On the heels of a tumultuous year, many small business owners still in operation are licking their wounds. They have had to lay off staff, reduce hours or even pivot their business models entirely. To say it was both unexpected and unprecedented in our lifetime is to put lipstick on a pig – and at this point in the pandemic, we know better than that. In all honesty, it was undoubtedly and unequivocally painful, both process-wise and from an emotional and psychological perspective.
According to a recent survey by small business accounting platform Xero, the top four concerns of SMB owners with respect to COVID-19 and moving forward are to be expected:
- Personal income
- Cash flow
- Losing customers
- Reducing costs
However, the fifth concern proves more surprising and will have a direct effect on solving the other four challenges: their own mental health.
With ongoing and new health and safety regulations, staffing limitations and the increased need to wear multiple hats throughout any given day, it’s clear that the mental health of small business owners may continue to be negatively affected.
Fortunately, there are concrete steps small business owners can take to quell all of the aforementioned concerns and move into 2021 with proactivity, confidence and positivity.
- Begin stashing your “rainy day” funds. While many small businesses typically prefer to put extra cash toward capital improvements or enhanced marketing, this year proved that it can be utilized in better ways (e.g., taking sales online or buying different lines of inventory) should an emergency arise.
- Implement a cash-flow tool. Research from JP Morgan found that half of all small businesses hold a cash buffer of less than one month. We know that cash flow is the lifeline of any business. Being able to forecast projected income and expenses on a timeline that shows when cash shortages may be on the horizon was a critical ability in 2020, and will continue to be one in the coming year.
- Create a business continuity plan. Business continuity planning is tougher than ever. In fact, Google searches for “business continuity plan” leapt 600% year-over-year in 2020. Begin by working alongside a trusted advisor or start with a basic template that helps tick off items that may be missed in a crisis. Note, it will likely be ever-evolving and something that is never quite “finished.”
- Invest in the appropriate tech. Looking at how quickly technology adoption advanced during the COVID-19 pandemic, 2020 became 2025. That means 2021 will be the biggest year (yet) for doing business from a distance and it will also be a big year for corresponding technology that closes the gap. Invest wisely in technology and applications that allow for e-commerce, payment via credit cards and contactless methods, cash flow management and inventory management. And, wherever and whenever possible, move to the cloud for greater flexibility and access to real-time data and insights.
When looking back, 2020 wasn’t all bad. In fact, if nothing else, it highlighted the resilience of small businesses and the communities that support them. It also uncovered the unrelenting empathy and kindness exhibited by society during a crisis, including those both in front of and behind the cash register. Many relied on the goodwill of suppliers, customers and employees; they cut each other slack on bills, worked hard to fill orders, and rallied around peers and competitors alike. It was, indeed, an inspiring reminder that there are people at the center of all of these transactions and we saw the strength of connecting to others and leveraging the power of community.
That gives us all hope that, in 2021, small businesses will continue to rise to the occasion, implementing the right strategies to better their bottom line, their business models and, in turn, better their mental health and headspace. Their communities need them to thrive, and to continue to be the pillar of America’s workforce next year, and for many years to come.
Ben Richmond is the US Country Manager for Xero. He leads the US business, and is responsible for driving growth and accelerating key partner channels. Ben is a chartered accountant who was named to Accounting Today’s “Top 100 Most Influential People in Accounting” and recognized by CPA Practice Advisor as a “20 Under 40 Influencer” in 2019 and 2020. Ben earned a Bachelor of Commerce degree in Accounting Finance and Information Systems from the University of Canterbury. His Twitter is @BenRichmond1.