There’s no doubt that businesses across the globe, across nearly every industry, are suffering due to COVID-19. The hardest hit is the micro, small, and medium enterprises (MSMEs). This segment of the economy has been grappling with problems like low liquidity or cash flow due to the halt in their manufacturing and production operations. According to a survey by SOLV, 90% of the MSMEs surveyed have reported that they have been negatively affected by the coronavirus pandemic.
How can small businesses survive long enough to make it through this crisis?
Impact of COVID-19 on Small Businesses
Every business is affected in some way or the other since COVID-related restrictions were put into place. But some companies are affected more than others. Restaurants, salons, gyms, car dealerships, theatres, retail shops, florists, and bookstores are shut, without the slightest inkling of when they can open.
Meanwhile, these businesses still have to pay their rents, electricity bills, EMIs and salaries as they:
- struggle to stay alive.
- battle to remain efficient.
- avoid vulnerability and risk.
Despite the uncertainties, these two things are certain:
- This isn’t the time to panic.
- This is the time for prudent planning and preparation.
Reasons Why You Should Continue Growing Your Small Business Despite COVID-19
The most important thing you must realize here is – COVID-19 will not last forever. Although the isolation may seem to be dragging on, the pandemic shall pass. You, as a business owner, need to adapt to the change and continue your efforts – right down to the last straw – to sustain, thrive and grow despite the crisis. If you are in doubt as to why you should continue your efforts to grow your business when there are no customers to consume your product or services, we have two very valid reasons for you:
1. Your business was established to meet a need:
Remember, what made you start your business. You saw a need and worked on your business idea to meet this need.
Right now, the virus has travelled the world, but has it changed or eliminated that need? Most definitely not. Your target audience may have changed its priorities due to COVID-19, but the need is still there, and your business has to exist to solve this need.
2.Your business goals will outlast COVID-19.
You didn’t start your business with a conditional plan that you would only pursue growth if there are no unexpected market disruptions.
You knew that an entrepreneur’s journey is full of challenges, and this crisis, though tragic, is a challenge every business owner is facing today. This pandemic cannot stop your business growth, but can definitely slow it down; however, you need to take measures to survive these times of uncertainty and position your company for growth when on the other side.
What Small Businesses Can Do to Survive and Prepare for Growth Beyond the Pandemic
So, what can small businesses do right now to survive this crisis and pave a path for growth beyond the pandemic? Here are a few things to consider.
1. Monitor cash flows:
Your cash flow is crucial – as long as you have cash flowing, you can keep your business running. Therefore, it’s important that you protect your cash flow during this economic downturn. So, review your company’s policies, stop non-essential expenditure, identify areas where you can cut costs, review inventory, watch for payments and prepare cash flow projections.
2. Apply for government aid:
Government is putting forward extraordinary measures to save the economy. Recently on the 17th of April, the RBI had announced to conduct ₹ 50,000 crore of TLTRO 2.0 in various tranches to help small scale firms survive this crisis.
3. Apply for corporate aid:
Other than the government, a few big corporations are taking action to support the small and medium businesses. Research for such programs and take their help to stay afloat during the pandemic.
4. Apply for a moratorium:
The RBI has announced a 3-month suspension of EMI payments. But should you use it? You need to carefully assess your financial condition before making the decision. If you are facing a cash crunch, talk to your existing lenders and request for a 3-month moratorium. However, you need to understand that moratorium does not waive the interest. The interest on the outstanding will continue to grow during the moratorium. So, if you can afford to pay the EMIs, don’t defer them.
5. Get a line of credit:
If you need funds to overcome any shortfall in the cash flow, approach banks, NBFCs, or fintechs for a line of credit. Work out a maximum limit, loan tenure and repayment terms or moratorium period (if required) with them.
6. Consider a loan:
If your business does not qualify for government aid or any other kind of relief, consider taking a loan to keep your business running. Approach a bank with whom you have already established a relationship – the loan application process can be faster and easier. If you cannot get a loan through banks, apply with new-age fintech lending institutions as their eligibility criteria are a bit more relaxed.
7. Work with vendors to extend terms:
If there is a mismatch in your account receivable and account payable, it is wise to ask your vendors for extended payment terms to match your cash flow cycle. For example, if your clients pay you on a monthly basis and your vendors expect to be paid fortnightly, then there is a gap of 15 days between when you are paid and when your bills are due. If you have sufficient cash on hand, you can deal with the mismatch. But if your cash flow is dwindling, this gap can quickly spiral out of control, draining your cash flow and straining your relationships with your vendors.
8. Take your business online:
In such uncertain and volatile times, taking your business online can help you keep it running. If your business is online-based, your employees can work from home. Use technology to boost communication – tools like Slack, Microsoft Teams, and Zoom can help the team come together, maintain productivity and retain clients.
If your business sells products off the shelves of a physical store, consider transitioning to online retail. Invest in a strong online infrastructure. This will take a while, but in the long run it will help you remain in business and grow.
9. Develop social media partnerships:
Now is the best time to make use of social media as a legitimate source of income. Invest in digital partnerships to give your business an edge. Network on platforms like Instagram and LinkedIn and look for companies whose services/products you can incorporate in your products/service, and vice versa. If possible, barter your way through with these partnerships, instead of paying cash.
10. Diversify your offering:
Never put all your eggs in one basket. We all have heard it, and it’s entirely true. Take some time to think what more you can do to minimize your risk and create new revenue streams.
Look for areas where you launch new initiatives and introduce new products and services. Seek out new opportunities aggressively and re-align your team to make the most of this situation to develop an edge over your competition.
Watch market trends and see what your customer wants in addition to your normal product/service offering. Diversification can be applied to every single industry. Some examples:
- If you are an advertising agency, offer online training courses to help clients’ with their marketing and advertising skills.
- If you are in the market offering cost-effective graphic designing services, up your game to offer premium services to elite or mature businesses.
Is Your Small Business Ready to Weather the Storm?
We hope so. After reading the above, we hope that you are feeling more prepared for what’s ahead. We want to encourage preparedness and not panic. With people under quarantine and the economy in recession, we’re likely to see things get worse before they get better. We’ll all come out to the other side of this stronger if we batten down the hatches; plan for rainy days, prepare for the future and hope for the sunshine that’s waiting for us on the other side.
Thank you for reading!