With U.S. cases of the delta variant of the coronavirus on the rise and several countries returning to some form of lockdowns, we have to wonder...
Are more lockdowns on the way?
While the likelihood of a second round of lockdowns in the U.S. is unknown at this time, it's safe to say we're all familiar with the financial impact lockdowns can have on small businesses...particularly in the restaurant and foodservice industries.
We can hope and pray a second round of lockdowns doesn't materialize, but Old Man Winter is betting preparation is a safer strategy. So without further adieu, here are...
5 WAYS SMALL BUSINESSES CAN PREPARE FOR A (POTENTIAL) SECOND ROUND OF LOCKDOWNS:
1. Communicate with employees and customers
Be real about what your business is going through. Employees and customers empathize with businesses that are honest and forthright.
Use email, social media channels, and good ol' face-to-face interactions to ask questions, request feedback, and give employees and customers insight into what steps you plan on taking to mitigate the risk of a second round of lockdowns.
When in doubt, communicate. Then, communicate some more.
2. Fine-tune your business plan
Now is the perfect time to dust off your business plan and make adjustments. What worked eighteen months ago may not be working as well today...or at all.
Analyze how your industry was affected by the first round of lockdowns and search for successful businesses in and out of your industry for ideas and inspiration.
For example, while breakfast sales fell off for most restaurants when people stopped commuting to work as a result of stay-at-home orders, Wendy's went all in on breakfast and is reaping the rewards.
Why has breakfast worked for Wendy's and not their competition? What are they doing better? Are they leveraging technology differently?
Don't know where to begin fine-tuning your new business plan? Don't fret.
SCORE, a nonprofit organization dedicated to helping small businesses get off the ground, grow, and achieve their goals through education and mentorship, can help.
3. Measure the right things
Once you fine-tune your business plan and clarify your goals, determine what key performance indicators (KPIs) will allow you to track, understand, and manage the cause-and-effect relationships that determine your business's performance.
The statistics you rely on to assess performance must be connected to your business's overall goal. They need to be persistent and predictive.
What drives value for your business can change over time. Especially after a Black Swan event like Covid. This means the things you measure need to change as well.
Identifying and exploiting the right metrics and statistics before your competition does is a major key to seizing advantage in a competitive environment.
4. Take profit first
"Treating profit like an afterthought, secondary to growth, usually has the effect of running your business to the ground," says Mike Michalowicz, author of Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine.
In this seminal book, Michalowicz boldly states all businesses have the power to guarantee profitability. He also explains why the traditional accounting formula of
Sales - Expenses = Profit is "a myth that locks businesses into a never-ending cycle of selling more yet profiting less".
Instead of relying on this mythical formula, Michalowicz flips the formula to Sales - Profit = Expenses. This simple mind shift allows businesses to take profit first and spend only what remains on expenses.
Start taking profit first today. Take your very next deposit and allocate 1% of the total amount to a separate bank account nicknamed PROFIT.
Congratulations! Your business just generated a profit. See how easy that was?
5. Keep a close eye on inflation
It's hard to imagine another round of lockdowns without more "quantitative easing", i.e. inflation.
Inflation is already rattling restaurants and our broader economy. Chipotle, the quasi-Mexican fast casual restaurant chain, recently raised prices 4% across the board. The average Chipotle meal will now cost 30 to 40 cents more.
While a large national chain might "get away" with raising prices, this option might not "on the table" for small businesses in a hyper-competitive environment.
So what to do?
Keep a close eye on inflation and find creative ways to fight it.
Have you maximized all your revenue streams? Can you reduce costs? Can you borrow money for capital and operating costs now before interest rates rise?
While we hope lockdowns are a thing of the past, it pays to think through a future scenario with a second round of stay-at-home orders. Understanding the risk another lockdown poses on your business is key to surviving the elements.
Fortune favors the bold.
Stay alert. Stay educated. But most importantly, stay cool.
Have a great week!
Talk soon,
Old Man Winter
