Small business recovery depends on entrepreneurial resilience and common sense

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Small businesses have had a particularly difficult year and a half since the pandemic started, but now the economy is reopening and morale is rising. A study from the first quarter of 2021 found that 92% of small business owners expect their businesses to thrive in the next three to five years, and 75% hope to fully recover within 12 months.

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That’s good, because the rest of the economy depends on them. An individual company can employ hundreds of times more people than a single small business, but collectively, small businesses are powerful. Between 2000 and 2019, small businesses created 10.5 million new jobs, while large companies provided only 5.6 million. In addition, small business revenues spreads in the community much more than that of large companies.

But to what extent small businesses are bouncing back Much depends on the small business owners themselves and how they react to the specifics of their own situation.

Adi Engel, CMO of a small business management software company vcita, said she was closely monitoring three key metrics. “First, there are return-to-work patterns, where many small business owners are unable to return to full complement as their former employees are unable or unwilling to return to their previous roles,” she explained via email.

“Second, the attempt to verify the sustainability of new work processes that have been created during the pandemic, particularly the push towards digital-first services,” Engel added. “Finally, many commitments have been made by financial institutions and governments to support SMEs, mainly in 2020. We have yet to see the full impact of these, many of which have yet to be delivered.”

Tax know-how and better financing go hand in hand

As small businesses continue to reinvent themselves with digital processes and service fulfillment, access to capital has become even more critical than before the economic downturn.

“Access to finance is a fundamental requirement for any business growth and is not unique to SMEs,” Engel noted. “Think of any startup or publicly traded company – all of them are funded by investors. From an SME perspective, those investors are normally banks, lenders and governments, and they all have a role to play in the recovery of the economy.

Of course, smart tax planning allows small businesses to optimize Business plans and maximize profits, so they know in advance when they are likely to need a loan and can plan enough time for the application to be reviewed and funds released before things get critical.

In addition, different types of loans, such as merchant lines of credit, long-term loans, equipment financing, etc. are suitable for different situations.

Most experts recommend forecasting income six to twelve months in advance and making cash flow projections on a monthly basis. Sales forecasting should rely on multiple data sources, including CRM for sales pipeline, sales performance billing, and business metrics such as billings and expenses.

When it comes to growth, it can also be helpful for entrepreneurs to figure out how many customers an average team member can serve well, to know when it’s time to add another employee. In this way, it is possible to calculate and prepare the additional salary and benefits in advance.

Emergency funding can be a lifeline for many business owners and, in turn, it will accelerate the recovery of the entire economy,” Engel said. “However, this is a short-term solution. Whether offered by a financial institution or government agencies, we must consider it as an investment, and as such, it must be accompanied by real tools to support the growth of the company over time.

Business growth is not just about money

While lines of financing are crucial, they are not the be-all and end-all of business growth.

At least as important is digitizing finance, automating and tracking accounts receivable processes, while tracking all expense data, including recurring overhead, utilities, tax obligations, and more.

Better business planning also underpins an effective business strategy. With an accurate understanding of cash flow, entrepreneurs can better detect which risks are overreaching and could lead to disaster, and which are masking opportunities that could drive business growth.

Accurate forecasts help reveal risks and opportunities while they are still emerging, giving entrepreneurs time to decide how to respond.

Digital transformation will not stop with the pandemic

Vaccines may be rolling out, but the COVID-19 digital transformation continues. Small businesses have embraced digital tools to survive, but now they need to keep them to thrive and grow.

It is estimated that digital adoption saved 11 million American small businesses full or partial closure during the pandemic, with many forced to rotate due to a lack of other options. Similarly, the manual management of appointments and customer communications are pitfalls to avoid.

Now is not the time to give up on these numerical gains, according to Engel. “The adoption of digital tools for business management has long been identified as a critical component of growing an SME,” she said. “As the financial landscape becomes increasingly digital, it’s also key to ensuring that business owners and their support ecosystem are speaking the same language and measuring the same goals.”

Customers today have learned to accept and in many cases expect digital channels such as chatbots, self-service portals, contactless and mobile Payments, and online planning. They’re not about to stick around for small businesses that no longer offer them.

Transformative agility and resilience

With appropriate support from government institutions and financial partners, SMEs can survive “the great resignation”, the ever-changing social distancing mandates and all the other challenges that will present themselves this summer and beyond. These are uncertain times, but there are reasons to be cautiously optimistic.

For their part, small business entrepreneurs can drive the economy forward, but only if they improve their fiscal and operational organization, access the right financing at the right time, and consolidate their digital transformation over the long term.

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