What Should Small Business Owners Focus On During A Crisis?

Economic crises can be challenging times for all of us but a grave pandemic such as COVID-19 and the ensuing economic fallout are particularly damaging to small businesses. In steering through this crisis myself, I thought I would write down lessons learnt about how small businesses can survive and thrive through economic crises.

During times of crisis, small businesses must focus on what matters most: your people, your customers, and your cash flow. It is about survival first and then about being prepared to take advantage of the recovery thereafter. 

While you are in the eye of the storm, the situation can be damning and it may seem like there is no end in sight. But hold tight and keep in mind that in every crisis there are challenges and opportunities. Here is what I learned during these difficult times and how you can succeed too. 

In crisis, focus on what matters most 

Whether your small business is hard hit or coasting through, at times of wide-spread economic crisis it is important to focus on what matters most: your people, your customers, and your cash flow – in that order. Everything else is secondary at this time. Nevertheless, look out for opportunities to benefit from the crisis.

Take care of your people

As the old adage goes, your employees are your most important asset. And it does sound like a cliche, but far from it. Your employees run the business. They are in touch with your customers. They make your products. They provide your  services. For many small businesses, it’s the employees that make the business special. Take good care of your employees at all times – and especially during a crisis. 

The crisis may be a major cause of concern for your employees. More than ever, it is important that you listen to your employees’ concerns and anxieties during a crisis. Will there be enough business to keep the lights on? How will the crisis affect their jobs? Will they be able to keep their jobs? Will I be able to earn a living and put food on the table? These may be just a few of their questions and concerns. Be receptive and empathetic to your employees’ worries and needs.  

Your employees look to you for leadership, guidance and a steady hand that navigates the ship through the storm. Communicate as openly, transparently and as often as you can about the situation of business. Tell your employees about the health of the business, what you are doing to keep the business going, and what they can do to help. Be honest, truthful, and candid. Don’t sugarcoat things. Your employees can handle the truth. In fact, anything but the truth may cause further concern and further distraction. 

At times of crisis, try everything you can to keep your employees. Whether your employees may have been with you for a long or a short period of time, they hold very valuable knowledge and skills about your business, about your customers and about your business partners. This is knowledge you don’t want to lose. And as you navigate through the crisis and prepare for recovery, you want to have your knowledgeable, skilled people around you to support a recovery out of the crisis as quickly as possible. 

If your business struggles through the crisis and gets under cost pressure, cut all other costs first before considering layoffs. Explore all options and find ways to retain your employees. There may be measures available to cut costs that you haven’t thought of. Consider the following measures:

  • Stop discretionary spending: cut out all the extras, such as free snacks and other office perks. Stop any non-essential travel or entertainment expenses. Delay any non-essential business expenses such as software or hardware upgrades. Freeze bonuses and new hiring. 
  • Offer unpaid leave: consider additional vacation time for employees. Even if it is unpaid, holiday time may be a good compromise instead of layoffs. 
  • Reduced business hours: check feasibility to shorten the workweek or closing your shop early when foot traffic is slow. Reduce salaries in accordance with reduced work hours. 
  • Temporary pay cuts: this may be a tough pill to swallow but is still better than layoffs. Make this measure temporary and allow employees to plan for it. This will go down much better if you as the business owner and the most senior leaders take a bigger pay cut than workers and front line employees. As the business owner, lead the way. Demonstrate that everyone’s in it and allow the broader shoulders to carry the larger load. 
  • Work-from-home arrangements: see whether working from home would be a feasible way to keep the business running and cut expenses. Consider to sublease space that you don’t need or to negotiate a reduced office or shop rent. 
  • Government support programs: I know this may not be popular or may require careful consideration. But check whether there are federal or local government programs available to you. Seek advice and check the fine print. There may be strings attached to accepting government money to retain employees.  
  • Reduce contractors or part-timers: if all other ways are insufficient, consider reducing part-time hours or contractors first before considering employee layoffs. 

Whatever you do, speak openly to your employees about the situation and that you need to take action. You are all in this together. Maybe you and your employees can jointly find ideas to cut costs or increase productivity that will take pressure off the business. It’s amazing what a joint brainstorm can do. Find solutions that work for everyone and that allow you to retain your employees. Besides helping the business through the crisis, involving your employees will foster greater trust and may actually boost morale. You will be surprised what is possible when everyone sticks their heads together to jointly find a solution. 

When in crisis, making it through the crisis immediately becomes the top priority. When you are on the other side, you will need your employees to build the business back up and you will be glad to have them.

Take care of your customers

Whether you are in the B2B or B2C space, take care of your customers at times of crisis. It is in difficult times that true partners and reliable suppliers separate themselves from the rest. 

Remember that it is your customers who you are in business for. They pay for your products and services. Their satisfaction ultimately determines your success – and how you steer through the crisis. 

In an unprecedented crisis such as COVID-19 with stay-at-home orders and social distancing measures in place, customer behaviors can certainly change and customer needs may too. Demand for certain products or services may suddenly decline or shift to different offerings or channels. 

Consider these consumer examples: 

  • People no longer shop at the mall but purchase daily necessities online
  • People no longer go to movie theatres but watch movies at home
  • People buy fewer leisure products and luxury goods and instead buy more hygiene products and cleaning supplies
  • People do not dine out as much and instead cook at home or order home delivery.

While some of these changes may be temporary, others may have a longer lasting effect. For example, consider someone who has signed up for a home delivery service or an online streaming service during the crisis. Once this person has become accustomed to the conveniences, he or she might be reluctant to change back. If this applies to your business and you have seen your customers’ behavior change, don’t despair. What you still have in any case is the relationship with your customers. So lean in.

Similar to being there for your employees, be there for your customers – through thick and thin. Speak with your customers to understand their situation, their needs and their concerns. Identify ways how your business can help your customers through the crisis. This will strengthen your relationship and put you in the pole position to support your customer also during a recovery after the crisis.

Besides your ongoing business which led you to the supplier-customer relationship in the first place, look for new ways to support your customers or look for alternative business models to serve your customers. For example, are there other products or services you can help your customer with at this time of crisis? Can you shift your offering to another channel or media, e.g. online via webcasts, podcasts, or video conferencing?

Consider the real life example of training and development consultancy Glo Training in Hong Kong. Started in 2018 by Principal Instructor and business owner Gary Lo, Glo Training aims “to inspire and transform lives through creating unique learning experiences in 3 areas: personal growth, professional skills and coaching” (www.glo-consulting.institute). When the pandemic hit, corporate clients cancelled training and sent their employees into home offices. Gary adjusted and shifted his programs online. Since the start of the pandemic, Gary has provided more than 70 webinars and has recorded numerous online video courses. You can find Glo Training’s YouTube channel via this link.

In addition to serving your existing customers differently the way Gary has done, changes to your offering may allow you to pick up new customers who you weren’t serving before. 

Imagine the fictional example of Tony’s Pizza I have written about in a separate article (see the Tony’s Pizza example here). Tony decided to transform his pizza parlor into an Italian family restaurant. During this COVID-19 crisis, Tony’s pizza delivery service with the added menu of the family restaurant may appeal to new customers who would previously not have ordered only from the pizza menu. 

Take a look at your business and your existing customers. Audit yourself and check whether you can transform your existing business in a way that serves your existing customers differently and picks up new customers

Ask yourself these questions. The list is non-exhaustive but might get your own creative juices flowing:

  • Can you provide your products and services to your customers online? 
  • Can you turn your knowledge & expertise into a service for your customers? 
  • Can you give your customers access to your equipment and machinery? 
  • Can you mobilize your business from a physical shop to a business “on wheels”?

Find ways to keep in touch with your customers and remain a valuable partner and source of information, hope and courage also during the crisis. Remember that strong customer relationships come out stronger after the crisis when weathering the storm together

Take care of your cash flow

Last but certainly not least, take care of your cash flow. When the crisis hits and the business stops in its tracks what matters most is liquidity, i.e. cash. 

According to businessdictionary.com, liquidity is “a measure of the extent to which a person or organization has cash to meet immediate and short-term obligations” (source). And that is what it is about in a crisis: having sufficient funds to pay salaries, pay bills, and survive.

At any time really, but particularly during times of crisis, as a small business owner be the master of your cash flow. Closely manage your cash inflows and your cash outflows and aim to achieve a net positive cash flow. A positive cash flow means that your cash inflows are larger than your cash outflows. Hence, your cash balance increases.  

Cash inflows

Your cash inflows are primarily the payments you receive from customers for the products and services you provide. In accounting terms, these are cash flows from operating activities. Cash inflows can however also come from bank loans or credit lines. These are called cash flows from financing activities. Finally, cash inflows can also come from investing activities such as selling assets including e.g. shareholdings, property and equipment.

During a crisis review all your cash inflows and identify assets that can be turned into cash most easily. These are usually accounts receivables and inventories which together make up your working capital. 

Accounts receivables are your customers’ outstanding bills to you. Follow up with your customers and make sure you are getting paid. When a crisis hits, your customers may be similarly affected and might likewise require to manage their cash flows. Place an emphasis on bill collection to reduce the risk of bad debts. 

If a customer has payment problems, work with your customer and agree on measures to get paid. Consider for example creating a payment plan in installments over time instead of a lump sum payment all at once. This might create just enough flexibility to help both you and your customer with cash flow. 

In addition, try as much as possible to reduce your working capital by turning your inventories into cash. Inventories are your raw materials and in-process materials held for production and your finished goods held for sale to your customers. Review all your inventories and find ways to reduce them and turn them into cash

For example, review aging or slow moving stocks and consider a promotion or sales event to clear them at reduced prices or discounts. Check whether you can bundle products and move slow-moving goods in combination with products that sell well. 

Cash outflows

Your cash outflows can equally be categorized into operating, financing, and investing cash flows. Review all your cash outflows and identify ways to minimize your cash outflows at times of crisis

Minimizing your cash outflows effectively means reducing your expenses and outstanding payments as far as possible. Review again the list from above for ways to reduce your expenses. Stop or significantly reduce:

  • Discretionary spending
  • Entertainment expenses
  • Business travel
  • External hiring 
  • Avoid any non-essential spending at this time.

This may include your investing activities – review these next. If your business is capital intensive, there might be large opportunities to preserve cash from reducing capital expenditures. Investments may include the purchase of new equipment, machinery or other property. Check whether you can postpone these activities or avoid them altogether. 

Next, review your accounts payable. Accounts payable are your open bills and invoices towards your suppliers (for sake of accuracy, accounts payable also count towards your working capital). These may of course also include interest expenses towards banks or other creditors. 

Speak with your suppliers about payment extensions to postpone making payments. Make sure to discuss and agree on measures with your suppliers or partners instead of deciding unilaterally to delay or withhold payment. This may cause late fees or penalties – especially when dealing with creditors, utilities or government entities – which will increase the burden later. Instead try to make deals such as agreeing on payment plans (see above). You may be surprised how accommodating some of your partners might be. Just ask! 

In any event, try to reduce any other expenses before you turn to your personnel expenses. As noted above, take care of your employees and work with them to make it through the crisis. There are several measures discussed above that might help you manage your cash flow without letting go of your people. Your people are your most important assets. Involve them in the process. Exhaust all your options before letting go of people. 

One additional thought which might be a bit late if you are already fighting the crisis. Here it is anyway: If your business depends very strongly on your cash flow to run the business, then you want to make sure to have enough of a cash cushion to make it through a crisis. Jim Harmer and Ricky Kessler of Income School advocate for private persons to keep cash reserves that cover 3-6 months of expenses. They call this an emergency fund. The same holds true for businesses! 

If you don’t yet have an emergency fund, consider creating one as soon as you can. This is cash you leave in the bank and that you don’t touch unless you have an emergency that requires you to tab into your cash reserves. If you have to use it, fill it back up as soon as you can. Again, as I said, it might be a bit late right now to build this fund if you are already in the crisis. But make sure to begin building such a cash cushion as soon as you can. 

If you are hit hard by the crisis, try to avoid any cash out that is not essential to keeping the business running. Maintain a net positive cash flow to build a cushion that allows you to survive the crisis and come out stronger on the other end. When the situation improves you want to be able to use your cash to take advantage of the recovery. 

Take care of yourself also!

One more thought: besides your people, your customers, and your cash flow, don’t forget to take care of yourself! Focus on your health and well-being and find time to reflect, recharge, and re-energize. Your business and your people need you at your best in times of crisis so invest the time that you need. 

It’s easy to forget about yourself while being there for your team and keeping the business afloat. But just like on the airplane, when we are told to put on our own oxygen masks first before helping others, make sure you’re OK yourself so that you can help others. 

When investing in yourself, consider both your mental health and your physical health. Make sure that you get plenty of sleep, eat well, and get sufficient movement. These times are stressful so make sure that your body and your mind are ready to cope. Your business needs you are your peak performance ability.


When in crisis, focus on what matters: your people, your customers, and your cash flows.

Focus first on survival and helping your business weather the storm. Then look out for opportunities to come out of the crisis stronger than you were before.

How are you managing through the crisis? Where do you place your focus? We’d love to hear from you. Feel free to drop a comment below. We hope you are healthy and well and are finding a way to cope. Take care!

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