The Coronavirus is having a serious and swift impact on small businesses. We’re the businesses that are most susceptible to market changes and this is exactly why we need to get management consulting services before it is too late. No one imagined that the American economy would grind to a halt in the span of less than a week.
If your intake of dark chocolate and red wine is on the rise, you’re in good company. But this will eventually pass, and there are actionable steps we can stake right now to limit the impact of Coronavirus has on our bottom line. I recommend implementing these five strategies right now to protect your small business.
PROACTIVELY PREPARE FOR SUPPLY CHAIN DISRUPTIONS.
Many of the components and raw materials used in our work are sourced (directly or indirectly) from Asia. Coronavirus has been spreading in those countries for months now, but they’re well ahead of us in terms of recovery. Even though their local factories have now largely resumed operations, the effects of the supply chain disruption have yet to be fully felt here in America.
Most American suppliers have been selling off existing inventory, but new stock is just now beginning to trickle out of Asian factories- months after the original target ship dates. That starts the four-to-six-week clock for transoceanic journeys, but disruptions are inevitable. And with American ports closing or reducing operations, our government officials aren’t sure how fast those materials can be processed and released for distribution across the country. In short: buckle up, because things are about to get bumpy.
What you can do: Research your sourcing to identify where you might be relying on Asian components or materials, regardless of whether your source off Asia directly or are working through an intermediary. Identify your vulnerabilities, then speak directly with suppliers to understand their stock levels and supply chain forecasts. Adjust your sails accordingly. That might mean:
- Buying up extra supplies if you have the cash reserves to support the purchase.
- Researching alternative suppliers, materials, or components.
- Temporarily reducing or altering your offerings while we wait for this crisis to pass.
ADD PAYMENT PLAN OPTIONS TO BOOST SALES.
In yesterday’s blog, I recommended that despite the Coronavirus outbreak, we fight the inherent reflex that emerges when sales dip. Our first instinct is typically to launch a deal, but that’s a dicey proposition for several reasons. A better option? Hold prices steady, add free shipping to create a value-added promotion (rather than offering a discount), and make your products more accessible with the help of a payment plan service.
These POS (point-of-sale) Loans or BNPL (Buy Now, Pay Later) services deliver your money immediately after the transaction happens. They vet the applicants, make quick lending decisions, and manage the loan in its entirety while shielding your company from risk. Everyone is feeling the squeeze right now, and dropping a $100 item down to $75 or $80 translates to a 20-25% reduction in your revenue, putting a significant dent in your profits. It also means that a customer must have $75 or $80 in-hand right now to buy the goodies you create.
With a POS financing coupled with a free shipping promotion, you’d still collect $100, and you pay out approximately 10-15% of the transaction price in shipping fees. That means…
- Your customer’s dollars go further because they don’t pay shipping fees. That helps ease the financial stress they’re feeling right now.
- You collect better profits when compared to hosting a discount sale.
- Your customer only needs $25 in-hand to make their purchase, and the loan company can help float the sale, enabling customers to make additional payments over time.
This quick read outlines the pros and cons of offering payment options with a POS Loan provider. Once you’ve studied up, here are several companies you can reach out to:
AVOID BIG INVESTMENTS THAT COULD BE DELAYED.
As a service provider for small businesses, I was set to enroll Brick House Branding (the most comprehensive, most expensive class I teach) last week. Team Lucky Break made an executive decision to postpone enrollment- even though the cash injection would be helpful at this moment. It was a hard call and an example of this next morsel of advice in action.
If cash reserves are high and you’re feeling confident, then forge ahead with significant investments in your business.
But for the rest of us, I vote for momentarily hitting the pause button on significant investments. New machinery, big branding packages, spendy trade shows, fancy new websites- all those expenditures are best postponed. I have confidence that this Coronavirus dilemma is a very temporary problem (thank goodness!), but cash-in-hand is paramount right now. Holding on to cash you don’t have to spend will ease your anxiety, give your business more runway, and allow you to remain flexible during challenging times.
If you can put off purchases for a month or two, I think that’s wise.
STRETCH MARKETING DOLLARS BY FOCUSING ON EXISTING CUSTOMERS.
There are two metrics used to measure your investments in marketing.
Customer Acquisition: This is the cost of converting a person into a customer. Your CAC (Customer Acquisition Cost) is the total investment made to obtain new customers, divided by the number of new customers you acquired during that tie period. For example, if you spent $1,000 on marketing to new people in 2019 and you acquired 100 new customers, then your CAC is $10 per customer ($1,000 / 100 = $10)
Customer Retention: This is the cost of keeping an existing customer purchasing. Businesses invest marketing dollars to increase customer loyalty or decrease brand switching.
Here’s what you ultimately need to know: It costs five times as much to attract a new customer as opposed to keeping an existing one. The probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is 5-20%. And your repeat customers tend to spend 33% more compared to new customers.
In lean times, it’s wise to shift your focus away from customer acquisition to double-down on customer retention.
- Adjust your paid ad strategy to focus on your existing base.
- Increase the frequency of your email marketing efforts.
- Concentrate on offering stellar customer service and creating joy whenever possible.
- Ensure that your unboxing experience is thoughtful and personalized.
TELL YOUR CUSTOMERS HOW TO HELP YOU.
Everyone is feeling the pinch right now, but most consumers understand the fragility of small businesses. Thankfully, small business lovers are a loyal bunch who are willing to work hard to protect the companies they love. Harness that love and put it to work for you by advising customers about how they can help.
- Recommend that they email, tweet, and call your state’s governor. Ask them to declare a state of emergency to unlock access to federal SBA Disaster Assistance Loans for small businesses.
- Encourage them to purchase a gift card or two from their favorite brands and shops. That cash infusion helps blunt the economic blow now, and they can treat themselves later.
- Invite them to leave a review on your site singing the praises of their favorite product. Those reviews will help drive sales once this crisis is over.
- Encourage them to shop small throughout 2020. Long after these quarantines are lifted, we’re going to need their support!
HOW CAN WE HELP?
We’ve compiled these recommendations into a Coronavirus Action Plan for Small Businesses. I invite you to download a copy and put it to good use!
Team Lucky Break understands the swirling fear and the swiftness with which economic scares come home to roost for our community of small businesses. Let us know how we can help by dropping your questions about grappling with Coronavirus in the comment section below. We’re pulling together videos, action plans, and additional blogs to help support you during challenging times. We’re all in this together, friends!