The economic and operational effects of COVID-19 present an unexpected challenge for businesses of all sizes, especially small businesses. While more counties and states implement mandatory social distancing requirements or “stay at home” orders, business owners are forced into a corner and they must make difficult decisions that significantly impact their current and future operations. Each business is different and there is no “one-size-fits-all” strategy for ensuring sustainability and profitability. However, some universal themes can provide guidance to managers and owners to mitigate the long-term and short-term consequences of our current economic environment.
Take Time to Self-Assess
Prior to making any strategic decision, it is essential to have a comprehensive understanding of your current operations. Understanding your business’s existing structure, capabilities, resources and bandwidth is essential for effective strategizing, understanding where your resources are presently being directed, and why it may be necessary to redirect them to maximize profit or control cash flow. Small businesses especially tend to find comfort in their routine day-to-day practices, so having the ability and downtime to assess your current business practices also gives you an opportunity to acclimate to the ongoing economic changes. Whether it be searching for cost-efficient alternatives to current practices or taking the time to build the kinds of professional relationships that pay off in dividends, it is important to use this time to become proactive. The alternative is to remain in a state of complacency during a time where very few companies can afford to do so.
Focus on Core Business Competencies
A common misconception of small business owners is the belief that they need to expand their services and offerings in order to maximize their profits and attract new customers. However, with that practice comes an avoidance or neglect of the business’s core competencies. When a business adds additional services to diversify, their focus can shift away from what allowed them to be successful in the first place. Introducing new services, products and procedures presents the risk of diverting essential resources from core operations. A company that is introducing new offerings can often struggle in the early stages as they fine-tune their operations for the new expansion of services and can run the risk of falling short of their, and their customers, expectations. Instead of trying to deliver a plethora of services, a business’s objectives and profits can be better realized by focusing on delivering a smaller number of exceptional services and products.
Focus on Existing Customers
The importance of customer retention cannot be overstated. In the wise words of Sam Walton, the founder of Walmart, “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else”. This couldn’t be more true in the context of keeping a small business afloat in times of economic and financial distress. Marketing strategies geared towards converting competitor’s customers are expensive and time-consuming. Instead of spending marketing dollars on obtaining new customers, try shifting your strategies to client retention. Create loyalty programs and incentivize your already loyal customer to come back to you. Create open lines of communication. In times of uncertainty it’s natural for individuals to look for guidance and leadership. Effective messaging regarding how your business is adapting to take care of your customers, your employees and your community can position your business in a leadership position and create relatable ties with your customers and help develop your brand image.
The business of cannabis is a business of both products and services. Like most industries, it is a sector that has already been significantly impacted by recent market changes and is not exempt from traditional business principles. The three strategies can be equally applied to your cannabis business and they may be just the plan you need moving forward.