From February to April 2020, 22 million small businesses in the United States permanently closed down despite hundreds of billions of dollars of government subsidy. As for Americans that became unemployed, nearly 80% believe that their situation is temporary according to a recent CNBC article. A study by the Breckman Friedman Institute suggests that 42% will not return to work. The newly unemployed will be the least likely to patronize businesses and should another surge in COVID-19 force more into unemployment, a significant number of businesses could fail by the end of the year.
The perfect storm of shuttered businesses and poor employment prospects begs to ask the question – who did successfully navigate the COVID-19 shutdown and how can we learn from them?
Joey Hervey, a hair stylist in Scottsdale is one of a small percentage that has defied the odds.
“I had a three month emergency savings fund to carry me through. Even though I wasn’t working,” he said, “I was communicating with clients to tell them how to do an at-home color. I would drop off the color at their front door. I adapted and called it a ‘virtual appointment.’ I gave them consultation with Facetime or Messenger and taught them how to do their own services. I also called them when it was time for each step – shampoo, apply color, and at each interval.”
“Learning to do a virtual appointment was key. It allowed me to still have income coming in. I taught clients how to cut their own bangs, how to do a retouch and glaze.”
For small businesses, startups, and side hustlers who seem to be coming back from COVID-19, re-opening their doors, and both contributing to the economy and rehiring workers, there are five elements that many have in common. As a business owner of three companies who have all added new hires during COVID-19, the following five pillars have definitely played a significant role in navigating the crisis.
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Have Three to Six Months of Operations in an Emergency Fund
The failure rate for small businesses is staggering in non-pandemic times. 20% of small businesses fail in their first year and 50% by year five. Many business owners do not have additional savings to navigate an unexpected crisis. As difficult as this may sound, having six months of operational expenses, including your salary, in an emergency fund is essential.
Look at your monthly expenses, ideally prepared by your bookkeeper or accountant, and simply multiply by six. Include your salary. It may take time to save this much however when the next downturn happens, you will be in good shape. This is one of the first things I teach our Agency clients – save, save, save!
Hervey had three months of savings in his emergency fund however he was fortunate that Arizona was one of the first states to allow stylists to return to work.
Jessica Leichtweiz, an autism consultant from New Jersey learned the lesson on savings several years ago.
“Five years ago I lost my job. I had a few hundred dollars in the bank and one more paycheck coming. I have never been so afraid in my life. I was absolutely paralyzed with fear. I had no idea if I would be able to replace the groceries in my refrigerator when I ran out of food. I decided to start a business and made the decision I would never experience that fear again. From the first day, I opened my business bank account and I set up a direct deposit to a savings account which I paid weekly. It meant some sacrifices in my lifestyle such as buying clothes second hand or camping rather than staying at a hotel when traveling.
As a result, I faced ridicule from even some of my closest friends. However, recently when factors outside of my control temporarily shut down my ability to make money, I never had to be afraid. I knew I had at least six months of savings in the bank even without making lifestyle changes. I used the time as an opportunity to work on my personal brand and emerge as a leader in my field. Instead of worrying about where my next meal was coming from I go to pray about how I could better serve my customers. As a result, I just had my highest income week ever in my business. It can be so tempting to live outside of our means. I once had over fifty thousand dollars in credit debt. None of the short term pleasure I experienced from frivolous purchases compared to the confidence in knowing that despite the world crumbling around me, I would be okay.”
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Use a CRM (Customer Relationship Management Software) to Communicate With Your Customers
Communication is key. Being able to let your customers know what is happening can be the difference between survival and failure. One business, a yoga studio which was forced to shut down for eight weeks, used their CRM to offer free and paid virtual classes, sell apparel, solicit donations for teachers, and let students know the moment the studio was able to re-open. On the first day back, there wasn’t an empty mat.
Just as social media is essential for any business, so is a CRM. Businesses who relied solely on social media during COVID-19, had to compete with all of the pandemic related stories. Being able to email and text clients directly en-masse is critical.
At Agency 8, we have a ‘plug-and-play’ system that combines a CRM and an enhancement pack that allows you to email, text, use one-click registration for webinars, countdown timers, invoicing, and more. Agency 8 is an agency founded by small business owners for small business owners.
You can find out more here.
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Look for Alternative Ways to Provide Your Service
Barb Walker, a music teacher, was suddenly without income when COVID happened. She came onto one of my live coaching calls and was inspired to reach out. We helped her turn her face-to-face business into an online music school and business is booming. After one Facebook post, she scheduled seven students.
This is a changing world and the businesses that can adapt, will be much more likely to survive. For many business owners, this might mean using technology in different forms, creating a greater online presence, or enhancing customer delivery and pick-up.
Hervey and Leichtweisz both found alternate ways to deliver their former face-to-face services.
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Expect More Challenging Times Ahead and Adapt Now
Governments are struggling to navigate new daily data. On June 20th, the City of Phoenix made wearing masks outside of the home non-negotiable, and violators would be fined $250. There are some exceptions however this forced restaurants, bars, and other establishments to pivot quickly. Some have returned to curb-side pick-up only as many customers felt wearing masks in a restaurant to be both uncomfortable and difficult especially when eating.
If you have a brick-and-mortar business, you might experience a drop in customers either because people do not want to wear masks or because they are fearful of others not wearing masks. If you are a speaker or an event planner, your government’s changing regulations might be cause for another long business downturn.
As of May 28th, over 40 million Americans had lost jobs due to COVID-19. Although jobless claims continue to decrease, the reality is that if there is another shutdown, or a partial shutdown, more people will lose their jobs and the number of consumers will also significantly decrease. This has obvious consequences for business owners.
Adapting might include picking up a part-time job in order to save more or learning new skills that can be monetized in some form. Leichtweisz, who had previously built websites, returned to it as a side hustle. With a combination of Telehealth and building websites, she earns double what her colleagues do.
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Make Paying Off Debt a Priority
As business opens back up, it is not a time to start spending or look to leasing a new BMW. This is the time for frugality. Pay off your business expenses and credit cards. Look for ways to eliminate non-business expenditures. If we are indeed heading into another surge or a vaccine doesn’t arrive for over a year, it is going to be a long, arduous road. If you have your emergency savings and you have no debt, then you can also take another page from Hervey’s playbook. Hervey has no debt.
“I used my extra time to do more of the things I enjoy. I went fishing. I learned to cook gourmet meals. I spent time relaxing. I wasn’t really stressed at all,” he reflected when asked about his COVID downtime. Smiling, he said, “you should see my chicken alfredo.”
