According to the latest business intelligence reports, the future’s not looking too rosy economically. The International Monetary Fund (IMF) is predicting a global recession.
As such, small businesses are likely to be hit the hardest. SMEs have been especially vulnerable during the coronavirus pandemic. That includes companies of small, medium, and/or micro size.
However, it’s not all doom and gloom for SMEs. Those that are willing to seek out the right support and change their strategies have the potential to not only survive but come back even stronger post Covid-19. It’s crucial that small to medium sized businesses do recover. According to studies, these companies account for 90% of businesses worldwide. They also employ more than 50% of the workforce.
What Challenges Do SMEs Face?
During the height of COVID-19, many businesses experienced significant supply chain disruption and demand depression. SMEs sourcing inputs from abroad faced longer, more complex supply chains. Some firms even reported that shipments were being grounded at airports due to changing travel rules around the globe.
Because of this, SMEs are having to weather a liquidity crisis like no other. Smaller businesses and entrepreneurs often have smaller cash reserves to draw upon. International traders are especially hard hit. They’ve had to depend on access to scarce U.S. dollars and other trustworthy currencies for their funding.
Small businesses have also experienced the added problem of buyers making late payments. As such, even when sales haven’t been hit too hard, purchases have been left unpaid or delayed. In this situation, small business owners have found temporary funding to meet their cash crisis, as opposed to buying assets for growth.
Another challenging situation is the current work environment. Many factory floors are not designed for proper social distancing. Without the right technology in place, many office workers haven’t been able to move seamlessly to working from home. However, SMEs that are ahead of the tech game, such as those with the latest contact center solutions in place, have been able to realize the benefits of that investment, and enable staff to work remote quickly.
How SMEs Can Get Back to Business Post-COVID
Post-pandemic, there are steps SMEs can take to gain control, reconnect with buyers, re-employ staff, and get production into full swing once again.
1. Take stock of and modify strategies.
SMEs need to change their playbook. The targets and plans that worked before COVID-19 won’t work anymore. They must discuss strategies both internally and with government and support organizations. This allows for assessing what they need in terms of assistance as well as how to draw up a recovery plan.
For example, pre-crisis some companies relied on footfall as their primary way to sell. In which case, the crisis has reinforced the necessity of offering a multi-channel customer experience. These companies need to work out how they can boost their digital presence if they are to stay profitable going forward.
2. Keep tabs on borrowing.
It’s important to keep tabs on borrowing capital. Did you take out a loan for your business? Aim to keep loans at manageable levels. A number of favorable loan options have been established to help small businesses during the crisis.
For example, in the United Kingdom the government recently launched ‘bounce back’ loans. While companies of all sizes can apply, these loans are aimed at small businesses with 10 or less employees. Companies can borrow up to £50,000 for up to six years. That is up to a maximum of 25% of their turnover.
3. Prioritize paying back loans.
Taking out a loan is how small businesses are able to get through a financial crisis. However, it’s just as critical that small business owners pay off this debt. This is especially true of loans with high interest rates.
How do small businesses do this? SMEs may need to cut short investment in assets. Compromising on growth for the short term to keep debts low is a sound strategy to sustain growth over the longer term. Make room in the budget for extra loan and debt payments. Do not push these aside to address later. The focus should be on paying off each loan.
Owners may also consider deferring their own salary for a short time. This may last just a few months. Obviously, this will depend on personal circumstances, but it can help get a small business back on track faster.
4. Crunch the numbers.
SMEs need to be ready with the numbers to measure the impact of the crisis. They need to make this analysis available to key decision makers and companies.
Has it been awhile since you were able to update profit and loss accounts? It’s time to do this now. This is essential in order to compare last year’s numbers with numbers from 2020. It’s possible, but not probable, that some companies may not have been too adversely affected.
It’s a good idea to look not just at profits and cash flow. Examine other ways the company might have felt an impact. Maybe there’s been a necessity to lay people off or cut down the money spent on marketing and advertising? Have you lost business to competitors?
It’s important to assess how the industry is doing as a whole. This gives you a chance to examine your place in it. Perhaps there’s a new gap or need that’s has been neglected your business can fill.
Financial forecasting can also help estimate the business’s future health and help owners plan for future emergencies. Far-sighted companies with an emergency fund to dig into are now in a far better position than those that had no such contingencies. If no fund is available, begin building one slowly for the future. A general rule of thumb states that it’s good to have a cash reserve that covers three to six months of business expenses.
5. Work with business support organizations.
SMEs need the help and advice of support organizations more than ever. This provides them with the best practice advice and latest market information to help adapt to changing conditions.
SMEs that are struggling to pay small business taxes in the United Kingdom, for instance, can call the HMRC helpline. Local chambers of commerce have also offered various sources of support and guidance during the COVID-19 outbreak. Similar channels for support are also available around the world.
There are also organizations that help rebuild a business after the crisis. They offer resources including remote mentoring programs or free webinars that address COVID-19 issues.
6. Go digital.
Small business owners have to embrace the online world in order to keep up with demand. They must be able to take orders over the phone — here, it is ideal to install a VoiP system. Businesses must be able to process orders online so as to offer home deliveries. By going digital, owners can empower themselves to serve more customers.
Social media selling has also proven a good way to continue trading for many companies during the crisis. Billions of people have turned to electronic devices to help them cope with life under lockdown or other restrictions. As such, there’s been an unprecedented increase in the adoption of social eCommerce for everyday activities like grocery shopping.
Paid advertising on social networks may not be an option due to current low cash flows. However, that does not mean companies can’t ramp up their presence on social. Organic social is on the rise. This offers a big opportunity for marketers who’ve seen their budgets slashed. Posting relevant content on social media platformis a simple business marketing idea that works well for many SMEs.
For example, tutorials and how-to-videos are amongst the top kinds of content consumers wanted more of during the crisis. These can represent a compelling opportunity for SMEs to reach out to people and get them to connect with their brand.
7. Develop a realistic timeline for rebuilding.
Rebuilding a small business all at once may not happen overnight. As such, SMEs must create a timeline. They need to prioritize the most important tasks by short- and long-term needs. For example, securing funding to stay afloat may be the first priority in the short-term. Once this plan is in place, it’s time to start re-hiring employees and restocking inventory.
It’s also important to track progress, so time isn’t wasted time on activities that aren’t helping to increase ROI. Without the huge bargaining power of large organizations, small businesses are always hit the hardest during any crisis. However, with the help of policy makers, banks, and other support networks, most SMEs will return to profitability.
The outbreak has also demonstrated the importance of having liquid savings to lean on during any crisis. It’s equally important to have the right tech on board. Companies that lagged behind, without the option to run their customer service or sales team remotely for instance, are more likely to suffer long term effects from the pandemic.
Once back on track, SMEs need prepare for the future. Having access to an emergency fund and putting into place the right technology means there will be less disruption should another crisis occur.
Sam O’Brien is the Senior Website Optimization & User Experience Manager for EMEA at RingCentral, a Global VoIP, video conferencing and call center software provider. Sam has a passion for innovation and loves exploring ways to collaborate more with dispersed teams. He has written for websites such as G2 and Marketscale.