There’s no question about it – as small business owners we are all facing unprecedented times. Heck, as college students or retirees or schoolteachers or really just, well, anyone, we are facing unprecedented times. But if you own your own business, if you depend on your own skills and capabilities to make a living – with or without employees – then this is a Big Deal with a capital D.
Perhaps you were forced to close. Or you had clients cancel their work with you. Or suppliers who can’t deliver your order. Or maybe you’ve been busier than ever with not a moment to rest and a fear of putting your health or that of your employees at risk.
According to Small Business Majority, “the spread of COVID-19 around the country has already had a devastating impact on small businesses,” with one in three small businesses already closed in April, and at least 100,000 small businesses having closed their doors permanently.
Whatever your situation, I can imagine that the pandemic and quarantine world we’ve been living in has had some impact on you and your small business. And now the country, your state, your community is looking at opening back up again. Everyone is talking about “the new normal”. What does it look like for your business? What changes have to take place to keep people safe? Will your customers still be buying? Do you still have money for marketing? How and when do we get to push the reset button and pretend the last couple months were just a bad dream?
How can you plan for a future post-pandemic when none of us have ever been in a situation like this before? How do you forecast revenue in this new world, as we begin to open back up but still don’t know what the future will hold? Even as SMBs are starting to be able to access AI to aid in forecasting, the fact that we are in an unprecedented time means that not even AI can predict demand. Consider the fact that even Amazon’s best AI algorithms could not predict the rapid shift in demand for toilet paper to demand for puzzles.
After all, even the very definition of the word “forecast” is using the past to predict the future. Can we really do that right now? Will your revenue go back to what it was? What about your expenses? If you run a restaurant, then the short-term answer is no. For the long term, the answer is, who knows?
So how in the world do we open back up again with no idea what will happen next? Perhaps it’s time to revert back to start-up mode.
Think about when you first opened your doors for business. As a brand-new business, you were forced to make some predictions about sales volume, employees, expenses, and so forth. Were you right about those predictions? Of course not! That’s why they’re called predictions and not “actuals”. But your goal with those start-up pro formas is to make an educated guess about what the future looks like.
In my opinion, the most important part of a pro forma financial statement is the list of assumptions. What are you assuming the world looks like when you start your business? Is there seasonality in sales? Differences between weekdays and weekends? How busy do you need to be before you have to hire help? What are the payment terms of your vendors or suppliers? How does that affect cash flow? Where do your customers come from? How many are out there? How are they hearing about you?
Whether you started your business 5 months ago or 5 years ago, I’m betting you still remember the starting point where there were no guarantees. You just had to make some guesses, and then get out there and slowly replace each guess with an actual sale. Until eventually you could actually forecast future revenue based on past sales. You knew there was a lull every Thursday afternoon, or that most sales inquiries came in on Tuesday mornings. Slowly but surely, you became more confident and captured more data until you got into the flow and could forecast your revenue and expenses with some degree of accuracy.
It’s time to channel your inner start-up. How do you do that? Consider these 3 Start-Up Steps for Post-Pandemic Re-Starts:
How are other businesses like yours doing? What are they doing to open up safely? What do your industry associations recommend? How about your local Chamber of Commerce or Economic Development organization? Where can you find guidelines on safely re-opening? How can you obtain the right protective equipment or ensure your employees are safe? Do some online searching, and reach out to government agencies, industry associations and local business groups for advice and guidance. Consider sources like the U.S. Chamber of Commerce and Start Us Up Now.
#2: Reach Out
Unlike a typical start-up, you have one huge advantage. You’ve already been open for business and you (I hope) have a way to reach out to your customer base. So reach out! Ask them what would make them comfortable doing business with you again. Ask them if deferred payment, or different delivery methods or phased-in operations or any idea that fits your business type will encourage them to buy again. Ask how they are doing. How can you support them? And while you’re at it, reach out to your own suppliers and vendors as well to learn what changes are taking place, what has changed for them, how it might affect you and how you might be able to help. We are truly all in this together, so reaching out for feedback from your key stakeholders is an important step to helping you understand and start to predict sales moving forward. Look for online survey templates like these from Survey Monkey.
Start with some assumptions. And consider the huge advantage you have in that you already did this once. What does Day 1 or Week 1 look like for expenses? What about revenue? Are you starting back at zero? Or expecting a slowdown from your frantic “essential business” pace? What seems realistic as we start moving the country forward and cautiously re-opening? Now consider how you can grow from that start. What are your limitations? Is capacity at your restaurant different? Or do you need to find new ways to connect with customers if you don’t want to travel or attend trade shows? What new expenses might you incur to find new sales and keep your employees, customers and vendors safe?
Are there new revenue streams you could offer that might help address the new situation? Or special offers, or new customers? Be open to new ideas here, as if you really are starting all over again, just under new constraints. Consider that businesses who are able to adjust to a new situation may have an advantage over those who want to stick with the status quo.
Can you make some initial projections? Start with some assumptions, use your past data along with the feedback from your industry sources and customers, and revise and revisit your sales forecast regularly as you learn more.
Most importantly, remember the reasons why you started your business in the first place – the passion you have for the products or services you offer to your customers, the control you have over your own destiny, your ability to make a difference in your community. Times may be tough, but we entrepreneurs will get through this together!