As the fallout from the coronavirus constricts the economy, businesses must make their cash go further. In this article, we’ll share with you the top 4 cash flow tips during the coronavirus crisis. No mention of hoarding toilet roll here – that’s a promise.
If you’ve received a loan or investment recently, growing lean is doubly important. This means taking proactive measures to tighten your belt, from cutting costs to optimising operations to hiring freezes.
There aren’t many positive things about an economic slowdown. Businesses, though, are resilient. During this time, it’s imperative that businesses eliminate waste and invest intelligently in their operations.
As such, businesses can become leaner and stronger than ever, setting themselves up for success when the economy picks back up.
1. Reduce Expenses
Cutting costs is the best way to preserve your cash reserves.
Often, cutting costs is associated with layoffs. That does not always have to be the case.
Start with easy cost-savers: Utilities and overhead.
- Save on energy use by turning off lights that aren’t vital to operations and unplugging computers and other non-essential electronics after hours.
- Check that your service plans are aligned with your current usage or capacity needs.
For example, if you’re paying for cloud storage or leased equipment that’s no longer necessary, review these plans and downsize if possible.
By contrast, upsizing to a more robust service for your remote-work employees and cutting back on office overages could save you hundreds of pounds.
Other areas to address are “fringe” benefits as part of employee benefits package such gym memberships and public access benefits (e.g., transit) aren’t of much use currently.
Of course, it’s important that businesses frame these changes as temporary – often, generous benefits packages are effective recruiting and retention tools for businesses.
Companies should not, however, rush to slash critical operational programs such as marketing during a downturn.
People are restless in times of economic uncertainty and looking to make a change. Your marketing is vital to retaining customers and perhaps enticing business away from a competitor.
2. Freeze Hiring
A hiring freeze is a stopgap measure to preserve your revenue, operations, and your best employees.
A hiring freeze helps you preserve revenue for essential functions during an uncertain and evolving economic situation.
Halting the hiring of non-essential employees allows you to consolidate existing employees and restructure departments to best serve your customers.
For example, providing excellent customer service can help you differentiate yourself from the competition when times are tight. In fact, many small businesses and startups survive on the strength of their customer support.
Before freezing hiring, businesses should identify essential and non-essential business functions and look to retrain and allocate employees to support their critical processes.
Another cost-effective way to add expertise to your organization is by hiring freelancers and consultants. Contract workers let you pay only for what you need without incurring the expenses of employee benefits.
Hiring freezes, though, should be short-term. Relying on contract labour for essential business processes is risky.
3. Create Lean Processes
An economic slowdown creates an impetus to do more with less.
By improving operational efficiency, you eliminate waste and conserve capital in the short-term while earning dividends in years to come.
To create lean processes, you first must identify areas to make meaningful improvements, for example:
- Employee training
- Production capacity
- Product quality
- Inventory management
- Supply chain management
Adopting a mindset of continuous, ruthless improvement will help your company emerge from a recession with an emphasis on process improvements that can power lean growth in the future.
4. Maximize Current Customers
Though acquiring customers is expensive, it pays to retain your best customers.
According to the book Marketing Metrics, a business’ probability of selling to an existing customer is 60-70%.
Source: Marketing Metrics
Focus on upselling and cross-selling to your loyal fans. Marketing campaigns that both reinforce customer loyalty and encourage referrals can help you maximize your revenue.
Rewards programs and “loyalty discounts” are an excellent way to encourage repeat business and referrals at once. After all, word of mouth is a key sales driver and everyone loves a good deal.
One tangible (and free) method for businesses to invest in customer retention is through managing customer feedback across their digital portfolios, including online reviews platforms and social media.
A few more cash flow tips during the coronavirus crisis:
- Respond to customer feedback promptly
- Acknowledge criticism
- Celebrate your most loyal fans
- Provide excellent customer service
- Encourage former clients to leave online reviews
Demonstrating that you care for your community is vital to securing their loyalty and generating goodwill in uncertain times. To capitalize on these relationships, leverage reward programs that encourage repeat business and referrals.
Growing Lean in a Down Economy
In lean times, it’s best to spend every pound as if it were your last.
Pull a comb through your company to see where you can trim expenses and make meaningful improvements to operations.
Meanwhile, focus on generating revenue and goodwill with your current customers, then leveraging those relationships into valuable referrals and re-sells.
We’ve shared our 4 top cash flow tips during the coronavirus crisis. Read more about how to manage your small business finances.