Ever since COVID-19 hit the global economy like a ton of bricks, small businesses have been trying to dig out from the multifaceted challenge of navigating local and state guidelines, shifting customer preferences and concerns, staffing and scheduling worries, supply chain volatility, and a host of other issues. Depending on the industry, some have thrived, some have just managed to survive, and others, sadly, have closed their doors.
The outlook for 2021, according to various sources, is “cautiously optimistic.” No one has a crystal ball and no one can guarantee specific results. But it is true that, so far at least, the stock market in general has weathered the pandemic fairly well, even considering its precipitous slide not long after the onset of lockdowns. It is also true that we have had historic unemployment levels, and far too many people have been swept down the wrong part of the K-shaped recovery we’ve heard so much about.
As we enter this New Year, and a new era in our nation’s history, it remains important to stay the course in reviewing your operations and strategy. As we’ve said before, economic downturns impact all business, but especially small businesses. During the Great Recession of 2007-2009, where jobs in small businesses fell 39% faster than in larger companies, and the failure rate of very small businesses (fewer than 5 employees) jumped 500%.
During an economic downturn, consumers are generally more price-sensitive and tend to spend less. This is especially true if the downturn has been caused by a pandemic, which adds health and safety concerns to financial worries. Restaurants, bars, tourism, travel, and other industries where face-to-face contact is critical to transactions have been hit particularly hard. Yet, in specific market sectors, an unforeseen development—such as a global pandemic—can prove to be a revenue driver. Think of online conferencing, food takeout and delivery, online entertainment, and online shopping in general.
Let’s look at 5 areas in that one of our Clover Point of Sales from JadaPay that can help you future-proof your business against volatility and uncertainty.
1. Manage inventory wisely
Research shows one powerful way small businesses manage fluctuations in sales is to reduce inventory. Certainly, selling off slow-moving inventory can help with cash flow, but that’s just the beginning. Simply putting things on clearance until they are gone won’t get you the biggest bang for your buck. Managing inventory is as much about taking advantage of upswings and introducing new products as it is getting rid of the old.
First, consider what led to slower sales in previous cycles, or imagine factors that could impact you down the road.
- Is your pricing model competitive?
- Are your top-selling products tied to a particular fad or trend that might become obsolete?
- Do you need to attract new customers?
Inventory management apps can help you track inventory real time and show you trends over time, so you can make informed choices about your pricing and marketing based on your existing sales data.
Ask questions that can give you the insights you need:
- When did sales slow down?
- Who is still buying specific products?
- Who is more likely to buy if you have a promotion?
- Which product sales bring in the highest return?
These questions give you insight into what kinds of promotions to run and how to help stabilize your cash flow even when your best customers become price-sensitive.
Inventory management software can also help you adapt to changing preferences. For example, you can easily set up a new product or add modifiers so that customers can get exactly what they want. Adapt your best dishes to be dairy free, Keto friendly or vegan. Break up services like a haircut and blow out. You want to keep customers moving through your doors—whether those doors are physical or virtual—even if they aren’t spending at the levels they used to. Modifiers can help customers who are watching every penny stay engaged with your business even if they have to scale back.
If you’re holding a sale to get rid of excess inventory, take the opportunity to entice folks to buy other things as well. (Psst… here are some tips for running a successful promotion.) You may want to offer people who buy the overstock a discount on other products that will bring you a bigger return, or possibly a discount on a future visit (whether in-person or virtual) in a specified time frame. Bundling products together helps the customer rationalize their spending (after all, they’re getting more for their money). Inventory management software helps you bundle things easily, and will keep track of your inventory so you don’t run out of stock.
2. Give new life to your products with creative bundles
Speaking of bundling, there’s no reason you have to stick to overstock. You can take two popular products and bundle them together to make them more attractive. Even popular products can get more mileage if you repackage them.
If you run a coffee shop, offer a morning special by bundling a baked scone with your customer’s morning coffee at a slight discount. If you run a beauty salon, you can bundle together makeup and a mani-pedi. If you run a bookstore, make gift basket bundles that represent your local history, combine useful cookbooks, or pull together puzzle and activity books to keep people busy and entertained while sheltering at home.
Gift cards can be another great way to offer more value and keep the income streaming in. Offering a $5 gift card with your overstocked items can entice people to spend more. Even better, instead of training them to expect lower prices, you’re offering them just enough value to rationalize buying something else without eating too much into your profits. Use Clover’s small-business CRM to design a promotion that will keep customers coming back.
3. Partner with other local businesses
Can you partner with another nearby business to bundle your products with theirs, especially during a pandemic? It depends in part on what type of business you run, and what type of business you’re thinking about collaborating with. If you run a coffee shop that’s been hit by a decrease in foot traffic because of lockdowns, and you’re across the street from a restaurant that seems to be doing well with its takeout and delivery, you might consider offering your coffee and baked goods through them—and letting your customers know via email and social channels. Not only do your customers get to continue supporting you, you are now also visible to new people—customers of the restaurant you’re now working with.
Another option is to work with complementary businesses, even if they aren’t in your immediate vicinity. For example, If you’re an antique shop, you could partner with a local hardware store to offer a “remodeling” bundle. You can offer them advice on what pieces fit in with the style home or local history, and the hardware store can offer advice on how to restore the home itself.
You can set up a reciprocal relationship by offering a 10% coupon to the other store on your receipts. You can also redistribute the discounts for a more equitable profit share. Alternately, you can offer a gift card on a reciprocal basis.
4. Rethink your space
Pre-pandemic, we would have suggested myriad ways you can rethink your physical space. But with social distancing and other health and safety precautions now in place, we need to rethink the rethink. So what is a small business owner to do when your shop, studio, or restaurant is no longer humming with foot traffic?
Many business owners have gotten quite creative in re-imagining their space. Retail shops are offering private in-person shopping experiences. Restaurants are converting a portion of their operations to grocery sales. Changing the purpose and function of a physical location requires that you take a number of factors into consideration:
- Your business model—Does the new purpose or function of your space fit your current business model, or is it part of a complete overhaul of your business?
- Cash flow—If you switch gears, will you be able to generate enough revenue to turn at least a modest profit?
- Brand—Does the new purpose or function of your space still fit your brand, or would it confuse, and potentially drive away, customers?
- Customer experience—How does the repurposing of your space improve or redefine the customer experience?
- Staffing and supply chains—Make sure you have the resources and logistics necessary to support the shift in your location’s usage.
Take a look at how physical spaces in different industry sectors are shifting gears during the pandemic.
If it no longer makes financial sense to maintain your physical location, you might consider either shifting your business to a smaller location with lower rent, or letting the space go entirely—assuming you can operate your business from another location, such as your home.
5. Offer bulk sales
Got a lot of stock you need to move quickly? Think about who might be interested in buying in bulk and how you can market to them. Tougher financial times can make bulk discounts appealing for individuals, organizations, and businesses alike.
- Schools—Include teachers, parent-teacher organizations, and student clubs.
- Businesses—Would your products make good gifts? If so, you might consider offering them as appreciation gifts for employees who’ve had to work from home throughout the pandemic—especially working mothers.
- Event planners—While many event planners went out of business during the pandemic, the most innovative and entrepreneurial have found ways to thrive. You can too… market your inventory as items for virtual holiday parties, online off-sites, and other special events.
- Care centers—Hospitals, senior centers, and other care centers may be interested in offering your products or services to patients.
If none of the above is a possibility, ask your accountant if you can donate excess stock to a charitable organization and take a loss against your taxes.
Resilience, insight, and perseverance
You might not need to shift gears entirely to survive these volatile times. Even a minor shift in a key area of your business can prove critical in the long term. While there is no golden key to future-proofing your business, planning for multiple scenarios is a critical strategic approach that can help you prepare for both periods of growth and for economic downturns. Small businesses that have a solid plan for the things they can control, as well as a flexible approach to address the things they cannot, have a stronger chance of surviving.
Above all, know that you are far from alone; thousands of other small business owners are tackling the same challenges, asking the same questions, probing the same potential answers. Make sure to email me directly at MEPannell@gmail.com to get started.