The middle of a pandemic might not seem like the most opportune time to think about building wealth. Most business owners and individuals are focusing on tightening their belts and just trying to survive until the market recovers. However, building wealth during the COVID-19 pandemic is possible. It just takes a little creativity and planning. Start with one of these 10 strategies for building wealth during the COVID 19 pandemic.
1. Revamp Your Budget
Cutting your budget will, unfortunately, be a key component of wealth building strategies for small business. A pandemic is a good time to take a hard look at how your business is spending money and whether or not each dollar is being spent in the most beneficial way possible.
To start, look at your expected revenue for the rest of the year. Are you on track to earn at least as much as you did last year? Are you likely going to see a decline in revenue? Maybe that decline has already started.
Whether your revenue is taking a hit or not, do an audit of all your business expenses and think of creative solutions to meet your company’s needs for less. Some key areas to look at include:
Rent can be one of the biggest expenses your business pays but in the age of COVID, the necessity for that office is being called into question. It might be time for you to think about how important it is to your business to have that space.
If your employees work primarily at their desktop computers throughout the day, is there a reason they need to come sit in an office to work?
With the advent of SaaS and other digital tools, it’s easier than ever to offer remote work opportunities while keeping your team connected and productive. Switching to a remote team can instantly cut your budget by 20% or more, depending on how much of your overhead goes to rent.
If you can’t afford to get rid of the office or move to smaller one, there are other ways to cut your overhead here:
- Invest in double-pane windows, blackout curtains, caulking, weather-stripping, and other insulating upgrades that can help stop the loss of heat or cool air and significantly cut down on your energy consumption.
- Upgrade lighting, appliances, and other equipment in your workspace to energy efficient versions.
- Power down all nonessential equipment at the end of the day. It sounds obvious but the biggest source of nonessential power usage in the office comes from employees not powering down their computers or turning off the lights when they leave the office.
- Go as paperless as possible. Avoid the cost of paper, ink, and even the energy costs of using the printer or copier by transitioning to digital as much as possible. SaaS solutions can really help with this as employees will no longer need to physically bring documents to each other.
Equipment, Services, and Software
How much are you paying for the software and equipment your company uses? Include the costs of maintenance, updates, licensing fees and other associated costs. For any subscription services your company uses—think SaaS, internet, phone plans, and even legal support—look at the monthly or annual plans you are currently signed up for with each of them.
Then, look at your actual usage and needs for these. Are you paying for more robust service packages than you actually need? There will probably be at least a couple subscriptions where this is the case. Contact those providers to get your company switched to a cheaper plan that’s more in line with your actual usage.
This process might also uncover some plans that are currently not enough for your needs, leading to extra fees and costs for those overages. For example, your phone plan for business phones might have low data limits that then charge additional fees for each gigabyte of extra data you use that month. In this case, upgrading to a plan with more data included could save you money in the form of avoiding fees.
Ask Vendors About Discounts
A lot of vendors offer early payment discounts. These aren’t usually that massive but saving an extra 2% here and there can add up. Especially since these are expenses you were already planning to pay anyway. With the discount, you’ll be able to make a cut to the budget without sacrificing quantity or quality.
Consider a 4 Day Work Week
Did you know the average full time employee is productive for just 3 hours a day on average? The reasons for this can vary but, in a lot of cases, stress and sleep deprivation account for a big part of this lack of productivity.
To increase productivity, you could offer either a 4-day work week or even consider allowing employees to come in later or leave earlier. In companies that have made the switch, productivity increased by 40%. That’s an extra 6 hours of productive time each week. But you’re not just getting more out of your employees, you’re also saving money on overhead by using the office 20% less than your normally would.
That’s 20% less energy use, 20% less office supply use and a great way to incentivize employees without spending any extra money on perks. In fact, if budget constraints this year mean you are likely going to have to skip raises (or worse), offering the 4-day work week could be a great way to compensate for that loss.
2. But Don’t Make the Wrong Cuts
For all the emphasis right now on budget cuts, you have to be careful about where you make those cuts. Some of the most expensive pieces of a company’s budget are also the most productive and offer the highest return on investment.
If you make the wrong cuts today, you risk doing serious damage to your long-term income potential. Cutting salaries or benefits is very tempting, for example, but it also puts you at risk of increasing employee turnover. Those employees who took the cut are more likely to start looking for another job at their original pay scale. The cost of productivity loss, hiring and training new staff, and related expenses need to be factored in before you make a cut to salaries.
In general, calculate the long-term cost of any budget cut you are considering. Marketing budgets are some of the first items to end up on the chopping block, for example. But consider the long-term consequences of that decrease in brand awareness and customer acquisition.
This doesn’t mean you won’t end up having to make cuts in these areas. You just need to make sure the short-term savings are larger than the long-term losses they’ll cause.
You should also make sure you have a game plan for later down the road when your business has recovered from pandemic losses. If you must make harsh cuts, let employees know your plan for reversing those cuts when the company recovers.
3. Diversify Your Revenue Streams
Depending too much on one type of income is extremely risky in any economy but in a market as volatile as the one we are in now, it is downright dangerous. Businesses should be seeking to get irons in as many fires as possible.
This is the time to start developing new product or service ideas to build out your portfolio. Ideally, you should be looking for ideas that have a low initial investment and would be easy to add into your existing portfolio. Think about what you can do with the resources you already have.
If you’re a client-driven business, this is the time to start reaching out to as many clients as possible to both offset any clients that may be leaving and to make sure that no single client accounts for more than about 15% of your income.
4. Double Down on Your Current Client Relationships
Customer loyalty is more important now than ever. Come up with creative ways to demonstrate that you stand by your customers in these times and they will likely return the favor. At a minimum, send out an email campaign to past or existing customers to express support and solidarity in these times. You can offer discounts or just talk about the ways you are contributing to your community in these hard times.
If you run on a subscription model, consider offering a discount to current customers in order to increase your retention rate. Make cancelling that subscription as painless as possible so that customers who just can’t afford it right now don’t feel like you’re trying to trap them in a monthly payment they can’t afford. This way, they will leave with a good impression of your company and be more likely to return when they can afford your service again.
If you are in a B2B industry, be prepared to negotiate contracts and show understanding to corporate clients who may be looking to end your contract because they’re tightening their own belts. Get ready to remind them of how essential your work is to their success and to potentially offer a temporary discounted rate in order to avoid losing the account altogether.
If you don’t have room in the budget to offer significant discounts, there are other creative ways to strengthen customer relationships without affecting your budget.
For example, consider organizing a volunteer event or ongoing community service. You might organize a PPE drive where customers can donate extra masks, gloves, or other supplies to send to hospitals or distribute to low income community members who may not be able to afford it. Giving back to the community and getting your customers involved in that will build a sense of trust and loyalty that will pay off down the road.
5. Seek Out Financing Options Before You Need It
Looking for a loan when you’re on the verge of defaulting on your monthly bills or in the midst of a serious budget shortfall is the worst time to look one. You’re stressed. You’re desperate. You run the risk of getting locked into terrible terms or missing out on better opportunities because you were in too much of a rush to thoroughly research all your options.
Avoid this by taking a hard look at your budget and your forecasts for the coming year. What risks is your business exposed to? How likely is it that those risks will be realized? How much uncertainty are you prepared to deal with? In other words, how much cash on hand does the company have and how long would it last if things took a serious turn for the worse? Start looking at your financing options now and get a plan in place before that happens.
You are also in the prime economy for taking out business loans. During recessions or at the cusp of a recession that we are trying to avoid, we tend to see significant drops in interest rates. This means you could secure financing for your business at a much better rate than you would in a stronger economy.
So even if you aren’t facing a looming budget crisis, now might be the time to secure some additional capital for investments in your business’s future.
6. Become a Pandemic Resource for Your Community
We’ve seen some inspiring examples of makeup companies pivoting to manufacture affordable hand sanitizer and car manufacturers switching gears to produce ventilators. Think about what the most pressing needs are right now and how your business is equipped to meet those needs.
It may not even be related to your main product or service. Maybe your HR department can start offering affordable resume writing services for newly unemployed people. Your marketing department might offer to help individuals build websites to launch their new small businesses.
Not only would it be a quick and easy way to diversify your revenue streams, offering these kinds of services would bring some great publicity. It would also help solidify your business’s position in the community. You’re not just a faceless corporation concerned only about the bottom line. You’re a compassionate brand that is ready to adapt to the times and support your community.
The goal is to think of services or products you can offer that meet an urgent need and would take little to no initial investment to get started. Have each of your departments come up with some creative ideas.
7. Reach Out to Clients in Thriving Business
If your customers are primarily other businesses, consider redirecting your efforts to landing new clients in the industries that thrive during a pandemic. Typically, that includes the following:
- Financial Advisors
- Auto Repair and Maintenance
- Home Maintenance Stores
- Rental Agents and Property Management Companies
Start tailoring pitches, marketing material, and service offerings to uniquely address those industries. While other industries are slashing budgets and cutting contracts, these industries are likely experiencing even more need than ever before.
Find out what those needs are and where your business might fit in with them. Then, start putting together a list of the local businesses in those industries and get in touch with them!
8. Consider Teaming Up with Other Businesses
Forming strategic partnerships with other businesses in the community is one of the most enduring strategies for building wealth and can be particularly beneficial during a pandemic. Teaming up can help both businesses acquire new customers, increase revenue, expand reach, and even develop creative new product or service offerings.
Business partnerships are also a great way to share resources, gain access to technology you may not have and diversify your revenue streams. All of these benefits mean your business can reduce costs and build wealth at the same time.
So how do you form these partnerships? Here are a few tips:
- Identify businesses who serve a similar customer base as you but don’t offer the same product or service. Ideally, the product or service they do offer should be complimentary. Classic matchup examples include a massage therapist and a chiropractor or a bar and a nearby restaurant.
- Develop a concept to pitch. Think about what your partnership could do. If you own a bar, for example, you could ask a restaurant to recommend your bar to customers for an after-dinner drink. In exchange, you could hand out coupons or specials to bar patrons looking for a place to eat. A massage therapist and a chiropractor could exchange referrals. Perhaps you can organize an event with this business partner or work together to create a unique offer to your overlapping customer base.
- Reach out to those businesses. Contact business owners and pitch your idea.
- Run the campaign. Once you’ve found a partner, start hashing out the details and launching this idea.
9. Maximize Your Tax Deductions and Credits
As your fiscal year comes to an end, you’re going to have to start preparing your taxes. Make sure your business is claiming every deduction it qualifies for. Then, find out what special deductions you might qualify for during the pandemic. The CRA is offering special support for businesses who have been affected by COVID-19, including:
- Wage subsidies for up to 75% of wages paid between March 15th and June 6th, 2020.
- Payment deferrals for taxes owed
- 10% temporary wage subsidy to reduce payroll taxes
10. Continue Investing in Your Business
There are a lot of smart investment strategies for building wealth in the pandemic. This is actually one of the prime moments to score some really great deals and take advantage of some unique opportunities. Investing now while interest rates and costs are low, will position your company to come back strong when the market starts to rebound.
Some of the best investment strategies for building long term wealth include:
- Real estate. As others are panic selling, you can find some great deals on store fronts or offices. Owning your space will save you money down the road and the mortgage you take out will likely have a lower interest rate than usual.
- Equipment upgrades. Many businesses are offering some pretty incredible discounts on their products right now. This makes it an ideal time to invest in those office upgrades mentioned earlier or to replace any aging technology in your office.
- Invest in other industries. If your business is in an industry that declines along with the rest of the market, you can hedge against some of that loss by investing in shares or even buying companies in other industries that tend to move against the market. This way, when you start to decline, those investments will start to grow. You just don’t want to over-invest in these industries because when the market recovers, they will likely decline, and you don’t want them to drag your overall value down.
As you can see, it takes some creativity and strategic thinking, but it is far from impossible to build wealth during a pandemic! Whether your business has a whole team of talented employees to work with or it’s just you and your own unique skill set, these strategies for building wealth in the pandemic can help you not only survive but thrive, no matter what’s happening in the market around you!