3 steps to maintain cash flow during economic change

Staying profitable while the economy shifts is no small feat for small businesses. It takes hard work, innovation, and perseverance to stay atop cash flow and profits when the business environment changes. 

Gulaid and Davina Ismail are spouses and business partners who are intimately familiar with the challenge. They were among the many Americans who opened a new business just as the pandemic took hold in 2020. They pivoted their community-oriented coffee shop into an e-commerce business that gave back to local health care workers — turning a potential disaster into a profitable business.

The Ismails, founders of East Coast-based INI Sips, share the steps they took to successfully maintain cash flow during economic turbulence — and the ways they're continuing to think about pivoting today. In this episode of Mind the Business: Small Business Success Stories, the Ismails and hosts Jannese Torres and Austin Hankwitz discuss the ways small business owners can prepare for the unexpected, adapt their businesses, and be proactive. Listen to the full episode below.

1. Be prepared

Sometimes, you can see hints of what's coming, such as signs of an economic recession, inflation, or stagflation. In other cases, such as devastating weather events or pandemics, the timing can be wildly unanticipated. You can't know exactly what to expect, but it's wise to generally be prepared.

Know your niche

Researching the economy and your industry in particular — both upfront and on an ongoing basis — is crucial to anticipating your cash flow. 

"You have to study the market, because capital is one of the huge issues that could come up with a small business," Gulaid advises.

Understanding the seasonality of businesses like yours and reviewing your own financial reporting can help you anticipate ups and downs.

"Do a projection. See what happens if you have a low amount [of revenue]. Do studies. Find out when are the times that [businesses like yours are] not making money," Gulaid says. "Passion doesn't feed the capital needed for a business."

Build a buffer and redundancies

There will always be forces outside your control that affect your business: the economy, the supply chain, other businesses' pricing. 

"The biggest place where we see inflation issues is with the vendors that we work with and their increased pricing," Davina says, adding that the challenge is in covering those price hikes in their margins, without alienating customers. 

"We're trying to keep our costs at a place where our customers are used to, but also we can continue the business. It's a very delicate balance."

Davina suggests business owners get ahead of unexpected changes in the supply chain in a few different ways.

"Pricing needs to be at a point that it can absorb surprise price hikes. Have multiple vendors that offer the same thing. Keep an eye on who you're working with, what their values are," she says. 

Diversify revenue streams

The Ismails were able to make the pivot to an e-commerce business because they had already decided to sell pre-packaged coffee and tea in store. It was one way they were diversifying their revenue streams from the very beginning. 

Tapping into multiple sources of revenue gives a business owner more options when the environment changes.

"I have about 10 [income streams] at this point that I can use as levers, that I can turn on and off, depending on what's going on," says podcast host Torres, who's a creator and business coach.

Torres can decide which "levers" to pull by keeping her financial data and reporting in her accounting software.

"QuickBooks' ability to have your chart of accounts and your cost of goods is really helpful for me to know exactly where I should be focusing my effort and what income streams make the most sense for me to double down on," Torres says.

2. Be flexible

Understanding that your business plans are more like business preferences is the first step in flexing during times of change. It wasn't easy for the Ismails, but it was the first step in their survival and pivot. 

"We had to talk ourselves through the process of not being too attached to what we thought we were going to be," Davina shares.

Start with a mindset shift

To be flexible and stay profitable, Davina says, you have to reframe your expectations for your business. 

"It's a mindset that you have to have that things are going to change," she asserts. 

The Ismails have pivoted from an in-person coffee shop to an e-commerce business with two warehouses along the East Coast. With the wind-down of the pandemic, there are further shifts to consider.

Adapt and innovate

Innovation isn't something you can do once and be done with.

"We're currently in a place of change right now, making some big decisions on the direction of the business," Davina says. "Knowing that you want the business to be successful should be the premise, but what that looks like should be continuously flexible." 

Holding too tightly to your original vision — instead of adapting and innovating — can be devastating for even the cleverest of small businesses. 

"You have to stay innovative or you will disappear," Gulaid warns. "You'll end up becoming a dinosaur, and everyone else will move on while you're stuck with all this product."

'Control the controllables'

Being flexible also means understanding which aspects of your business you can influence and executing against them, says podcast host and creator Hankwitz.

"As a small business owner, you can only control the controllables. Which also means if life throws you a curveball, it's up to you to do everything you can to take control and turn things around," Hankwitz says. 

Hankwitz suggests leaning into your strengths when uncertainty hits. When two major clients had to cut their spending, Hankwitz assessed: What am I uniquely good at, that I can control? The answer was marketing — and his pivot toward more marketing is making up the lost revenue.

3. Be proactive

One of the things you can always control as a business owner is your relationship with your customers. The Ismails have a few pro tips for being proactive when the economy isn't on your side. 

Communicate

Even when you have no news or bad news, customers appreciate when you keep them in the loop, the Ismails find.

"Davina does a great job keeping in communication with the customers," Gulaid brags of his wife. "We let them know, 'Please continue to work with us as we go through these growing pains.' And because she's continually communicating, because communication is key, that's also what helps with the brand loyalty."

Build loyalty among customers

The Ismails always add a personal touch to their business, like hand-written notes delivered with bags of coffee, or posting who had sponsored a free bag of coffee for a health care worker. After an influx of referrals, they decided to focus on building a loyal customer base.

"We started focusing a little less on obtaining new customers and focusing on keeping the customers that we had. We have a pretty high — it's above 70% — returning customer rate. That's one thing that we've tried to maintain," Davina shares.

Those customers who know your business and are invested in its well-being are the ones who can support you through tough times.

Hold to your True North

During INI Sips' initial pivot from in-person to e-commerce coffee, the Ismails stayed true to the heart of their business: supporting their community.

"Buy two bags of coffee, we would donate one. That allowed us to grow online," Davina explains. "And thanks to social media … we grew in a way that we wouldn't have expected or had ever thought about happening so quickly."

About the Mind the Business podcast

New business? No problem. Mind the Business: Small Business Success Stories, from the team at Intuit QuickBooks, is the source for tools and resources for small business owners as they face new hills to climb. Hosts Jannese Torres (Yo Quiero Dinero podcast) and Austin Hankwitz (Rate of Return podcast) connect with entrepreneurs across industries as they start and grow their businesses. From securing funding to building a team, they'll uncover what it takes to power success.

If you're looking for tools to manage your business, reporting process, cash flow, and funding, the team of experts at Intuit QuickBooks can get you started with free guided set-up.