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Small Business Survival Plan for COVID-19


No money? No hope? Don’t give up! Your business can survive!

Even if you have totally run out of money and are completely without hope, your business can almost certainly survive the COVID-19 crisis. Furthermore, you can emerge with a business that is stronger than the business you had before the crisis.

How do I know this? My name is Bob Adams. I have started many small, woefully undercapitalized businesses and successfully navigated them through one crisis after the next. The most common and painful crisis was running out of cash. At times not only did I have no cash on hand, but I projected massive cash shortfalls in the months ahead. At other times my bank showed me the door and no other bank would lend me money either.

I’ve survived running out of money and so can you.

All too often it seemed like my business was finished. I was totally out of money and hopelessly in debt. And the future looked even worse. It seemed like there was no way out.

But time after time, I put together a plan and found a way to survive. For example, I started my book publishing business in my basement apartment with just $1500 and took it through one crisis after the next, eventually growing and selling it for $40 million.

No matter how bleak things seem now, your business can survive. And you can create an even stronger business model at the same time. Here’s how to do it.

First, calm it down.

When the bleakest moment hits, you have to calm yourself down. For me, I’d first go for a run. Then I’d remind myself that while running out of money was bad, it wasn’t as bad as let’s say getting hit by a truck. But sometimes I felt so shocked by sudden bad news – such as finding out that we would be $400,000 short in 30 days – that I would have to digest the news for a day before being able to work on a solution. Sometimes you can’t just dive into it.

Small Business Survival Plan for COVID-19 First, you need to clear your mind and get ready for some deep thinking.

You might be thinking how can I get calm when the crisis is threatening to end my business and throw my life into upheaval? You can’t expect to get totally calm. But you can get calm enough to start working on a new plan for your business.

OK… so you’re maybe you’re thinking…forget getting calm and coming up with a plan, I already am out of cash and can’t pay my bills. Now what?

Second, understand the key positive difference for you in this COVID-19 crisis.

Listen. This COVID-19 crisis really is different than any other. Everyone on the entire planet knows about it! And everyone is being impacted by it!

And that’s a huge benefit to you! Usually, your business problem is YOUR business problem. But this business problem is the WORLD’S business problem.

Because it’s a global problem everyone understands what your problem is.

This crisis gives you a carte blanche to stop paying your bills! It gives you a carte blanche for creditors to understand why you are not paying your bills.

You’ve got a carte blanche to stop paying your bills.

One of my friends got a letter from his landlord saying that they expected him to continue paying his rent. So he told me he still needed to pay it. But the reason the landlord sent the letter is because they don’t expect him to pay the rent! Or at least they expect there is a good chance he and many of their other tenants are not going to pay the rent. At least not right now.

coronavirus bills Don’t panic. Almost every business is struggling to pay their bills right now.

This crisis in your business did not happen because you made a business mistake. This crisis did not happen because you were not prepared for a recession. This crisis happened because of a global pandemic that led governments forcing businesses all over to shut down and consumers to stay at home. It’s not your fault.

You can’t be expected to pay your bills normally when the government is shutting down both businesses and consumers.

People don’t expect you to run your business and pay your bills the way you usually do.

To be honest, from a legal perspective, you are taking on risk if you don’t pay your bills. But if you can’t pay your bills or all your bills, then you can’t pay them. During this crisis, there is nothing dishonorable or unethical about not paying your bills if you can’t. It is possible that creditors could take legal action against you. But in most cases, the legal action is not going to begin quickly, especially at this time.

But you do need a survival plan.

So let’s start developing a survival plan that’s going to get you through this.

If you have some key employees you may decide to completely involve them in all steps of creating your survival plan. For me, during a total cash crisis, I tend to do most of the work in creating a survival plan on my own. Speed and making difficult wide-sweeping decisions quickly matters. I do whatever I have to do to find quiet time, out-of-the-office to get going on a plan. And I typically work on it deep into the night.

Then once I have a basic plan, I’ll go and present it to key employees, get their feedback and modify the plan. Rushed as I might feel to get a survival plan into action, I would try to listen patiently to feedback from key employees. My plan may change significantly after getting their feedback. And even if my plan doesn’t change much, it is important that the key employees felt that they had a “voice” and their opinions were “heard.”

If you have a really talented and highly involved team of employees you may instead decide to involve them completely during this process of creating a survival plan. This, of course, can get messy if even part of the discussion gets into even temporarily eliminating their positions. So think out this approach before you embark on it.

Now I know many business people, like my son, think that I run my business like someone from the age of dinosaurs since I don’t involve my key people throughout a process like this. And I don’t think he is necessarily wrong. You need to choose which approach will work best for you.

Forget how you ran the business yesterday. Today is a whole new ball game.

Whether you create a survival plan by yourself or with your team, there is a basic mindset that I recommend: “zero-based planning.” In other words, the past is past. Forget it. It’s not going to work now. Start with no assumptions. Start with a blank sheet of paper.

In other words, you are not going to think about maybe trimming the hours you are open or reducing your marketing costs or trimming your overhead.

Instead, you are going to redesign your business totally. And you are going to design it to survive during this tough time.

Small Business Survival Plan for COVID-19-2 You need a survival plan now. And it needs to work for the months to come, not just for a couple of weeks.

Don’t trim a little bit each week…make all your changes at once.

You don’t want to be in a situation where you slowly decide to trim a little this week and hope that this crisis will end really quickly. It’s not going to happen. This crisis is not going to end overnight. COVID-19 isn’t going to disappear instantly. And even when the worst of it ends, the economy is not going to bounce back like a rubber ball! That’s a fantasy! It’s going to take time to get back to a high spending, normal economy. So you don’t want to be in a situation where you cut a little this week. And then you go into crisis again next week and you cut a little more. And so on and so forth!

Instead, you want to redesign your business on a survivable basis right now. It will likely involve some painful decisions. Maybe you won’t be able to serve customers who can’t pay in advance. Maybe you will need to abandon a slow-moving product line. Maybe you will have to reduce your staff.

My experience has been that it is much better to do a complete redesign of your business as soon as possible, rather than make one incremental cut after the next. Later as you find your business is gaining strength you can consider adding back aspects of your business that you are cutting now.

coronavirus timing No matter how busy and overwhelmed you are, you must take the time to create a new plan.

You just gotta find the time to create a great new plan.

I know that at this point it may seem impossible to come up with the time to carefully put together a thoughtful survival plan. But you have to do it. You have to take the time to do it.

It will likely involve working day and night for a few days to come up with a great plan. But if you can remain optimistic that you will survive today and that you will thrive tomorrow, it is easier to keep up the energy to create a great plan.

Here’s a basic 7-part survival plan:

Your Small Business Survival Plan During COVID-19

#1. Strategy
A short one-page description of the temporary design of the business for the crisis period, with an emphasis on ensuring survival of the business.

#2. Bill Prioritization
A ranked list of which bills will be paid as money is available.

#3. New Budget
A new monthly budget for the crisis period.

#4. Projected Income Statements
Projected profit and loss statements for each month of the crisis period.

#5. Projected Balance Sheets
Projected balance sheets for each month of the crisis period.

#6. Projected Cash Flow
Projected cash flow for each month of the crisis period.

I had my first cash flow crisis in my first business Bob’s Rent-A-Bike.

Here’s an example of a Survival Plan Strategy for Bob’s Rent-A-Bike, loosely based upon my first business venture.

Sample Survival Strategy: Bob’s Rent-A-Bike

Current Situation:

Because of the COVID-19 crisis, I expect the demand for bicycle rentals during our peak summer season to sharply decline somewhere in the range of 30 to 50 percent. With my current budget, even a 30% decline would make the business unprofitable. and I would have to use some of my meager savings to keep the business running. At a 50% decline, the business would be losing money so quickly that it would use up all of my savings and I would be bankrupt if I tried to pay all my bills. And speaking of bills, I am already behind on paying many of my bills and creditors are calling looking for payment.

Changes to Increase Cash Flow:

New Service: We will start offering bicycle repairs to the general public. Since we anticipate running below capacity this will not require any additional employees.
Pricing Change: We will reduce our rates for multi-day bicycle rentals. This should increase the total revenue by encouraging people to rent bicycles for longer periods of time.
Asset Sales: We will sell off 30% of our bicycle inventory at cost or even lower if necessary.

Changes to Reduce Costs:

*We will cut our advertising costs by 50% by eliminating our least effective advertising channels that might not be profitable with reduced demand.
*We will trim our operating hours during the offseason when demand is low.
*We will hire one less seasonal employee during our peak season.
*We will go through all budget items one-by-one and determine which items we can skip or reduce at this time.

Bill Prioritization Plan:

Cash on hand: $2,190

Bills Overdue:

Commonwealth of Massachusetts, sales tax: $312
Landlord last month’s rent: $2,300
Internal Revenue Service, income tax payment missed: $985
National Bicycle Wholesale, 47 days overdue: $3,412
First National Bank, last month’s term loan payment: $1300

I will first pay the Massachusetts sales tax. Really sales taxes and payroll taxes are not bills they are money that I am holding in escrow for the state or federal government so paying them is a very high priority.

I hate to not pay the landlord the rent but I don’t have enough money now. I will call the landlord and tell him I don’t have the money now but that I have a “Survival Plan” and that I can only pay half of the rent and I can only pay it 15 days from now.

I will pay the IRS income tax over the busy summer season when I have the income. I will notify them of my situation and explain when I will make payments as soon as the summer season begins.

National Bicycle Wholesale I will first ask if I can return any recently purchased bicycles for credit since I now anticipate lower demand. Then if I can’t then I will tell them they will have to wait for payment until I am able to sell some of the excess bicycle inventory.

With First National Bank I will call my loan officer and tell her about my Survival Plan for my business. I will assure her that the bank will be repaid eventually but for the next 90 days, I will not be able to make any payments.

There is almost always a way to finance a small business.

Tap Any Possible Financing Sources

Financial projections

Creating all these financial projections is a lot of work. How detailed should they be? For how many months should you create them? Should you include multiple scenarios?

Your new monthly budget should be quite detailed. The more detailed it is, the more you can cut expenses. Similarly, I rather risk being too detailed as opposed to not being detailed enough when projecting your cash flow. For your income statements and your balance sheets being detailed is not as important at this time of crisis. Cash is what matters most.

For a simple, one-person service business, making three months of projections may be sufficient. And you only need one set of projections: your most likely scenario.

For a complex, multi-person product business that relies upon bank financing, you may want to make projections for 12 months. And you will likely want to create three sets of scenarios: a likely case scenario, a pessimistic case scenario, and an optimistic case scenario.

New financing sources: There are lots of alternatives.

Of course in the US as well as in many other countries, government agencies are dramatically ramping up financial support and lending for small businesses at this difficult time. Beyond that, there is an incredible number of different ways you can finance a small business. And while it may usually be difficult to finance a business in deep trouble, potential financiers may in some cases be more understanding during this unique situation. I’m not saying getting financing can be easy but it can be done. Especially if you are willing to carefully and professionally approach a variety of potential funding sources. However, if time is of the essence, which it often is in these situations you might want to first consider friends and family financing

Implementing Your Plan

What you plan to do matters. But how you communicate that message to your key stakeholders is important as well.

How do you talk with creditors and lenders?

First, don’t ignore them. For key creditors and lenders, you want to try to get a decision-maker on the phone. Have your survival plan ready first. If you can’t pay them now then tell them you have a plan. If you know when you can definitely pay then tell them. If you don’t know, then don’t promise a date. But try to be in a situation where you can promise them that you will survive and you will pay them. Be confident and genuine on the phone. Everyone else is having cash flow issues too. You have nothing to be embarrassed about.

Working with your employees

Once you have your Survival Plan put together and discussed it with your key employees, it’s time to discuss the situation with the rest of your employees, if you have any.

survival guide covid customers Be fair to the employees you have to let go and involve your team’s key players in the survival process.

First, you want to separately meet with any employees that you are dismissing, temporarily laying off, or reducing hours for. You want to meet with them in-person, one-to-one if possible. Then explain in a nice way your difficult situation and what it will mean for them. If you are dismissing them, then hopefully you will be able to offer some kind of severance pay or extend benefits for at least a short period of time. While you and or your key people may be very busy and distracted it is important to take time and energy to deliver this difficult news to employees as carefully as possible. For one, how you deliver the news will impact other employees who are not being dismissed. And for another, it’s just the right thing to do.

Re-assure your employees with an in-person meeting.

Then you want to pull together your remaining employees in an in-person group meeting. You want to assure them that you now have a carefully developed survival plan for your business during this difficult time of COVID-19. You especially want to assure them that you believe you will not have to make any future job cuts and that you believe that their continued employment at your firm should be safe.

Then you can outline any changes that your company is making. I would also recommend asking for everyone’s help in either increasing revenue or decreasing costs or both. I would even consider offering cash prizes for cost-cutting suggestions. And finally, I would field any questions that people might have. Additionally, I would offer to be available to discuss anything about these changes or the impact of COVID-19 on them or the workplace on a one-to-one basis.

Seek help from your employees.

When I tried this at my book publishing company the employees in the warehouse came up with a proposal to dramatically reduce our trash removal costs of damaged books. In fact, they came up with a source to buy the damaged books so they were able to turn a large cost into a significant piece of ongoing revenue.

Communicate with your customers.

You have to put yourself in your customers’ shoes and think about how they view your business now. Communicate with them how your business has changed. Communicate with them how you will handle things differently now. If you have any in-person contact with them or with products being delivered to them, emphasize steps you have to ensure their safety.

How you will treat your customers in this time of crisis could define your business for years… So do your very best!

Here are two different examples of customer communication and service during COVID-19.

At the beginning of this crisis, I had to cancel a hotel reservation that I received a special no-refund non-cancellable rate on. Just before I was about to call the Marriot-owned hotel, I received an email from the CEO of Marriot saying that because of COVID-19 anyone could cancel reservations for a full refund. Then I called the hotel and the cherry reservation agent also assured me it was not a problem to cancel and they were happy to issue a refund. This left me with a great feeling and I can’t wait to go back to this hotel in September.

Then I tried to contact American Airlines. Their website had ambiguous messages on cancellations. At one place the website said I could cancel but I would only get a refund. At three other places on the website, it said I would not even get a refund for my ticket type. Finally, after waiting endlessly to get someone on the phone I asked the reservation agent if I could get a refund or credit for another trip. She said that I could not get a refund but that I could rebook the trip using the same ticket. On top of that, she seemed “matter of fact” not at all as friendly as the reservationist at Marriott. Unlike Marriott, I’m not eager to go back and use American Airlines.

A Great Chance to Radically Improve Your Business Model

So how does my company emerge better from the crisis?

The “small” answer you can see from the examples above. Such as turning damaged books from a cost to a source of revenue. And the example from Bob’s Rent-A-Bike of adding bicycle repair to the company’s products.

A big crisis opens the doors for big changes and improvements.

But the “big” answer is that a crisis can open your mind and the mind of your employees to consider totally re-doing and improving your business model.

As Winston Churchill said, “Never let a good crisis go to waste.”

A good crisis is an awesome time to rethink some of the basic concepts and assumptions about your business. A crisis opens your mind to doing things in new ways and frankly just opening up one’s mind to new possibilities is one of the biggest stumbling blocks to radically improving the performance of a business, especially a small business.

Hence a crisis is a great time to re-examine your core business strategy.

covid business crisis This crisis is a great opportunity to rethink and transform your business.

In particular, I believe that the vast majority of small businesses could radically improve their business performance if they just improved these three things.

The Three Big Things I Suggest You Take a Hard Look At

Just re-examining three things can send your business performance through the roof!

Three key things almost any business can do better:

#1 Clearly target identifiable markets
#2 Sharply differentiate products and services
#3 Communicate your value proposition in a “Unique Selling Proposition”

Doing each of these three things exceptionally well is extremely important for a well-run business.

Very very few businesses really do these things really well!

So why don’t small businesses do these three things well? The problem is that most businesses think that they do. And maybe your business is the exception. Maybe you do all of these three things great.

But I’ll share a secret with you. I have a Harvard Business School degree. I have successfully started over a dozen businesses and made a lot of money. But here’s my secret…I have not always done these three things well. And in hindsight, if I had, I would have been even more successful.

Not doing these three things well is the #1 reason that small businesses underperform. It’s the #1 reason that so many small businesses suffer from low-profit margins, slow growth, and weak financial performance. And it’s likely the #1 reason that small businesses fail.

Let’s take a quick look at these crucial three factors for business success:

#1 Clearly target identifiable markets

First, you need to have one or more clearly identifiable target markets. You want to design your business to do an excellent job of serving these markets.

#2 Sharply differentiate products and services

Second, your business needs to be “differentiated.” You are unique and your products and services need to be unique to. They need to offer something special that your competitors do not. Something that really matters to your customers.

Weak differentiation is perhaps the most common reason small businesses underperform and fail. 

#3 Communicate your value proposition in a “Unique Selling Proposition”

Third, you need a powerful unique selling proposition. A phrase or sentence that neatly explains why a customer should do business with you and not your competitor?

Excelling in these three dimensions alone can create a very successful business model. And there is no time better than a massive crisis to re-evaluate your whole business concept and make sure that it is strong as it can possibly be.

It might seem grim now, but your business can survive!

So no matter how grim the situation seems for your business now, let’s a powerful Survival Plan in place that will ensure that your business not only thrives but is stronger than ever before.

For more help on how your small business can survive the COVID-19 crisis, I suggest my short video courses:

How to Turn Around a Struggling Business
How to Kickstart Your Business
How to Boost Your Profits
How to Create Your Business Plan
Business Strategy: Your Formula for Success
How to Create Your Competitive Advantage
How to Finance Your Business: The Best Options
Accounting & Financial Statements
Credit & Collections

These courses are all on BusinessTown which you can try for free for 7 days.

Bob Adams

Bob Adams is the founder of BusinessTown the go-to learning platform for people starting and running their own businesses. Bob has started dozens of successful businesses, including one he launched with $1500 and sold for $40 million. He also has an MBA from Harvard Business School.


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