ASCA President Kieran Westlake shares steps to mitigate the effects of COVID-19 on cafés and small businesses.
The COVID-19 pandemic is on course to be the most destructive economic issue since the Global Financial Crisis, due to its unprecedented nature and scale of the outbreak. This is especially true for individuals and families living week to week, as well as businesses that are reliant on face-to-face customer transactions, like cafés.
As entrepreneurs and business owners, how do we protect our businesses and our people? The first step is to secure your family’s safety, then that of your livelihood: the business.
Before taking action, we need to establish a vital mindset: communicate, communicate, and communicate. Unless we make our circumstances known, our network of suppliers, customers, and creditors cannot be expected to divine the pressures we may be facing. This isn’t weakness, it is an act of strength. With this in mind, we can press on to practical steps.
A lack of revenue doesn’t kill a business. It’s the costs and the lack of capital to pay them that does. Unless your business is flush with cash reserves for six months of bills, this will be your most important action item.
Contact your landlord. Your landlord has to consider that if your tenancy ended today or next month, the likelihood is low that a new operator will want to take up the vacancy for the same amount of rent. Find an arrangement that will allow you to continue to occupy and trade from your business premises.
Contact your creditors. If you find it difficult to make repayments, you should contact your financial firm straight away. Many have a dedicated financial hardship team that you can speak to. You can ask for any reasonable change to your credit contract that may help you to repay your loan. Your financial firm should work with you to help overcome your financial difficulty.
Reduce your fixed costs. Can you refinance your equipment finance costs to a lower weekly or monthly cost? Can you scale your phone and internet costs back by changing your plan? Call your electricity and gas suppliers for a better deal or consider changing them. Can your landlord help you negotiate a better deal? These are questions to consider.
Labour costs. Your people make your business what it is, but your business ultimately needs to survive if it is to provide a livelihood to both employer and employees. Talk to your people and brief them on the situation and what that means for them.
Stock levels. Use what you have on hand and don’t order more unless you have to.
We have our high impact costs strategies executed, so how do we now focus on protecting, growing, or supplementing revenue in a downturn for a potentially extended period of time?
Pre-paid services. This means your loyal, regular customers pre-purchase your goods or services in bulk and for use in the future, typically with a discount applied upfront. This means you get vital capital into the business and they get to support their favourite businesses.
Sales channels. Pivot or strengthen sales channels not linked to “face to face” transactions. Look into selling your coffee products online, meal delivery services, and promoting takeaway.
We also need to market our products and services and get the messaging right. We have the strategy, now we need the execution.
Social media is a cost-effective way for small businesses like cafés to market. You can target current customers, build look-a-likes of our existing customers, target them in close geographical proximity, and communicate our story effectively.
Our target audience’s viewing time of these platforms is likely to rise during any form of social distancing or isolation, so this further improves our marketing efforts.
Just because revenue is down, doesn’t mean we skip the investment in the strategies that will have the most impact.
Promote how all consumers can help their favourite cafés and small businesses.
Again, we have to tell people why and how to help. If we don’t, we can only blame ourselves for staying quiet when we may have a fanbase willing to support us in our time of need.
The next few weeks or months could prove challenging, but the health and sense of community of the Australian coffee industry means we can make it through.
This article appears in the April 2020 edition of BeanScene. Subscribe HERE.