The United States is currently facing an unprecedented economic crisis due to COVID-19, better known as the coronavirus. Unemployment rates have quickly spiked to their highest rate in decades shortly after being at their lowest rate in decades, as many kinds of businesses are closing their doors according to government orders or the lack of customers, related to those orders or the virus in general. Businesses who don’t have adequate funding may not be able to survive, depending on how long this period lasts.

With the stock market tumbling, many people’s hard-earned money is decreasing in value. Though it is not the apocalypse, if you have a diversified strategy, you can come out of this better than those who didn’t. If you haven’t had a diverse approach, now is the time to start so that you can be prepared for the continuation of this crisis, and whatever crises may come in the future. Keep in mind that long-term, the economy always trends upward. With regards to the stock market, though selling certain stocks during this period is wise, panic selling is not. It is a good time to purchase stocks that have become low, in anticipation of selling them for profit when they rise back up in the future.

Why diversify?

Diversifying your business means having multiple sources of revenue. Every business has the potential for bringing in income beyond its primary avenue. You should have at least a few alternative sources or opportunities for income to be prepared for a time like this, such as online ordering for retail businesses or delivery and takeout options for restaurants. Diversifying your business’ sources of income will mitigate risk, ensuring that you have at least one backup, though that backup may not bring in as much revenue as what would ordinarily be your primary source.

It can be compared to diversification in purely financial investments. Diversifying in this context means having different types of investments, as well as investments in varying industries. There are dozens of forms of investments, from stocks to mutual funds to gold and silver.

If most of your investments were related to travel and tourism stocks, you are in trouble, but if you also have many investments in companies that make household goods or provide healthcare, you will be in a better place. Though every industry is taking a hit, some are far lesser or greater than others. Diversifying your investments keeps your finances safe because even if many of your investments decrease in value, you will still have many that don’t.

Business is like an economic chess game.

In chess, it is critical to stay at least several steps ahead of your opponent. Having a plan for what you will do following any move that they may choose to make will help you protect your queen, as well as the rest of your pieces. Sometimes you have to sacrifice a less valuable piece, like a pawn, to protect a more valuable piece. This is an excellent analogy, in that it is essential to know your next move based on whatever may occur. 

To know your next move in any number of situations, being knowledgable and well-informed is the greatest asset. Keeping up with accurate news and trends related to the economy and your part in it is key to staying ahead of the curve.

Financing your business during this economic crisis.

In the U.S., Stay-at-Home and Shelter-in-Place orders are dramatically affecting businesses, large and small. Even though business is difficult right now, every business can find sources of income beyond their usual products or services. Besides thinking outside the box to make additional income, thanks to the new federal stimulus bill, the CARES Act, businesses can apply for deferrals on their rents and mortgages if they are unable to make their monthly payments as a result of reduced revenue. Property owners are being supported by banks, who are, in turn, being financed by the federal government. 

We recommend that all business owners learn about the CARES Act and how they can take advantage of it; the U.S. Senate Committee on Small Business and Entrepreneurship has a helpful guide on the Act.

SL Companies, Inc. is a mergers and acquisitions firm managing and deploying capital to develop businesses and real estate. Learn more about our services here!