Small businesses are bearing the brunt of the COVID-19 pandemic as they scramble to keep their businesses afloat in a depressed economy. With the slowdown of business activity and consumer spend, businesses across the board are feeling the pinch and have had to quickly adapt in order to withstand the pressure imposed by COVID-19.
Business owners are dealing with several challenges including disruptions in the supply chain, cash flow issues, an economic recession, halted business operations and rising financial burdens. There is an estimated 5 million micro and small businesses in the formal and informal space in South Africa that have been severely affected by the pandemic.
Take a look at some of the ways in which your business can adapt to the current conditions and hopefully weather the storm:
Businesses need to be agile to thrive during this time
To echo the words of Bill Gates, “Success today requires the agility and drive to constantly rethink, reinvigorate, react and reinvent”. The key point here is that businesses need to harness their ability to be agile during this time and quickly adapt to this changing environment. Do not hesitate to reinvent your business and introduce new products and services. In these trying times, businesses can no longer be dependent on their core products alone but need to diversify their offerings. Every crisis offers opportunities, how can your business adapt in order to thrive during this crisis?
Diversify your risk
Businesses need to consider diversifying their risk by moving into businesses that are similar to their core business. Creating a new product or service can be risky for any business, therefore entrepreneurs need to ensure that the new offerings create value for the customer. It will certainly help bring in other revenue streams that will keep your business afloat during this time. However, not all interesting ideas are worth pursuing, so it is important to assess your systems and teams in place before pursuing this new venture.
Manage your working capital cycles
Regardless of a company’s size, working capital is an important metric in any business. Therefore, businesses need to pay careful attention to working capital management. Working capital management is designed to ensure that a business runs efficiently through using assets and liabilities in the best way possible. The purpose of this is to maintain cash flow that can be used for short term operating costs and debt obligations. Control your expenditure and do not go into high capital-intensive projects that demand cash flow during this time. After all, it will determine the long-term financial health of your business.
Invest in repositioning your business
The main priority of every business right now should be to reposition your business to ensure that you stay afloat during the pandemic. It is prudent to defer your longer-term investment projects for a later date. As the circumstances and the market improve, you can revisit those projects. This is the time to utilise your balance sheet in the most responsible manner possible. If possible, bring in facilities for secondary financing to leverage your balance sheet.
Run a lean and mean business
It is uncertain how long this pandemic will last and the road to recovery will be long for small businesses, but it can be done. It starts with creating greater value for clients and consumers while using fewer resources. Adopting lean principles eliminates waste and increases operational efficiency and will guarantee that you weather the storm.
Think outside the box
These are unprecedented times that require a new way of thinking. They say necessity is the mother of invention and business owners should utilise this opportunity to think out of box and do things differently. Do not be afraid to move into the digital space, if need be. This is the time to show resilience and be responsive to the needs of your business. Establish different revenue streams and de-risk yourself. It will pay off, in the long run.
To take lessons from Grindrod Bank, our first response to the COVID-19 pandemic was to assess the lay of the land and take stock of what had happened, all the while trying to find ways to continue to add value to our clients. Due to our close relationships with our clients, we were able to work with them during this difficult time by adopting a responsible and proactive approach to their requirements.
Remember that it is not the strongest or the most intelligent who will survive but those who can best manage change and the risks they face.
Orignally published: https://www.gq.co.za/wealth/6-tips-for-small-business-during-covid-19-49984348