How your small business can survive the pandemic
The Covid-19 pandemic is rewriting how we run our lives and how we do business. It is not business as usual for small enterprises that are fighting to stay alive in the wake of stay-at-home and physical distancing orders.
Paul Kibicho, a financial expert and CEO of Panorama Consulting Company, offers tips for small business owners on staying afloat during the coronavirus crisis.
1. Do a reality check“First and foremost, ask yourself whether the same line of business is tenable in light of the Covid-19 pandemic. If it was having difficulties before the upsurge of the scourge, harvesting it would be recommended,” Dr Kibicho says.“Harvesting a business means starting the process of dissolving or closing the business by disposing off equipment that can fetch money, and eventually closing it. There is no need to hang on to a business that has symptoms of closure. It will lead to further losses and regrets.”
2. Evaluate human capitalHe also advises business owners to evaluate their current human capital. “Is the business supporting the current number of employees? Is revenue being generated by the business sufficient enough to meet all the obligations? Does it leave reserves to caution against unforeseen eventualities?
There are businesses that have an over-supply of labour. This does not necessarily translate into desirable output. Entrepreneurs must critically analyse their employees, and where necessary make the painful decision of laying off as opposed to continually struggling and eventually closing the venture.Yes, before the Covid-19 crisis, the situation could have allowed their sustainability. However, due to constraints brought about by this pandemic, it’s only fair that they evaluate their financial strength and make an informed choice,” Kibicho says.Depending on the line of business, he adds, demand should be the pointer for stocking. Avoid spending your finances on assumptions.
3. Harness the power of social mediaMore and more people are using social media to connect and provide emotional support now that unnecessary movement is discouraged. Businesses can harness the same.“Small business owners must realise that technology is the in-thing now. One has to look at how best one can ride on it to reach his or her customers. Use of social media is highly recommended,” says Kibicho.
4. Review profit trajectory and link up with like-minded people Sometimes mergers make economic sense. “A meeting of minds is encouraged. People with similar enterprises can forge together to surmount the situation. Every possible alternative to rescue the business should be given a thought. This is also a period to review profit trajectory. Business owners might be forced by circumstances to reduce their pricing to ensure that they remain afloat. This will guarantee customer traffic and flow. Desperate times call for desperate measures, and it is better to reduce profitability as opposed to business closure,” he advises. Also, take advantage of reprieves given by the government. “The government has given a reprieve to business people by saying that commercial banks can allow borrowers to reschedule loans and they have also been instructed to lower interest rates. It is an opportunity to borrow and enjoy the moratorium given.”
5. Avoid lending
No one knows how long this crisis will last. Therefore, this is not the time to give goods or services on credit, advises Kibicho. It is equally not the time to expand your business or spend retained savings and profits. Also, avoid capital expenditure.
6. Renegotiate contracts
Your business is most definitely feeling the heat of the crisis, and you may be experiencing losses or earning less profits. What should you do if you have a loan?“Financial institutions are alive to the situation. Renegotiate loan repayment terms and conditions. By so doing, they will amend the contract and allow for an extended period of loan repayment. You can even request for deferred payment or top-ups where possible to solidify your business base,” he explains.
7. Take care of your customers
Don’t forget to show your customers that your care about them and their health. Go beyond continually providing goods and services to showing your concern by, say, providing face masks and calling to check in.“This will build confidence in them and they will feel that beyond seeing them as customers, there is a relationship. This will make them give you referrals. Ensure that staff members are observing high standards of hygiene. This will reassure the customers of their safety and you get their continued co-operation.”