If management is mentally agile, periods of economic instability can create opportunities for small business owners
The past three years have offered such opportunities to a variety of businesses. What is needed is qualified management that is willing to take some risks to retain its customers while simultaneously considering appropriate expansion possibilities, and keeping an eye on profit margins. Fortunately, small to medium size enterprises with good management can adapt more readily than large corporations. Many have succeeded,
Management should analyze the company’s revenues and expenses , and consider what operational changes could be effective without incurring major costs. A company might have to consider changes in the products or services offered, evaluate vendor relationships, employee policies, marketing strategies, and financial procedures. Logical decisions should be followed by rapid execution in times of uncertainty.
Every company has distinctive needs. I am happy to share the knowledge I have gleaned in my role as a financial consultant to SMEs.in South Florida. Some of the techniques that have worked for other companies may serve as options that might be considered by your company, in your market.
Here are eight best practice survival options for small business owners:
- Creating an online marketing platform for existing and potential customers
- Diversification of products to attract new customers and reduce the cost of goods
- Reduction of the cost of goods and/or services from local vendors
- Retention of employees by offering increased wages and benefits
- Eliminating unnecessary overhead expenses
- Reviewing financial statements monthly rather than quarterly
- Maintaining acceptable credit scores to assure easy access to working capital
- And, expanding working hours to accomplish the above referenced adjustments
Companies that have long term market recognition, have maintained limited inventory, and have retained adequate capital reserves, can adapt more readily than newer companies with limited cash and a need to access new customers while reducing COGs. Nevertheless, all the companies that have survived have recognized the need to adapt in their market. They were agile.
Food Related Businesses
I have worked with many business owners in the food industry and witnessed many successful adaptations in the past three years.
Some specific examples are:
- Reducing the number of items on a menu to reduce inventory costs
- Altering products and services to address health and wellness concerns
- Reducing hours of service, thus reducing payroll costs
- Providing at home deliveries to customers
- Offering catering services for holidays and special events
- Packaging foods to retain freshness
- Increasing prices to retain profit margins.
- Offering bulk discounts to major customers
- Addressing the consumers recent interest in “farm to table” products
- Considering retirement – selling the assets of a business to a 3rd party
There are many entrepreneurs who want to open restaurants, catering facilities and other operations that require full kitchen build-outs. These companies prefer real estates that has been improved with kitchens that meet local compliance standards. As a result, many long-time restaurant operators who are considering retirement now have buyers for their businesses and/or their assets. Even if they had economic setback during the last three years, they can sell their hard assets to a franchisee or a solo entrepreneur with a dream.
Many Lenders Have Altered their Perspective
In the past many lenders considered restaurants and other food and beverage facilities such as nightclubs, bistros and non-franchised food operations risky investments. Currently many lenders acknowledge that many food operations have been profitable, despite the impact of the pandemic on other industries. Both Bosses and employees are working from their homes and like to socialize during their non-working hours. In South Florida many restaurants offer outdoor service. Therefore, many banks currently have a greater interest in food related businesses than they did five years ago.
Institutional lending rates are currently higher than they were a year ago, but food operators that are doing well will qualify for bank loans. Most lenders want to see that the business has been operating for not less than one year and the borrowers/guarantors have an acceptable personal FICO score to qualify for an SBA 7A loan. Every small business owner should maintain a relationship with a loan officer at a commercial bank or a savings and loan that is a preferred SBAS lender. Most successful operation need working capital to cover high operating costs and having up to date financial statements will help shorten the time required for loan approval. Each lender has different underwriting criteria, so sometimes you have to shop for the best loan terms. Good luck.