There is little doubt 2020 presented unique challenges for business owners. Across the United States, thousands of business owners were faced with rolling forced shutdowns, others had to adjust to fewer employees in their workspace, and still, others faced the potential of closing permanently.
Business owners that were lucky enough to have their business survive 2020 must now take stock of their past year’s financial performance to determine the goals that will set them up for success as they navigate the next twelve months. 2021 will not be just another year. The recent rollout of approved vaccines is good news for everyone. This is important because it will play a role in businesses getting back to financial “normal” and how we set our goals for 2021. Here are some of the things you need to consider when evaluating your 2020 performance and prepare to establish your goals for 2021.
Evaluating Your 2020 Goals and How You Adapted to Challenges
Chances are you first laid out your business plan for 2020 with certain projections, goals, and benchmarks which were quickly thrown out of the window at the first onslaught of the pandemic. Looking back on 2020 as a whole may have you feeling somewhat defeated. However, it is important to put the year into perspective. Since March of 2020, nearly every business owner has faced financial challenges due to the impact of the pandemic.
Those businesses who were able to stay operational because they could have their staff work from home were forced to increase spending on technology to use at home. Others were facing serious reductions in orders resulting in less income. Some businesses were faced with increased spending while grappling with decreased income while finding it necessary to invest in personal protective equipment to allow their operations to continue.
For some small businesses, the Paycheck Protection Program (PPP) was a lifesaver. For those businesses who did not qualify for PPP, some are looking at their bottom lines and seeing a sea of red. It can — and will — get better if you put everything into perspective and prepare your plan for 2021. The message here is simple: Do not let the setbacks of 2020 cloud your vision for 2021. The time to prepare for 2021 is now and you want to set a realistic set of goals while keeping in mind the challenges you will likely be facing. Here are some steps you should be considering:
Understand the Landscape of Business
One of the factors you will have to evaluate is what impact COVID-19 will have on your business entering 2021. Even with vaccine distribution beginning, chances are your industry will face some impact from slowdowns either from your vendors or customers. While it may be challenging to accurately forecast the impact, make sure you have some plan in place for any slowdowns in distribution chains, manufacturing chains, and supply chains.
Businesses will have to face head-on the new reality and set their financial goals for 2021 based on what they know today — however, this also means many will be forced to reevaluate those goals should the landscape of business change. Ensuring financial stability in an uncertain marketplace will require businesses to address their finances in a way that is flexible. Developing a financial plan that allows for change as the market changes will be the key to continued success during 2021.
Preparing Financially for 2021
Naturally, one of the biggest factors for 2021 will be the capital needs of your business. Chances are your business may also be facing additional operating and overhead costs in the new year which have to be dealt with. Some ways to help you prepare to include:
- Know the figures – have you accounted for all your financial activity in 2020? What are your profit margins and break-even points? Do you know the balances owed on all outstanding debts or balances owed to you?
- Identify areas for business growth – determine if you have maximized revenue and profitability with your current client base. Customer needs may have changed so businesses should look for other goods or services to supplement their demand. You should reach out to your customer base and determine their foreseeable needs for the next three to six months.
- Set short-term and long-term financial goals then prioritize them – this will help you make sound financial decisions when unexpected issues arise.
- Create a cash flow projection for a minimum of four to six weeks and one encompassing all of 2021 – this will help you identify your immediate working capital needs and help you see the broader picture of your business’s finances. You may be able to reduce, cut, or reschedule expenses to give you time to collect on your receivables. Having a plan with sufficient reserves will help keep you on track to meet your financial obligations.
- Avoid financial products that promise immediate access to cash or ones with lax underwriting requirements – chances are there are some unforeseen strings attached. Stay away from payday loans and merchant cash advances (MCAs). They typically come with exorbitantly high-interest rates and will create a never-ending cycle of debt.
- Establish a means for monitoring both the local and national impacts caused by COVID-19 – monitoring will be crucial. Stay up to date on current events and monitor your industry to ensure if additional shutdowns were to occur what that would mean for your business and how you could mitigate the risks associated with it. Better planning today means a brighter tomorrow for the success of your business.
Going into 2021, your business will have to adapt to whatever the “new” normal which everyone will be facing. The COVID-19 vaccines show promise, but we cannot expect a return to the “old” way of doing things for at least the first half of the year.
Do not allow yourself to overthink the issues you faced in 2020, instead look forward to 2021 with a realistic plan to ensure you can ride out the storms facing us. Being prepared is the key to your ongoing success. When you are thinking about capital requirements, contact Capstone, and find out how we can help you be prepared financially to adapt to whatever changes you may face in 2021. You can reach one of our representatives by contacting us at [email protected] or call us at (212) 755-3636 to speak with a representative today.