The slowdown in the aftermath of the Corona virus pandemic is going to be very different from any other we have seen in the past. This is nothing like the dot-com bust, or the housing market crash that the world emerged out of in the last couple of decades. Experts say that what’s coming our way is comparable only to the Great Depression of the last century. The outcomes of the depression then were drastic declines in industrial output, severe unemployment and acute deflation in almost all parts of the world. The gloomy sentiment around the Covid-19 virus pandemic is recruiting more and more economists and public policy experts with each passing day. While we should certainly avoid panic, as things always fall in place eventually, we certainly should not waste time preparing ourselves for what’s sure to follow the health crisis – a severe economic crisis.
There could not be two opinions about the time to act in such circumstances. No, it is NOT “Soon”, it is NOT “Sometime this week”, it is NOT “at the earliest convenience”. The time to ACT is NOW, no later. The mantra is simple – Adapt or Perish!
We list down a few extremely important points on how an SME can adapt and survive the storm during the downturn, here:
1. Evaluate and eliminate excessive debt
The downturn will most certainly result in a drop in revenues and you will not be in a position to service your debt with the same ease. Take the effort to work out the terms of your debt and see how to make them more favorable during the period of the crisis.
2. Ruthlessly cut down on expenses
This includes all marketing and advertising expenses, general administrative expenses and rental expenses. Figure out with the owner of your office space if rentals can be cut down or at least deferred by some time to give your business a breather. You can no longer be experimental with your marketing and advertising expenses. Spend only on the segments and channels that have given proven results in the past.
3. Ensure sufficient liquidity – manage payables and receivables with a hawk-eye
Your liquidity position will eventually decide whether you will stay in business or will be forced to shut down. It doesn’t matter if you have piles and piles of receivables under revenue. It eventually comes to naught if collections do not happen in time. Negotiate with your vendors for more favorable credit terms.
4. Downsize and Outsource
Evaluate what is at the core of your business. Identify people that your business can’t run without. Cut deep and cut once. Let your core team know that they need not fear about more job cuts and dispel any fears. Outsource functions and jobs that were managed by employees that you decide to let go. Almost anything can be outsourced in this day and age of the internet economy – one of the very few industries that will still continue to rise amidst the slowdown. Checkout the various options for outsourcing, including www.AskSunday.com, which lets you hire an award winning dedicated virtual assistant who gets your projects and tasks done by a team of experts at the backend. Start your Free Trial and decide if it works for you and your business.
5. Don’t let your high value and loyal customers go
Most industries will take a hit with respect to new business revenues. In times like these, focus more on your existing high value customers and those who have remained with you for long. Make sure they are well taken care of. Do all that you can to make sure they are satisfied.
6. Never cease to look for new opportunities
Let’s take an example. Many plants and manufacturing facilities in the sporting, health and fitness industry are having to shutdown at least temporarily. The demand for products has been really low, and doesn’t justify the cost of operation of these facilities. However, some of the global brands have decided to focus on manufacturing PPEs (Personal Protective Equipment), masks and other protective gears for doctors and the general public. Not only does this create immense goodwill for such brands, but it also helps them stay afloat during these troubled times. Lesson here? Don’t be too rigid on your business model. Find ways and opportunities to add new business lines, partnerships, geographies and products to your portfolio.
Times are certainly extremely tough, and may even get worse. Take all safety measures for yourself, family and your business. Lastly, avoid panicking as it leads to irrational choices and decisions that can be detrimental in the long run. Stay informed, stay safe, and without doubt - ACT NOW!