Thanks to Jasmeet for the guest post today. Find valuable tips on how to sustain a business during coronavirus times, including a 7-step plan.
The situation and responding to it as a business owner
The ongoing global COVID-19 pandemic has impacted businesses and the world economy. From snatching innocent lives to crippling the world economy, it has already done more damage than any country would have ever anticipated.
At this moment, there are over 300,000 people affected from around the world. (Source: World Meter). As the virus continues to grapple people with fear, countries are heading for lockdowns paralyzing people’s daily routines, halting the otherwise busy economies.
While everyone’s been busy talking about how coronavirus has affected our personal lives and businesses, no one has really given a thought to “How can businesses prepare for the worst?”
I know COVID-19 has taken the business owners by surprises – forcing some of them to shut overnight. Having been a part of a few small businesses, I feel their pain and wish them well.
The impact had also been felt by the female workforce which is “maxing out and burning out” because of responsibilities of managing both work and home responsibilities (source: Guardian).
These are the time when no books for women entrepreneur or men can prepare you to start or run a business.
However, this article is for businesses that have survived the initial impact of coronavirus. How can these businesses react to this situation of calamity and uncertainty?
Do they panic and let their dream venture fade away, or do they improvise and stay committed to their business?
Times like these are uncertain, unpredictable, and unprecedented. Yet, times like these are the times when an entrepreneur, more than ever – can move with agility.
They can strategically navigate through the obstacles imposed by the novel pandemic while holding on to their strengths. Not only will it help their small business recover slow and steadily – It will also help them safeguard their dream and employees.
How can business owners stay positive and do that?
Well – I will get to that later in the blog.
But, first things first. Let’s try and understand the gravity of the situation by looking at the impact coronavirus has had on the world economy and businesses:
Coronavirus and the world economy
The striking impact of globalization may never have been so evident as it is today. Countries in every corner of the world are experiencing the blow due to the ripple effect caused by the gradual collapse of Europe, China, and the U.S. economies. The economic shock on businesses, employees, and consumers globally are believed to be higher than the impact of the Global Financial Crisis in 2007-8, according to experts (Source: World Economic Forum).
The Organization for Economic Cooperation and Development (OCED) has predicted global demand to fall by 0.5%, although experts believe that the drop is much higher (Source: OECD). Some indicators even signal that the world economy is heading into a recession (as the virus stings deeper into economies from both east and west).
While this currently remains an uncertain opinion, the pandemic is sure to leave some lasting consequences on the world economy. There will be a deep hit on the wealth effect, consumer confidence, and aggregate supply (Source: Harvard Business Review).
Therefore, the impact of the global shock can remain persistent to small businesses as there will be continuous market disruptions happening at an amplified rate. Moreover, the stagnation of the “factory of the world” in China can mean that businesses, both small and big, can experience a shortage and a rise in the cost of production due to an increase in commodity or raw material prices.
However, it is far from the end of an interconnected world and may even benefit businesses with stability in the future with better measures in place to face economic shocks (Source: Foreign Policy). The silver lining in the dark cloud is that everything isn’t truly over.
The world economy has combated crises in the past that have challenged businesses leaving employers, employees, and customers feeling lost. Nevertheless, it has managed to recover again. The present situation, therefore, deems a global response from all businesses to pull your guard up with prompt actions and stringent precautions.
Here’s the havoc COVID-19 has run amongst small businesses.
What has been the impact on businesses from coronavirus?
The downturn caused by the global pandemic has adversely impacted both large and small-scale businesses.
Leading retailers such as luxury clothing brands like Burberry, fast-food chains like McDonald’s, and supermarkets such as Target have temporarily closed their outlets around the world in areas that are more prone to the virus outbreak. The top executives of these brands claim that in addition to noticing a notable fall in their sales, they also encounter disruptions in their supply chain delaying the launch of their next products (Source: Business Insider).
While large-scale businesses have had the luxury of downsizing and saving themselves by virtue of their past resources, the small businesses have borne the brunt of coronavirus in the worst way possible.
To start with, small businesses do not have a cash reserve of 6 months to survive. As a matter of fact, if stats are to be believed – they have a cash reserve only to survive a month.
A study on small-scale businesses in America by JP Morgan Institute has revealed that they only have cash reserves to keep them going for a month. The burden imposed by fixed costs such as rent and wages for employees can run out of the little cash they hold, eventually forcing them to shut down (Source: NPR).
Although cash flow is a problem for small businesses, their biggest challenge comes in the form of letting go of people who are like family to them. Trust me, when I say “family” I mean it. In small businesses, employees become a part of a close-knit family that supports each other through thick and thin times.
Now imagine letting go of the right people working with you.
I have been through this saga in the past, and irrespective of how much you prepare yourself for the day – you are never prepared.
When you are going to give the “bad news” to the staff, you are never prepared. These are the people you have shared your businesses’ growth with. How can you let go of them?
Small business challenges during COVID-19
So, what are the challenges that small businesses face because of coronavirus that is forcing them to shut down or making it difficult for them to stay afloat? Here are the biggest issues:
Social distancing has led to a lack of revenue
Governments (in an attempt to curb the spread) have banned public gatherings of any form, encouraging people to practice social distancing. The majority of people in affected countries have confined to their homes.
This has led to small businesses facing a substantial drop in revenue, especially those engaged in the significant five sectors directly affected by Coronavirus such as air transportation, performing arts and sports, gambling and recreation, hotels and lodging, and restaurants and bars (Source: New York Times).
According to a survey conducted by Goldman Sachs, 95% of small businesses are already feeling the economic strain caused by COVID-19 in the U.S.
Lack of sales and the inability to commute were identified as the top two reasons, and 56% of businesses claim they would only be able to operate 0-3 months ahead. In comparison, only 13% remain confident, combating the negative impact of the virus and maintaining the business (Source: Axios).
Travel restrictions curtailing tourism
It’s no doubt that the travel and tourism industry is severely affected by the global pandemic as countries are imposing travel restrictions in every possible form. Every small business that is tied to the tourism sector has to prepare for – what OCED identifies as the ‘gravest threat’ to the world at present.
Among these, countries in Asia that are closely tied to China are more vulnerable, as they usually generate 50% of their tourism revenue from Chinese tourists. (Source: Forbes). According to a BBC report, small businesses in Thailand like flower stores, dance performance centers, and minibus operators have experienced a drop in income to an amount half as before (Source: BBC).
Meanwhile, Italy, on top of facing a death toll that has surpassed China, is also at the tip of going into recession.
A tourism startup known as Sweetguest has revealed that it has lost nearly 60% of its business within the first few days of the outbreak (Source: Sifted).
Drop-in demand has challenged the Engine of China
Small businesses are considered the engine of the Chinese economy. The pandemic, which originated from Wuhan, has affected small businesses in China to a great extent.
A survey by Tsinghua University on 995 small businesses shows that 30% of businesses have experienced more than 50% drop in revenue. Meanwhile, 85% stated they would go out of business within three months (Source: Rand Corporation).
In addition to the above, small businesses are also struggling to adhere to health and safety regulations – an added cost burden. Some companies also don’t have the option of letting employees work from home, and commute restrictions have doubled the challenge of running businesses (Source: CNN).
While the above surveys provide us an insight into how businesses are struggling, it is only a sliver of the actual impact, which is predicted to be multiple times higher. Overall, many workers are on the brink of losing jobs, as small businesses that cannot afford to keep paying wages without sufficient revenue are left with no choice but to lay off workers.
Here is a simple coronavirus business advice – do not panic. Trust your judgment and work towards a business continuity plan.
How do you work towards a business continuity plan?
7 steps to a simple coronavirus business continuity plan
If you are a small business, here’s how to brace yourself and combat the virus before it can take a massive bite out of your success.
1. Plan ahead and set priorities
Have you thought about how to run your business in situations of emergency like lockdowns? A backup plan is always good to have, and if you haven’t thought about it until now, the coronavirus scare should persuade you to do so.
Think about how you will manage the business using alternative methods, whether it’s online or offline. Decide as to how you will take care of employees and customers. Draft them into a well-articulated plan prioritizing your business objectives.
For example, if I were running a restaurant, I would start planning on how I can strengthen my home delivery business because of the social restrictions coming into the picture.
Now to strengthen my home delivery business, I could look at squeezing some money out of my operations cost of running the business. Since the business would not see any footfall during coronavirus lockdown, my electricity and other expenses would substantially come down. Also, I can quickly negotiate my recurring monthly rentals with the property owners
Once I had done that, I would buy premium ads in-home delivery apps or invest in Facebook ads to promote home delivery coupons.
The staff that was working as serving staff could work as delivery staff. I am confident that people would be agile and will do anything to keep a job.
Weel! That’s me thinking top of my head on what I would do as a business looking at a “coronavirus lockdown.”
It’s not perfect, but then we don’t live in an ideal world. Plans are fluid, and businesses should be agile during these tough times.
2. Re-evaluate your financials
You might be a meticulous entrepreneur who looks into every nook and corner of your income and expenses, but it doesn’t hurt to look back again. Segment your costs according to their importance and determine what you can cut down or live without. Think of any expenses that don’t return you with sizeable revenue and keep them on pause, maybe?
Crises like this also pressure us to make hard choices for the benefit of the overall organization. As small businesses cannot make consecutive payments for employees without any income generation, think of renegotiation terms of contracts with them. Instead of terminations, consider layoffs or furloughs as options.
As I tell everyone, it’s time to differentiate your wants from needs. Go frugal in living the entrepreneurial life.
An expensive office can wait. A renovation can wait, and definitely – a chandelier at the center of the office lobby can wait.
Time to brace up for the challenges ahead – by getting a grip on the expenses.
3. Adopt “work from home” practices
If you own a small business that has digitized at least some of its activities (so that remote working is feasible) – now is the time to execute this option. Although not all businesses have the privilege to practice remote working, it’s one of the best options left at the disposal of firms that can do it.
Explore the potential of working from home at least to complete a part of your business activities so that operations aren’t entirely halted. You might find it less productive and efficient at first, but take a look at these tips to overcome your work lag. (Source: Entrepreneur).
If you cannot give an option for everyone to work from home, at least have a few divisions that can definitely work from home. For example, the customer care of any business can work from home. So can digital marketing or IT Support.
4. Improvise alternative sales generation methods
Look out for opportunities that will allow you to supply your product or service to customers online or offline within the imposed limits.
This can be the ideal time in which you can evaluate unique market needs and customer expectations to see if you can fill the gap. One of the primary ways in which China’s businesses have responded to COVID-19 restraints is by switching to e-commerce methods (Source: Harvard Business Review).
5. Communicate with relevant stakeholders for support
Times are hard for all of us, and it is at this time all stakeholders of a business must help each other. Here’s how:
- Contact your bank to discuss possible options available to extend or lower loan repayments.
- Explain your situation to landowners and come to an agreement on a reasonable date for settlement of rent.
- Reach out to service providers, and explain your present situation to get the bill payment dates extended if possible.
- Keep your loyal customers’ hopes afloat by communicating with them via social media with words of encouragement. Your brand’s presence and acknowledgment regarding the Coronavirus can help you massively in the future.
The more you communicate and network, the better are your chances of survival. Everyone who is in direct or indirect contact with your business should know your plan of action. I.e., what is it that you intend to do during COVID-19 times?
For example, you should let your bank know about your plan of survival during these times, and what could go wrong? Show them your commitment to meeting their obligations and ask them how they can support you during tough times.
6. Stay informed to seek available help
Countries affected by COVID-19 are in a race against time to save the lives of people in danger. At the same time, numerous measures have been put in place to stop the economies from collapsing completely.
If you are based in the U.S., you can reach out for help through the program funded by the Trump Administration, which is planning to give out a total of $7 billion as disaster loans for small businesses (Source: Harvard Business School). Countries like China, Canada, Australia, and the U.K also have several measures in place at present.
There is also cross-national aid flowing, especially to developing countries affected by the pandemic, and contacting relevant government agencies. Also, stay current on the news to help you secure possible help.
7. Follow the required safety precautions
If your business remains open, follow the precautions like social distancing, washing, and sanitizing your hands frequently. Disinfecting workspaces is important too, ensuring customers and employees can function within a safe parameter.
Don’t be an f****g miser when it comes to buying stuff that will keep your staff safe. Yes, I mean that line. I have met entrepreneurs who make the wrong choices during cost-cutting only to regret it later.
Trust me – buying that expensive hand sanitizer for the office staff is an investment. Do not cut costs here because of one case of coronavirus and all your team will go into quarantine for a good 14 days.
Compare it with the costs of hand sanitizer, and you know what I am talking about.
Be vigilant about you and your employees’ health as negligence in functioning as a responsible business in a life-threatening situation as this can tarnish your local reputation. Take a look at the basic guidelines for workplaces here (Source: CDC)
Be flexible when your workers request sick or emergency leaves that demand them to be with their loved ones. It not only reinforces employer-employee solidarity but can also reward you with a loyal workforce that will stick with you in the toughest times.
On an ending note….
As an owner of a small business, you might have passed different hurdles to turn your business idea into a reality. Coronavirus and its direct or indirect impact might have left you scared, disappointed, and weary. That is okay given how the entire world is still struggling to deal with it in the best possible manner.
Consider it as one of the many challenges you have faced so far. Being cautious and prevention-oriented is the best measure at present.
Take it step by step. Hold onto your most significant strengths, and try your best to move ahead without giving up.
Quoting Winston Churchill, “Success is not final and failure is not fatal. It is the courage to continue that counts.”
Let me add to the above – Tough times do not last forever, but tough people do.
About today’s writer
Jasmeet is a founder of Lessons at Startup – A blog where he shares entrepreneurial stories. He specializes in Digital Marketing and Content Writing. He is addicted to Google News, Netflix, Good Coffee, and Quora ☺.