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How to Manage Your Small Business in a Crisis

Kody Wirth

19 min. read

Updated February 12, 2025

No matter how thoroughly you plan, every business goes through a crisis.

Whether it’s something widespread, like COVID-19, consistently falling sales, or a blitz of negative customer feedback—you must be prepared to navigate (and hopefully grow) despite these issues.

While you shouldn’t try to prepare for every situation, you can still set your business up to successfully navigate a financial crisis. This guide will show you how.

1. Assess the situation

Before you start planning, you must understand your situation. 

The point of this initial step is for you to take an honest look at your business and identify the real issue(s). It could be an external factor completely out of your control, something internal impacting profitability, or a combination of the two. 

Review financial statements

First, review your most recent financial statements for a high-level overview of your financial position. You can start with the Profit and Loss, Balance Sheet, and Cash Flow Statements and go further if necessary.

Treat this like a traditional monthly or quarterly review. 

Look for any obvious red flags and compare against the previous year’s performance to account for any trends or seasonality. You should also compare the actual results to your forecasts to understand how far off you are from expectations.

Use this surface-level overview to determine where you’ll dig deeper. Here are a few questions to help drive your exploration:

• Did any products/services underperform? Overperform?
• Did you over or underspend in any business areas?
• Were there unexpected expenses?
• Did you bring in as much cash as you expected?

Account for external factors

You must also understand what external factors impact consumer spending and your business expenses. 

Example: 

During the COVID-19 pandemic, physical storefronts were forced to shut down. For some businesses, they could not serve customers and generate sales. It also meant they weren’t incurring the same operational expenses. Additionally, the initial reaction by consumers was to tighten their wallets and limit or eliminate spending.

So, if you ran a strictly brick-and-mortar business, you likely saw sales dry up and some expenses (like labor and utilities) decrease. If you ran an online service that wasn’t considered essential, you likely experienced a drop in sales but maintained the same level of expenses.

Tip: Get out and actually talk to your customers. These conversations will provide first-hand feedback and possibly even ideas for immediate action you can take.

When analyzing external factors, identify what is impacting you and your customers now. Then consider: 

• How long will this issue impact your customers?
• Will there be a need for your product/service in the future?
• Will the issue worsen or improve in the next month, 3-months, 6-months, etc?

By exploring these questions and understanding your current financial position, you’re setting yourself up for step two—revisiting your financial forecasts.

Dig Deeper: How to conduct a market analysis in a crisis

2. Gather the right team

Not everyone needs to be involved with crisis management. You must select people specializing in the current issue or who can provide a diverse perspective. 

No matter who you choose, the important thing is to be transparent. You must get everyone involved up to speed and ensure they have the full picture. Holding back information could lead to unproductive efforts, and your team could miss out on potentially valuable ideas.

Tip: Start with a larger group and then refine. You don’t want to miss out on potentially business-saving ideas from front-line workers. Once you have a solid range of feedback, reduce your response team to encourage swift action.

To make sharing easier, have your business plan and current forecasts readily available. 

Lastly, make sure that you clearly define everyone’s roles and responsibilities. Each individual will likely manage a more focused extension of their current responsibilities. However, there may be an overlap between employees or a need to focus on one area of your business that could make the work unclear. 

Get ahead of the confusion and ensure everyone understands their part in mitigating this crisis.

3. Develop a crisis management plan

You’ve assessed the situation, adjusted your sales forecast, and have a team in place—everything necessary to create a crisis management plan. While your actions fully depend on your unique situation, these are potential options worth exploring.

Review expenses and cash

The first step is identifying opportunities to eliminate expenses and strengthen cash flow. You’ll do this by reviewing and updating your cash flow and expense forecasts (see told you we’d get to these). To do this, ask questions like:

• What expenses are absolutely necessary? What expenses can be cut?
• Can you maintain payroll? Do you need to consider layoffs or pay cuts?
• Are you able to speed up payments from current customers?
• Can you delay payments to any vendors?
• Do you have enough cash to cover expenses this month? Next month? 3-months from now?
• When will you run out of cash? 

What you identify here should provide immediate actions to help keep your business up and running. 

Revisit sales and your business model

Your sales forecast adjustments focused on addressing the current fallout. Now, you need to find opportunities to improve sales. Take your updated sales forecast, create a copy, and explore additional scenarios, such as:

• Raising or lowering prices
• Eliminating or consolidating products/services
• Adding new products/services

Additionally, you may be able to adapt or pivot your business model. If you’re primarily a brick-and-mortar business, explore shifting to online sales. If you sell a singular product or service, could you package it as an ongoing subscription?

Consider funding options

While it may be unnecessary, you should at least explore how an injection of external funding could impact your business. Consider the following:

• What funding or financing do you qualify for?
• How would it impact your cash position?
• How much funding do you need to maintain operations?
• Can you cover loan/credit card payments?

Perhaps most importantly, you must understand when additional funding would be needed. If you don’t need to take out a loan immediately, it may be best to wait. Additionally, if your business continues to struggle and funding is your last option to stay afloat—it may not be the best idea.

So, take the time to consider funding and how you’ll manage it. Don’t jump into taking on more debt, and don’t save it as a last resort. If you ultimately decide it’s the right option to get your business through a crisis, clearly understand how you will use it and pay it back.

Map it out

Once you work through these potential actions, you must map out how you will act on them. You can leverage the business milestones format from a one-page business plan to do this. 

At a minimum, you must address:

• When will you take each step?
• Who will be involved?
• What milestones do you need to hit?
• What metrics will you be tracking? 

Just be sure to keep your overall plan and actions fairly lean. After all, you are responding to a crisis, and the last thing you want to do is delay action by dragging out the planning process.

4. Adjust and create new forecasts

Once a crisis disrupts your performance, current budgets and forecasts are immediately outdated. While the disparity helps you assess the situation, if you continue using them as is, you’ll be completely out of touch with reality. 

You must update your forecasts based on recent trends in sales and expenses. The update is necessary to set a new baseline for your forecasts that better reflects the current situation.

Creating a crisis forecast

Now, you must:

• Analyze what is happening to your business.
• Create a revised forecast and budget. 

For this step, focus on your sales forecast—we’ll address cash and expenses shortly.

To guide your adjustments, revisit questions from your initial assessment like:

• How long will this issue impact your customers?
• Will they need your product/service in the future?
• What will their buying power be over the next few months?
• What are the different ways this could play out?

You’re attempting to predict how drastic the impact will be on sales and how long it will take to recover. Depending on the logistics of the crisis, it could be as short as a month or drag on for a year or more. 

You should take the time to explore several different scenarios to better prepare for any uncertain changes. Creating multiple forecasts that cover different possibilities may be worthwhile in this case.

Example:

A cycle of negative PR led to a massive loss of short-term sales. Depending on how customers react to your follow-up statements and actions, it could be a short-lived drop or lead to long-term boycotts of your products and services. You should account for both situations.

Remember, your sales forecast doesn’t need to be overly detailed. Start with your recent performance and make your best guess. If you haven’t created a sales forecast yet, or need a refresher, check out our detailed guide for creating a working sales forecast. 

5. Regularly review and adapt your plan

Your crisis response starts by reviewing your performance and adjusting your forecasts. You need to keep doing this. 

Not once a year, not every few quarters, but whenever necessary. Even if you spend an hour reviewing performance and making adjustments every week, it will be time well spent.

You are less likely to be surprised; you’ll understand if your adjustments are making an impact and immediately know when your performance starts shifting in a positive direction. 

Tip: Don’t just do this review process when combating a crisis. Consider holding a monthly review meeting to stay on top of your financials, adjust your strategy, and get your team up to speed.

6. Consider what happens after the crisis

It can be challenging to look past a crisis when trying to survive. However, if you don’t consider what happens after a recovery, you’ll save your business and not be able to capitalize on all of that work.

Luckily, by holding those regular review sessions, you’ll know when it’s the right time to start forecasting for the future. And you don’t need to waste time creating granular forecasts either. You just want a broad idea of what to expect in the next six months, 1-year, or even 5-years.

Your numbers and expectations will likely change, but you’ll at least have a general sense of where you want to go.

21 Cost-Cutting Tips for Small Businesses and Startups

If you’re trying to manage a crisis by cutting costs, here are a variety of tips to cut back smartly.

1. Go green

You’ve heard it before and it’s still true: going green saves green. Whether you’re running a home-based business, office, storefront—whatever kind of space your business is using, the more energy-efficient your space is, the lower utility costs you’re going to have.

So go out and buy those LED bulbs already—they can save you three-quarters of your lighting bill per year! For more information on greening your spaces, check out Energy Star, a program run by the U.S. Environmental Protection Agency.

2. Use open source and cloud computing

Every startup will use some kind of software, for things like bookkeeping and accounting, word processing, and presentations.

More than likely, you can find an open source and/or cloud version of it. “You do not need to buy that expensive office software and servers when you can switch to a cloud vendor—Google is an example—at a fraction of the cost,” says Ali Asadi of A Profit Maker.

3. Use generic brand goods

It’s always tempting to buy the name brand, but it’s rarely worth the money. If you’re looking at buying goods for your business, just go with generic; the box may not be as pretty but the product will be the same.

4. Co-sponsor community events

There’s a wide range of reasons why a business may need to throw an event, but you likely will need to at some point, and they can certainly be costly.

Joining together with another business as a sponsor to support or put on an event can mean a higher quality event and more press for all involved, simply because you’re able to share resources. 

5. Barter with other businesses

Especially with other businesses, bartering might seem old-school but can definitely still be effective. If you need a good or service and have something of value to offer in return, this could be a good route.

Approach these types of agreements with a spirit of generosity. Make sure you know the value of what you have to offer, as well as what you’re asking from the other business to avoid insulting or embarrassing anyone. 

6. Cut down on meetings

Cutting down on meetings is one crucial way to save money. Not convinced? The next time you’re in a meeting, do some rough napkin calculations based on the number of people in the room, and the average hourly salary you’re paying them. Sometimes the results can be staggering.  

Take a look at both your own and your employee’s calendars—how many hours per week are spent in meetings? Really evaluate the cost and benefits to the company. More than likely, you can cut back on some meeting time and free up time for actually getting work done. 

One suggestion is to eliminate a lot of information-sharing meetings. If you need feedback on something, send information ahead of time and ask everyone to review it before you sit down to meet. 

7. Hire capable employees with little work experience

Hire curious, capable people who are early in their careers. This might initially seem counter-intuitive, but people with little work experience are looking for entry-level positions and salaries, which saves your company money. Of course, there may be times when a more experienced candidate makes the most business sense, but often a solid employee with little work experience just needs a foot in the door, and you’ll find them competent and eager to do well. We all had to get our start somewhere. 

Good training counts for a lot. If you do bring in employees with less workplace experience, set them up for success by training them well and checking in often to help identify and address gaps in their knowledge and experience. 

8. Allow employees fewer hours

In a similar vein to the previous tip, this might sound odd at first. But there may be employees at your company who would transition to part-time (or even just four days a week) if given the opportunity.

This can be a touchy subject for an employee to bring up themselves, but if you as a business owner make it known that you’re open to shorter work weeks for those who might want or need them, this can save you from paying those full-time wages without having to lose a good team member (and their work product) completely.

9. Retain your best employees

A high performing employee, especially one who is an asset to your company culture is a valuable asset. Not only that, it’s a valuable relationship.

Costs associated with the hiring process can be shockingly high. If you have a solid team member, do what you can to keep them. Check in regularly and take the time to understand what they’re looking for in terms of career trajectory and opportunities for growth. It’ll save a lot in the long run. 

Dig deeper: 5 cost-cutting strategies that cause you to spend more

10. Consider outsourcing or contracting some work

For those moments when you have smaller tasks that don’t warrant a new hire but that you just can’t add to your already full plate, Simon Slade of Affilorama suggests outsourcing, which is also called micro-contracting. 

11. Review your operating expenses

If you buy bagels for the office, is there a different bagel shop that will give your business a bulk or loyal customer discount? Have you ever looked into it? The day to day expenditures on simple things—coffee, maintenance, and supplies, for example, all add up. Taking a chunk of time to go through your existing operating expenses to see where you might be paying more than you need to can save you a lot over the long haul.

Business coach Jennifer Martin suggests comparing vendors and getting quotes at least once a year to make sure everything you’re paying for is a fair market rate, including your merchant card services. Martin notes that the more money you process, the more clout you’ll have to negotiate a more favorable contract.

Dig deeper: How to run a financial audit and optimize spending

12. Set a budget, forecast your sales, and review regularly

To really get a handle on opportunities to reduce costs, create an expense budget for your business. Then create a sales forecast.

But, don’t stop there. Set a time each month to compare your actual spending and sales to your forecasts. The key here is that regular financial review is going to help you have better insight into where your cash is going, and opportunities to bring more in. 

13. DIY marketing and PR

Learn everything you can about marketing and public relations for your industry, and make sure you’re putting your best foot forward when you promote and talk about your business. Hiring a PR firm can be very costly, and if you’re passionate and knowledgeable, you could be your own spokesperson.

Lori Cheek of Cheek’d (who appeared on SharkTank) offers this advice on DIY public relations: 

“My number one marketing tip is ‘Don’t just think outside the box; Get rid of the box!’ Be creative. Think guerrilla. And if that doesn’t work, sometimes it just doesn’t hurt to ask. I’ve ended up on the news many times by just calling up the news channels and asking them if they’d be interested in featuring my business. It’s sometimes that simple. I would say the most crucial thing in getting media  coverage is a subtle yet persistent approach.” 

14. Minimize costs associated with inventory and supply chain

Contrary to popular belief, there are costs associated with having both too much and too little inventory on hand. Take a close look at your financials to come up with a plan to reduce your inventory supply chain costs. 

Dig deeper: 5 strategies to lower inventory and supply chain costs

15. “When in doubt, go without”

This tip comes from Chris Hoyt, and can really apply to every business.

Should you actually make that purchase? Do you truly need to replace something? Think it through instead of just going for something larger or newer. Use what you have until you are certain you need something else.

16. Stay on top of your accounts payable and financial statements

Asadi notes that when money is tight, late fees on bills can be a big problem. Stay on top of your accounts payable to prevent paying additional charges or interest.  “Pay your dues on the due date, and take pains to ensure that your collections are on time and that the outstanding balances are minimized,” he suggests. 

On the flip side, monitor your accounts receivable to keep your cash flow in good shape, and avoid challenges like having made plenty of sales….but tons of outstanding invoices. The cash flow problem arises when you’ve made plenty of sales, but you still don’t have cash in the bank because your clients haven’t paid yet. Save yourself time and money and set up some processes to make sure you’re getting paid on time and in full. 

17. Ask for a discount

So simple, yet often very effective. Just ask whatever vendor if they have some kind of promotional offer or rate and what it might entail. It won’t always work, but when it does, it’s so easy and worth it.

“I’ve found that 90 percent of the time, asking for a discount and then preparing to walk away if it isn’t granted will actually be the trick to save you money and secure that discount,” says Nima Noori, of Toronto Vaporizer.

18. Go paperless, as much as possible

Going paperless is a must in this day and age. Not only can it save you money directly, but this can also be a time (and thus, more money) saver. Meevasin notes “using tablets eliminates the time our people spent on printing, scanning, and filing forms.” 

When you do have to have hard copies, look into having regularly used forms printed and on-hand as opposed to photocopying them, as this can be a less expensive route in the long run. 

19. Buy used office equipment and furniture

Buy used office equipment and furniture. This one is pretty self-explanatory. Craigslist, yard sales, eBay, etc.—if it doesn’t absolutely need to be new, go for something nice and functional but used.

20. Share an office or use a coworking option

Another option for cutting costs on leasing is to go in on a space with another business. Of course, this carries its inherent risks, but this could be a viable option if you’ve got a close business connection, especially if you don’t need a ton of space.

Another way to approach this is to look for coworking spaces in your area, especially if your team isn’t too big.

21. Remember your tax write-offs, especially if you’re a home business

Don’t wait until March to start doing your tax planning. Talk to a tax professional if you’re new to paying business taxes. Your obligations, including tax rates and reporting dates, will be different depending on whether you’re a sole proprietor running a home-based business or a corporation.

The key is to plan ahead so you can both avoid paying late fees, and take advantage of as many write-offs as possible. 

Crisis planning should be focused on growth

Nothing we covered here should sound any different from how you usually run your business. You should regularly plan, forecast, review, and revise at least once a month. 

That way, if a crisis does occur, you already understand your business well enough to take action.

Looking for more ways to better manage and grow your business? Check out these resources:

• Create a business strategy
• Set business goals
• Selling your business

Kody Wirth

Kody currently works as the Inbound and Content Marketing Specialist at Palo Alto Software and runs editorial for both LivePlan and Bplans, working with various freelance specialists and in-house writers. A graduate of the University of Oregon, he specializes in SEO research, content writing, and branding.