As local business owners continue to adapt to the COVID-19 pandemic and do everything they can to keep their company running, it’s becoming increasingly difficult to stay afloat, as evidenced by the growing number of Toronto businesses closing their doors for good.
Compensating for lost revenues is all the more important for businesses that are forced to close their doors to prevent the COVID-19 outbreak, as injecting more cash flow can weather the temporary storm and keep staff employed.
Here are some immediate short-term steps you can take to mitigate cash flow restraints and respond to declining revenues.
Implement a Pre-Order Strategy
Consumers understand how challenging this time is for local businesses, even coming up with creative solutions to support their favourite Toronto-based companies and help them with their struggling cash flow.
If you’re a retailer or brick-and-mortar store with strong relationships to your local community, don’t be afraid to ask regulars to pre-order their favourite or your most popular products. You’ll be surprised at the response, and how accommodating people can be at this time – after all, we’re all in this together.
Offer Gift Cards
More and more local establishments are starting to offer gift cards for their products or services, which gives an immediate cash injection to the business, plus you’ll know these consumers will revisit your shop at some point in the future. If your margins are razor-thin, this can make all the difference in keeping operations running through the coronavirus pandemic.
Better yet, you can include discounts on gift cards, too, to further incentivize customers to make their purchase now – they’ll benefit in the long run with extra savings, and you’ll get the cash flow you need immediately.
Finally, you can always reach out to other local businesses and devise a co-marketing plan, so you both can support one another in acquiring new customers and more cash.
Discount Stagnant Inventory
Non-essential businesses that are still running are susceptible to oversupply. Therefore, you should do what you can in the short term to free up any cash, and not have it sitting on wasted inventory space or deadstock. Even lucrative businesses can have as much as 30% of inventory as deadstock; considering the circumstances, it’s more imperative than ever to move that product.
You can go about this in two steps:
- Using your inventory management system or app, begin analyzing, and then categorizing, the products bringing in the most revenue currently. Consider an A-B-C grade system, with A-products being your most valuable, B-products as middle-of-the-road, and C being the least in demand.
- Lower carrying costs by moving your C-products. You can heavily discount, bundle, or even sell C-products to liquidation retailers to get some semblance of value from that deadstock. Plus, you’ll free up valuable inventory space for A- and B-products that still have some consumer demand at this time.
Cut Your Shipping Costs
Shipping costs chip away at your margins, so in the short term, consider these adjustments:
- Fulfill as many orders manually as you can, if possible.
- Don’t use any ‘fancy packaging’ at this time; major couriers like Canada Post have free packaging, so take advantage of that for now.
- Implement local shipping*. If you’re a local business, it’s easy to incorporate a temporary ‘local delivery’ option for nearby consumers. By setting up local shipping, rates will be automatically adjusted and included at checkout. *Note that this applies to those with an ecommerce website; if you’re solely physical, it may be difficult to set this up online.
Work with Suppliers to Extend Payables
Injecting cash flow into your business can be done by either getting more immediate cash sales, or reducing expenses. Extending payables with your suppliers falls into the latter.
To keep that working capital in your business, reach out to your suppliers and work out an extended payment plan. Similar to local empathetic consumers, they should be willing to work with you to preserve your symbiotic business partnership (and increase its longevity). Considering the times, we’re sure both you and your suppliers can find an agreement you both can live with in the short term as we all navigate through these challenging times.
If you’re looking for other ways to inject cash flow into your business, the Eden Advertising team is here to support local business owners in Vaughan and Toronto. We can help you come up with affordable strategies that’ll keep you running in the short term, and set you up for growth in the long term.
Get in touch with us and we’ll discuss how we can best meet your business needs.