If you are a small business owner, you already know the challenge of running your business under normal everyday circumstances. Add to this a financial crisis and a global pandemic, and it’s not surprising to find yourself overwhelmed trying to keep your business afloat, maintaining your loyal employees, and positioning your business to snap back once the downturn of 2020 is behind us.
As I help our clients manage through this process and keep their doors open, here are 5 recommendations to help you best navigate through these murky waters of economic uncertainty.
1. Protect your cash flow by reviewing inventory management strategies
One of the best ways to protect your cash is to take a close look at one of your biggest (if not your biggest) assets: your inventory. Now is the perfect time to analyze your current stock and determine historically what is selling and what is not selling, take a look at historical stock levels and inventory turns, and re-evaluate what you should ideally order to maximize your gross profit and keep your inventory from sitting idle. If you find you are stuck with aged inventory, try speaking with vendors and wholesale liquidators to convert this stale costly asset into cash.
Study your Days Sales of Inventory (DSI), a popular method used for determining the average time a company takes to convert inventory into revenue. To calculate DSI, start with your average annual inventory value, divide this by your total cost of goods value for the same period, and then multiply this value by 365. DSI may vary depending on the industry, but typically a business that runs efficiently has a lower DSI (the smaller the better).
2. Increase productivity by automating business processes
A critical step toward preparing your business to recover and grow is to empower your operations for doing more with less. Reduced margins, increased labor costs, and fierce competition is creating a challenging environment for retailers of all sizes in a highly competitive global marketplace.
Embracing automation of business processes is a necessary means of increasing both your margins and operational efficiency. Some of the benefits you can achieve through automating your business processes include:
- Streamlined and efficient workflows
- Minimizing costs and improving margins
- Real-time and accurate inventory updates
- Improved quality control and compliance
- Great customer experience and satisfaction
3. Make informed business decisions by understanding your numbers
We’ve all heard it before. If you don’t know your numbers, you don’t know your business. Dissect your financials, and examine which divisions and products bring your customers the most value (and your business the biggest profits). Drive the best profits possible by tracking and analyzing each product’s financial performance, and identify those products with lower than desirable margins. Get creative and see if you can lower the costs of these items, but if not it may be time to consider removing them from your catalog and focus on items that will produce better returns for your business.
As you increase the profitability of your product selection, you may also consider introducing new products into your business. If done right, it can help excite your current loyal customer base while demonstrating innovation in the market amidst changing times.
To learn more about maximizing retail margins, click here.
4. Expand your online presence
With the current pandemic and economic climate leading to lower physical store traffic, your customers are being redirected to the online marketplace. Establish a social media presence that is kept current, offering a means for your customers to interact and inquire about your business. Have a plan to respond to your customers on a timely basis so they do not feel ignored.
Have you identified additional products or services that you can offer online that either acquires new customers or have the ability to strengthen relationships with your current customers? Creating an e-commerce channel is certainly a means of keeping your business operating, but you need to be prepared to invest in order to drive traffic to your virtual door. Paid digital media, which includes static ads, video ads, and social media posts and content, can do the job, however, it is recommended you partner with a lead generation guru to help you maximize the return on this investment.
For additional information on how to move your business online and remain competitive, click here.
5. Focus on your people…now more than ever
The 3 essential “P”s of running your business are people, processes, and products. During these challenging times, it is especially important to be there for your people. Create an environment where your employees can feel they are heard, empowered, and secure, and they will naturally be there reciprocally for your business. Involve your team in your operational strategy and planning, and give them a sense of ownership that empowers them to shine.
Additional ways you can strengthen the foundation with your people include:
- Form a Committee: have a platform by which everyone can have their voice heard
- Suggestion Box: encourage workers to suggest changes that can lead to improvements
- Review Options: allow teams to review options and vote on the best ways to improve
- Invest in Education: this may prove to be the perfect time to help your team improve their skills
- Flexible Work: if applicable, give workers some flexibility on hours, particularly if working at home
For more tips on engaging employees during the COVID-19 pandemic, click here.
Mind your business, and pay attention to what it is telling you. If you incorporate the above tips and strategies into your plans, you should find yourself empowered with the data you need to continue driving your business forward and prepare for what’s to come!
Ashley Mullen – Senior Director, Enterprise Systems & Operations
Ashley has 15 years of working in business operations and ERP/management consulting and is responsible for the internal operations across B2B Soft divisions. She is a strategic thinker, always willing to go the extra mile to ensure the success and efficiency of our operational teams. Her proven track record of helping multiple businesses achieve their goals brings a fresh perspective to the B2B Soft organization.