What should SMEs do in the Post-epidemic Era?
In 2020, the entire world met with the ultimate “black swan” event of Covid-19, causing varying degrees of losses in lives and economic damages.
Economically, service industries such as F&B and tourism are dealt the largest impact in the short term. In the medium term of the crisis, manufacturing industries are facing a supply and logistics crunch. In the long term, a potential rise in unemployment caused by permanent economic scarring is a looming concern.
SMEs, being vulnerable due to lack of capital, is facing a “life and death test”. Every business is put to the test. Who can survive the crisis? How can SMEs turn this crisis into opportunity?
Cash flow is the lifeblood of every company
To tide through the epidemic, it is vital for SMEs to secure more cash flow immediately and survive any liquidity crunch.
How can small businesses quickly improve cash flow in a short period of time?
- First, boost your working capital by tapping on the various government-supported SME loan schemes for business financing.
- Invite the company’s shareholders to inject further capital, if possible to improve the company’s capital position.
- Sell any excess inventory as soon as possible. Sacrifice margins with price discounts and aim to turnover inventory into cash as quickly as possible.
- Manage your accounts receivables. Push credit collections to recover dues from clients by offering early payment discounts. Tighten credit terms to new clients when necessary.
Keeping a lid on corporate expenses
Many companies have taken measures such as layoffs and pay cuts, as a last resort. Before that, it is also necessary to control unnecessary expenses with a thorough audit on cost-cutting.
Reduce discretionary fixed costs. New product development expenses, marketing expenses, advertising expenses, employee training expenses, etc. These budgets that you planned pre-pandemic should be deliberated if they should be shifted after the overall situation picks up.
Before laying off employees, consider if there are any innovative ways to reduce payroll expenses for a couple of months. Job sharing or enabling employees to take on multi-roles in a temporary arrangement might work.
Seizing the opportunities driven by the epidemic
Opportunities are to be found in every crisis.
When physical businesses are unable to operate due to mandated closures, online transactions and the cloud economy are ushering in an unprecedented adoption rate and growth.
Online education, virtual meetings, and tele-medical care are now increasingly accepted by the public. What could have taken business providers years to educate their target audience on adopting their virtual solutions, has now suddenly become so easily popularized in the face of the epidemic.
The epidemic has filled our lives with uncertainty, but at the same time, it has also driven deep changes in consumer behaviors. Changes in consumption habits and transaction mediums will bring new business opportunities.
Some industries that are faced with the most direct impact are:
- Sanitation, everyone will pay more attention to their own sanitation and environmental sanitation. Cleaning firms could move up the value chain by providing specialized deep cleaning and sanitization services.
- Healthcare and mental health. There will be more demand for quality healthcare services. Ancillary products or solutions such as meditation apps are seeing a pickup in demand due to the increased awareness of mental health care.
- Online education. Enrichment and tuition providers with a robust and interactive online platform to deliver their content are now not restricted to just their country of operations, but can now sell to a worldwide audience.
- Real estate and remote working. Home improvement supplies, co-working space providers are industries that are experiencing shifts in demand.
- Cloud economy and online transactions platforms. SMEs who are able to move their operations and customer transactions seamlessly online should double down on their online presence. The year 2020 and 2021 should be the tipping point for cloud services, e-commerce and virtual payments.
The epidemic will pass, but certain trends that arose due to Covid-19 will be adopted as the norm. For example, although education has returned to traditional classrooms, the integration of online education and offline education will become a major trend ahead.
SMEs should pivot and adapt their business model accordingly to the trends and opportunities discussed above. By being an early adopter of enabling technologies. SMEs are able to ride on the wave of opportunities presented post endemic.
Businesses that are able to optimize their cash flow and survive unscathed from the endemic are well-positioned to ride the wave of recovery ahead.