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March 16, 2021

Small Business Secrets to Crisis Survival

Catastrophic events often force businesses to shift gears, and perhaps no crisis demonstrates this better than the coronavirus pandemic. Nearly every industry, from established brands, to traditional manufacturers, to entertainment and sports, had to make operational adjustments quickly to survive the global lockdowns of 2020.

But what if you're a small business facing a new and diverse set of challenges daily?

"If there's one thing 2020 taught every company, big or small, it is the critical need for resiliency and the readiness to explore the different options to pivot," said Susana Fonticoba, founder of small-business growth consultancy Clear Path Strategy. "Resiliency is the keyword, especially in the game of small business survival."

Nevertheless, establishing long-term resiliency for any size business is complicated, especially if it's happening during a crisis. Below are several principles to keep in mind when developing systems to sustain small business success in dynamic environments.

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Always Shift Tactically

Many small businesses survived 2020 by changing their sales channel, target market, delivery method or products during the pandemic. Los Angeles business coach Dave Labowitz makes the point that successful companies stuck close to their wheelhouses when doing so.

"If a small business pivots too far from its original business mission, it's no longer a pivot - it's a reboot or, if temporary, a pop-up business," explained Labowitz. "If you want to maintain the benefit of your original branding, market positioning and prior customer relationships, there needs to be a coherent connection between what you used to do and what you will be doing post-pivot," Labowitz said.

He cited a yoga studio that was shut down for in-person classes due to COVID-19 restrictions and started streaming classes online.

"They were able to continue serving many of their existing clients while expanding their total available market by offering an online product," Labowitz said. "Once the pandemic is under control, they'll have the option to resume their initial, in-person model, blend the in-person and online strategy together or even remain strictly online. The continuity in their value proposition gives them a lot of long-term flexibility."

Another example of successful pivots comes from Shark Tank-backed Anaheim e-commerce entrepreneur Brian Lim, founder and CEO of EmazingGroup, an Inc. 5000 firm that sells apparel for live events, such as music festivals. He said the company, which operates Into the AM and iHeartRaves, faced what seemed like foundational challenges once live events were canceled or postponed, but they figured out how to respond quickly and intelligently.

"We maintained our brand and products but shifted our marketing away from festival clothing and onto other uses, such as lingerie or loungewear," Lim said. "Then, we added to our clothing line by designing face masks and offering an incentive that also served as a way to connect with our community. For each mask that is purchased, we are donating one non-printed face mask to nonprofits supporting those on the front lines. We are receiving thousands of orders and are excited to help anyone we can."

Whenever a small business is faced with adversity, it is important to stay close to its central focus rather than branching into an entirely new industry, said Steve Bash, who manages City National Bank's international banking and trade finance division.

"Sticking to your core proposition is very important," Bash explained. “Businesses that are looking to invest, grow or branch out into activities that aren't really core to who they are is a pretty risky proposition during a crisis situation. They'd need to interact with a whole new supply chain ecosystem, adding transportation, logistics and procurement partners with whom they have no experience."

Principles to Remember When Strategizing

Do:

  • Consider a new target market or audience that would take interest in your existing services if you were to shift your marketing message alone.
  • Explore new services you could offer to your existing market.
  • Research how you could deliver your services differently.

Don't:

  • Create new products for new markets. Instead, Ohio-based business strategist Diane Helbig of Helbig Enterprises recommended firms consider modifying an existing product or service so it has value to new markets, adding an offering that people need because of the pandemic, and reaching out to past, current and potential clients to see what they need now.
  • Stick with products or services that customers have dropped during the crisis. Look instead to replace these stragglers with more profitable offerings to meet customers' new and evolving demands.
  • Operate on auto pilot without considering the new environment. Even if you keep the same product line, tweaking your hours or ordering and delivery modes to make your business more accessible can prove critical to keeping or gaining customers during a crisis.

Reinforce Relationships

Along with sticking to core competencies, City National's Bash recommended doubling down on relationships you depend upon to run your business, such as current customers, suppliers, manufacturers, transportation partners and other important players.

"Whatever business relationships you have, and no matter how good you think they are, my advice is to do whatever you can to build, strengthen and even enhance your strongest relationships. Your best opportunities for success and survival if something goes wrong lie with your strongest relationships," Bash said.

One of Bash's clients, for example, produces tequila in Mexico and transports it in tanker trucks to the U.S. for bottling. When the North American Free Trade Agreement was being renegotiated, he advised the business to remain alert to what products the trucks were carrying on their return trips to Mexico and any related tax, border or tariff issues that might arise.

Without keeping on top of this information for their business relationship, he explained, “they couldn't just assume that the truck would come back on time and, after the hassle of crossing the border, be ready to work with them again."

Strong working partnerships can prove vital for business during a crisis.

Principles to Remember When Partnering

Do:

  • Your homework. The better your business relationships and the more you understand each other, the more willing your key partners are likely to help you in a time of need, Bash said. Building ties in your ecosystem also can help you shorten and extend payment terms, negotiate discounts and capacity issues and open new doors, he said.
  • Consider supply chain finance programs. During the pandemic, for example, big-box retailers have become very open to adding small suppliers to their supply chain finance programs, allowing the smaller players to be paid sooner and save on interest rates by passing along the big-player borrowing ability, Bash said. He recommended that suppliers talk to their bigger customers about being added to these financing programs, which would allow vendors to be paid by the customer's bank immediately after shipment and invoicing rather than waiting for 60 or 90 days.
  • Network heavily, especially with businesses serving the same customer base, suggested Brett Prentiss, co-founder of Sacramento-based Instinct Marketing. "Just because you can't go out and meet people does not mean you cannot continue to build connections," Prentiss said. "You never know who someone knows and who can be a source of referrals.

Don't:

  • Grow cold. Now is the time to humanize your company for customers and partners.
  • Make uncommunicated changes. During a crisis, you must educate customers and partners about how to interact with your business, from operating hours to facility closures.
  • Assume that customers and partners believe your values will continue. Any crisis brings brand values into question, and it's your responsibility to educate them again.

Small businesses that understand their partners and customers during a crisis can find success in pivoting to meet their critical needs.

"The most successful businesses are always the ones that solve some sort of pressing pain point for a customer. And in a crisis like the current pandemic, there are lots of opportunities. Just about everyone is feeling new pains on one level or another," Labowitz said.

Note also that any shift may permanently change business - and the way you handle business - in the future.

"I think the silver lining here could be the demand in the new way of working," City National's Bash said. “For all of us, it's accelerated a lot of the things we said we were moving towards, from digital operations to narrowing our focus, but now we're forced to be there already."

You are invited to keep up-to-date with the latest economic perspectives and shifting global markets during the pandemic by signing up for City National Bank's newsletters here. Delivered biweekly, straight to your inbox.

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.

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