left many business owners overwhelmed. We have all been in a place when it feels like we are stuck in a whirlpool of problems and can’t find the way out. However, proactive planning and having a strong grip on the situation can prevent you and your business from derailing from the set objectives. Here are some strategies that can help you secure your best interests and that of your business.
Develop your emergency fund
I always stress the fact that business owners should put away money for emergencies. Apart from having spare cash for your business, your personal finances must be fluid too. Now, this point is not just my opinion. In his book “the richest man in Babylon, ” George Samuel Clason says that “pay yourself first”. Try to see your business as a separate entity. In this way, when the disaster strikes, you will have operating funds available.
Establish a line of credit
I have been telling many of my clients to take advantage of the present situation. Banks are continually looking for opportunities to lend money, and that too at low rates. So, if you do run into an emergency, you can continue operating without tapping into any of your personal funds.
Imagine an automobile business owner who hasn’t explored options of being secure during a crisis. What will be the options to keep the business cash flow positive? For example, he might have to take money out of retirement funds or personal savings. This can be psychologically destructive. To steer clear of the financial roadblock, it is better to opt for refinancing with the help of the back.
Form a “family umbrella”
Try to create a business structure that will allow for diversification and cash flow. I will explain this strategy by narrating a story of my client, who had a large business. It had many parts that included real estate, a manufacturing plant, and a mechanical shop. So, I looked at it and asked him to structure it out by diversifying it. Resultantly, the main manufacturing plant became one business, and the rest became separate individual businesses.
The family umbrella helps in limiting risks. Apart from the crisis, this strategy can secure your finances in other scenarios. For example, suppose the kids want to take over the business and aren’t successful at it. The business owner will still have other cash flow streams. Breaking down a larger business into several smaller units can also benefit in mitigating tax liability.
Disability planning
I have seen people going out and buying life insurance. But what happens if they get disabled? If something happens to a business owner, then who is going to take care of the business? A business overhead insurance can act as a temporary solution as it will keep the payroll going. After that, somebody else will be hired to do the tasks that were the responsibility of the disabled individual.
Personal family protection
This strategy revolves around how you are going to protect yourself and your family. There are three ways in which you can create a safety net.
- An estate plan that will protect you in case something happens to you or your family.
- A well-communicated succession plan so that the business keeps on rolling.
- An adequate life insurance that is tailored to your needs.
Matt will help you strategize!
Are you struggling in the current situation, don’t have a plan, or are confused about where to begin? Contact me by booking a 20–30 minute session. We will talk about your business situation and see how we can come up with the best strategy.
Disclaimer
The information compiled and posted here solely represents the opinions and views of the guest. It might not necessarily be similar to the opinions and views of High Lift Financial. The availability of this content only serves educational and informational purposes. It is in no way a substitute for tax or legal advice or professional investment.
Always make sure to consult your financial advisor with any queries related to personal or business planning. DiFrancesco Financial Concierge, LLC. d/b/a HighLift Financial is a Registered Investment Advisor registered with the State of Pennsylvania and subject to the State of Pennsylvania’s regulatory oversight.