Fears of business dip and revival during Covid-19
As the impact of the Covid-19 pandemic grows, this spells death knell to existing uncertainties surrounding the survival of Micro, Small and Medium Enterprises across the country.
Quarantines, shelter-in-place orders, social distancing, and cascading economic impacts make it difficult for many of these enterprises to carry out business.
As it is important to save businesses, the need to safeguard livelihoods cannot be wished away.
MSMEs form the backbone of emerging economies.
While micro and small businesses are vital, they face immediate threats to their survival and a difficult road to recovery.
As entrepreneurs grapple with how to meet dramatically shifting market demands, reach their customers in an era of social distancing, manage new staffing challenges, secure their finances, and confront the stress of the moment, the prospects for their businesses may appear difficult.
Unfortunately, the impact on startups or small businesses can be way more brutal as they have scarcer cash reserves and a smaller margin for managing sudden slumps.
Members of the British Chamber of Commerce in Japan (BCCJ) have implemented measures to ensure business continuity amid the COVID-19 pandemic, even as they forecast a fall in revenue in 2020, according to a survey carried out by the BCCJ in April.
More than half of respondents foresee a loss in both revenue and net profit in 2020 as a result of the ongoing crisis; the remainder answered do not know. One fifth expects revenue to dip more than 40 per cent, 17 per cent expect a decrease of 26–40 per cent and 17 per cent a decrease of 10–25 per cent. Most respondents report greater positivity regarding net profit in 2020 than revenue.
Overall, respondents remain positive on longer-term operations. More than one third expect their scale of business to be the same in two years’ time, with 16 per cent even expecting an increase in business.
Only 14 per cent expect their business to have been reduced as a result of the crisis. One third answered do not know.
Challenges Facing Businesses during the pandemic
Declining sales
The Lockdowns, movement restrictions, and social distancing have made it difficult for firms to physically reach customers, as shops and offices are closed.
As the economic shock moves through the population, customers are adjusting their spending habits to cut back on non-essential goods and services.
Specific activities, such as travel and events, are considered virtually impossible to carry out safely.
Operational challenges
Social distancing guidelines are creating operational challenges as firms struggle to safely accommodate their employees in the place of work
Securing a supply of goods may be difficult due to restrictions on mobility and the limited availability of transportation.
With school closures and an increase in household demands, business owner and most frequently women entrepreneurs may face challenges dedicating time to their entrepreneurial activities.
Because many firms lacked remote work strategies prior to the crisis, they have faced difficulties shifting to this way of doing business and managing operations remotely.
The financial strain on the business
Cash flow challenges emerge due to declining sales and operational difficulties.
Entrepreneurs have difficulty accessing working capital due to reduced lending (although new aid is becoming available).
Personal stress
Some entrepreneurs struggle to adapt their mindset to the current challenge and manage their fears, personal stress, and concerns about the business.
Entrepreneurs must also manage the concerns and stress of their employees.
Uncertainty about how the situation will evolve makes it difficult to plan for the future.
The stress makes it harder for entrepreneurs to make numerous difficult, time-sensitive decisions that are necessary to navigate the crisis.
Customer centricity.
During an economic downturn, customers tend to be risk-averse and value a sense of security, which should push companies towards a more empathetic approach. Pricing, like customer relationships, is a long game know who your core customers are and defend them ardently.
Especially now is not the time to lose your loyal customers to price slashing competitors. Building a solid relationship outlasting the crisis should be the interest of both parties.
Data-driven decision making.
The COVID-19 crisis is being dubbed the first data-driven pandemic as it has brought an openness in sharing information between researcher’s worldwide, allowing governments and citizens to plan based on the latest information.
Data collection is essential, but performance improvements and competitive advantage arise from analytics models that allow managers to predict and optimize outcomes.
The government in Business revival.
Provide credit:
With reduced revenue, enterprises are running short of working capital. At the same time, banks and other financial institutions will be reluctant to lend, in part because they predict some businesses will not survive and the loans may never be repaid. Nonetheless, lending can be encouraged in several ways.
For private banks, more funds can be provided by the central bank for on-lending to businesses. This can be further encouraged by the expanded use of credit guarantee schemes which exist in an increasing number of countries.
Governments can also encourage the delay of payments on existing credit, This measure will no doubt impinge on the liquidity of banks. They can be encouraged through extra liquidity provided to them, moral suasion, and the idea that delayed payment is better than no payment should the business collapse. Tax breaks or deferments for banks will also ease liquidity constraints.
Doing Business with SMEs
Government tenders frequently have demanding financial requirements that make it difficult for SMEs to qualify. The government can relax its tender requirements and procurement barriers in a bid to accommodate SMEs.
Trade and Industrialization Cabinet Secretary Betty Maina recently announced at a post-budget forum that “the government will ensure SMEs supply goods that were previously being imported”, with preference going to women, youth and persons living with a disability.
Improvement of Infrastructure.
When governments improve on infrastructure, it improves businesses. Governments should build and maintain roads, airports, bridges, seaports, energy transmission lines, telecommunication systems and any other infrastructure that promotes business success.
Tax Incentives
To woo investors in the SME sector, governments can also reduce or exempt such businesses from certain taxes. Tax incentives lead to the growth of SMEs as they allow them to channel most of their profits back to the growth of the business.
For instance, in the wake of COVID-19 earlier in the year, the government reduced the rate of turnover tax from 3 per cent to 1 per cent for all micro, small and medium-sized enterprises.
As an individual how to revive your business during the pandemic
This is the time when understanding the gravity of the situation and turning it favourable for the business is all that matters to let it sail smoothly in these difficult times. Here are a few tips to stay connected and afloat during this period.
- Communicate transparently with your customers
We are all in this together, so the ideal way is to stay transparent with your consumers about what your business is going through.
Customers can empathize with companies facing a crisis, as long as the communication is transparent. Communicate with customers to understand their perception of the product/solution offered by you.
- Maintaining a healthy relationship with contracted parties
It is understandable that it might be difficult to pay out vendors or suppliers during the pandemic. However, it would be helpful to give your vendors, suppliers, landlords’ etc.
sufficient notice in case there is going to be any delay in payments so that they can also be prepared and there is no bitterness in this already difficult time.
- Keep Your Team Engaged
Your team relies on you so keep them updated about every development. As a promoter, it is your responsibility to keep your team members engaged and stay connected with them through video conferencing tools like Zoom and Google Hangouts.
It is very important to maintain high spirits within the team and understand the general mood within your remote workforce.
- Managing employees and related optimization
For large companies considering layoffs, the primary option should be to cut the salaries of the higher paid exec/employees to try to retain the people who least can afford to lose their jobs employed.
However, when the time comes to make the tough call, do it with compassion lookout for government directives, and offer extra compensation as and when required. Such implementation should be carried out only once and not in stages such that it does not affect employee morale.
.5.Communication to stakeholders
Consult with your investors or external experts to plan the right form of communication with stakeholders, most important customers and employees.
Have an honest conversation on the situation and its impact on your business with your entire leadership team. Any negative message should be delivered with utmost empathy along with transparent reasons.
