4 Major Concerns: How Coronavirus Will Affect Small Business

how will coronavirus affect small business
I took this photo of the toilet roll aisle in a local supermarket in early March. Stressful situations mean people respond in unpredictable ways. Be prepared for the unexpected.

The harm that the COVID-19 Coronavirus pandemic will inflict upon the population of the world is becoming painfully clear.

The hidden sting in the tail from the pandemic, though, will be the economic consequences of virtually closing 50% or so of major economies around the world.

The UK, US, Australia, Germany, France, Italy are just the tip of the iceberg, as economies globally are reeling from the impacts.

As a business author and growth advisor, there’s a different question on my clients’ minds: how coronavirus will affect small businesses? And what are the strategies to create a recession proof business?

The likely problems from coronavirus fall into a these 4 categories…

To help my clients, I created a coronavirus contingency planning cheat-sheet. There’s finance, staffing, supply chain and many other things to consider. How coronavirus will affect small business is largely a matter of being prepared. The thing is, you want to do it quickly and then have it ready to roll. The cheat sheet helps do this efficiently. You can download it by clicking here.

1. How Coronavirus Will Affect Small Business Finance?

The big financial risk to small businesses during the coronavirus pandemic is cash flow.

The old saying about cash being king really comes home to roost when a business looks profitable on paper, but has nothing in the bank.

Turnover is vanity, profit is sanity, but cash is king

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When you sell products and services to other businesses, it’s common to offer terms of 30 days and sometimes even longer.

It’s also common to get paid late when you’re running a small business.

Both of these could cause serious problems if your business operates on a lean bank balance and you’re unable to pay your staff or other major bills.

More businesses fail because they run out of cash than for any other single issue.

It’s for this reason that I would put cash flow at the very top of the list of problems likely to arise from the coronavirus pandemic.

This is the single thing that will be responsible for the failure of many businesses affected.

The issue may occur for one of several reasons…

For example, customers may hold back payments due to having money problems themselves.

Or it may be caused by the customer having staff absences. If the business is closed altogether, or the person who pays the bills is in isolation, you may be high and dry waiting for them to get well again.

2. How Will Covid-19 Impact Small Business Staffing?

There are many considerations for your team, both employed staff and subcontractors too.

The first is simply their availability. If somebody is self-isolating or unwell, they won’t be available for work.

You can mitigate this risk to some extent through home-working.

It’s possible to work remotely far more easily now than at any time in the past, with so many systems now accessible in the cloud.

Add onto this services like Zoom, GotoMeeting and Skype for online videoconferencing and you have a plethora of choices for both doing work and communicating with your team.

On the topic of staff sickness, you will have to consider whether or not to pay fully.

The 2020 UK budget reveals that statutory sick pay will be available for people self-isolating as well as those who are diagnosed with the Covid-19 coronavirus.

There is also the furlough payment, where the government will pick up 80% of the wage bill for your staff if business needs to halt temporarily with the coronavirus.

When staff take holidays, how will you assess the risk of them bringing coronavirus back into the business?

Will you have a list of places they are asked to avoid?

Will you insist on self-isolation if they come back from certain destinations?

Perhaps one more reason for staff absence is if they have illness in their family.

It’s pretty likely that you’ll see this happening across your team and so having a position ready on this will pay dividends. It also means you’ll be prepared the first time it’s asked.

To help my clients, I created a coronavirus contingency planning cheat-sheet. There’s finance, staffing, supply chain and many other things to consider. The thing is, you want to do it quickly and then have it ready to roll. The cheat sheet helps do this efficiently. You can download it by clicking here.

3. Running Out Of Materials and Stock – Covid-19 Supply Chain Problems

You may already have some idea how coronavirus will affect small business suppliers if you use things like face masks for your work.

The general public has been snapping them up in attempts to protect themselves.

So demand outstripping supply (another pack of toilet rolls, anybody?) is the obvious way in which supplies could run short.

But there are others, too, and just like the toilet paper buying spree, remember it’s quite likely that there’ll be surprises in your supply chain.

Beyond out-of-stock situations, you may also find some suppliers not operating because of staff availability issues or other reasons.

It may be worth carrying slightly bigger stock than usual to cover a slightly extended period. Just be careful it doesn’t compromise your cash flow – don’t over-do it.

There’s also the problem of very small one-person supplies too. For example, specialist craftsmen or craftswomen may be personally unable to fulfil orders due to illness.

In the worst instance, you may need to find new suppliers.

This is not pleasant to write, nor to read.

It’s worth pre-planning this if you do depend upon individuals so that you’re not in the difficult position of being unable to trade in a few months time.

Finally you’ve got the really obvious problems of just being able to get hold of stock, consumable items and so on if the logistics industry slows down and deliveries become difficult.

Speaking of logistics, you might also want to think about how your customers receive your products. Will you be able to get them out, or is that a weakness that may need extra cover preparing, too?

There’s also the question of how coronavirus will affect small businesses that manufacture. Carrying increased stock of component parts and materials may be a wise and necessary precaution.

Just remember to pay attention to the points above.

4. Running Out Of Customers – Covid-19 Sales Problems

During a crisis, everybody will change their priorities.

If your business is on the receiving end of a changed priority, it’s going to hurt.

Probably the most painful way how coronavirus will affect small businesses is by taking away the confidence they have in their sales.

There will be less money going around. There will be fewer people getting paid a full salary.

There will – unfortunately – be unexpected healthcare costs and funerals.

And of course, there will be bulk-buying of food (and apparently toilet roll, which I mentioned earlier!).

Money spent elsewhere is money that can’t be spent with your business. As priorities shift, be prepared for lower sales.

There is a recession expected, caused by the drop and shift in normal consumer demand.

But don’t let your head go down. The recession is not automatically a drop in your sales. It is simply a time to focus harder, keep your chin up and do that little bit more, that little bit better, than your competitors.

The best companies fly through recessions, picking up more sales and customers, and making more profit than they do during the good times. The main reason is that their competitors drop their heads.

Lee Duncan

Now is not the time to stop advertising and growth – but you cannot do it blindly either. Every penny must be spent wisely.

Some businesses need to batten the hatches right down unless they can find a new service or product to sell. Parts of the tourism and hospitality industry spring to mind.

In Your Coronavirus Business Contingency Plan: Do It Now I explain how you may need to reinvent your service to be relevant during this dark period.

To help my clients, I created a coronavirus contingency planning cheat-sheet. There’s finance, staffing, supply chain and many other things to consider. The thing is, you want to do it quickly and then have it ready to roll. The cheat sheet helps do this efficiently. You can download it by clicking here.

If there are other ways how coronavirus will affect small businesses, I’d love to know them. Please leave a comment. At times like this, it’s good to talk.

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Lee Duncan

Lee Duncan is the author of "Double Your Business: How to Break Through The Barriers to Higher Growth, Turnover and Profit", from Financial Times Publishing. He teaches the owners of small to medium businesses how to make more profit and enjoy more free time.

2 Comments

  1. Jeanie on April 2nd, 2020 at 11:55 am

    hello Lee

    I am a small business owner 20 employed staff 25 self employed

    I have read but not downloaded your guide yet…

    what I have read so far has helped … a bit

    thank you x



  2. Lee Duncan on April 2nd, 2020 at 1:38 pm

    Hi Jeanie,

    Pleased to help anyway I can. Do you have any specific questions at all? These are difficult times and I wrote this to help.



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