The current coronavirus pandemic is the latest economic shock that businesses worldwide have to contend. An economic collapse is classed as an unforeseen event that has widespread impact and ramifications on the economy. Following the COVID-19 outbreak, government restrictions and public concern have resulted in rapid, often unfavourable, changes to supply and demand; leaving businesses to pick up the pieces. Despite this, all hope isn’t lost, and in this blog, we’ll discuss some ways set a company can set themselves up for survival.
Review financial position
One of the first courses of action should be to review the current financial position of the business. It involves assessing the liquid assets available, calculating the money owed to others and the money owed to you. Forecasting a cash-flow, this will give a business clarity on their financial strength to deal with an economic shock and inform what future adjustments they can undertake.
Gauge the duration of the shock
Having an idea of how long the economic shock will last is a vital precursor to devising an effective survival strategy for a business. The course of action a company should take depends much on the duration of the shock. For example, if the excitement is estimated to be short term, i.e. a couple of months, then only temporary adjustments will be required. However, if it is long term, i.e. several years, then a business may have to make wholesale changes to their operations.
After drawing up financial data and estimating the duration of the shock, businesses should identify what costs need to be cut and by what margin, for survival. Ideally, they should look to make savings in every part of their operations if possible, as finances will be uncertain for the foreseeable future.
If a business’s financial position was weak before a shock or became weakened following the collapse, then sourcing funding from an investor, bank or even the government is a great option to keep things afloat. This will fill the gaps for now and buy a business time to improve their financial situation.
Good communication with stakeholders
A business needs to meticulously inform their employees and customers of any changes that will occur due to the shock and why. For example, letting employees know of changes to their pay, schedule or duties; and letting customers know of changes to prices, stock availability and opening hours/delivery services. By proactively communicating these changes and their relevance to the shock, it reduces the likelihood of a negative backlash that exacerbate the situation.
It’s not all gloom and doom, and by instilling a survival mindset sooner rather than later, businesses can live to tell the story!