In addition to the potentially serious implications to one’s health and healthcare facilities, the impact of COVID-19 is being felt by businesses worldwide, with their leaders having to navigate a wide range of issues from keeping customers and employees safe to navigating complicated support programs offered by the government.
The results of the recent US Census Bureau Small Business Pulse Survey that 22,449 small businesses participated in, revealed that well over three-quarters in the food services and accommodation sector were negatively affected by the pandemic. Over half of all respondents believe it will take more than six months for their businesses to return to normal.
As a business owner, it’s important to gauge COVID impact on your business by understanding how much it has been affected and how long it can withstand the effects.
One of the first things that all business owners need to take is to benchmark performance to determine precisely how well the business was doing prior to the crisis, how much it’s suffered and how much more it can withstand. The first step in this process is to gather data that includes all open invoices, vendor bills that are still unpaid, bank statements, point of sale reports, credit card statements, and all assets such as inventory, furniture, and equipment.
You’ll need to determine profit and loss in 2019 from the start of the year through today’s date in 2019 in addition to your profit and loss from January 1, 2020, through today. If you’ve had any large, unusual expenses, or made a big sale, remove those from the data and then compare the two to find out where you’re at. This will allow you to see where you can cut expenses and create a budget to determine how long your organization can last.
Gathering External Information About Your Vendors and Customers
You’ll also need to look outside of your business to determine how the pandemic has affected you and how it might in the future by gathering information about your vendors and customers. If you’re a business selling directly to individuals, you’ll want to keep an eye on the US Department of Labor’s weekly jobless claims report as those claims are directly linked to non-essential purchases. If you sell goods and services that aren’t necessary for survival, your sales are likely to decrease at approximately the same rate as the increase in unemployment. If you’re selling to other businesses, the effect won’t be as immediate, but you will ultimately still be affected by drops in consumer income.
Of course, pulling all this data can be time-consuming, and there may be some that you can’t extract at all. One of the best ways to get the information you need to gauge the impact of COVID on your business may be to hire an economic research firm. An experienced economist can analyze seemingly intractable data and acquire additional data to help you assess the damage that has occurred along with possible future implications while coming up with potential alternative methods to stay afloat.
Creating a New Budget
The impact of COVID means you’ll need to create a new 12-month cash flow budget using the information about how much you’re spending and earning, along with the external data that will provide you with a good idea of how much your sales are likely to change in the coming months.