How micro, small, and medium enterprises can navigate this crisis
Micro, small, and medium enterprises (MSME) started looking for exit plans following the nationwide lockdown imposed by the government to fight Covid-19. Micro and small businesses are experiencing far greater impacts, especially in urban areas, no matter how established they were in pre-Covid 19 situations.
Now, it’s time to revisit existing business processes and figure out what is required to survive in these unprecedented times. Industry experts universally agree that it is only innovation that can help MSME take businesses forward, and it needs to be marched up more than ever before.
Unfortunately, the impact on start-ups or small businesses can be more brutal; many small businesses may never come back, even in a post-pandemic world, because they could not cope with this situation. Some will fail due to the natural consequences of the health and economic turmoil.
In contrast, this global crisis will open windows to start and establish magnificent businesses by solving consumers’ newly evolving pain-points. Establishing brands in global financial crises is proven history for us.
Some 500 companies were established during the economic recession following World War II. If you don’t want to go that far, look at the inception of some legendary business companies in our country, like Meghna and Jamuna Group -- they were started in pre or post 1971 Liberation War to cater to people with a bare economy. World-renowned Bangladeshi development organizations like Brac, Grameen Bank, and GSK are also results of rightly picked initiatives to fight against difficult situations.
Here are some practical and innovative survival guidelines for MSME derived from global practices and on-the-field experiences:
Establish your business and equip brands to contain Covid-19 while in operation: This is something that every entrepreneur should establish right away. The sooner entrepreneurs are able to establish in the mind of their customers that doing business with them is safe, the higher the possibility of attracting more customers will be.
Given the current situation, and without having an effective vaccine available, it is highly expected that people will be very cautious about social or physical distancing and hygienic measures while doing business or going for simple shopping.
In that case, assessing the existing process of doing business to redesign the whole process with limited physical contact will do the job. Find out physical interaction points of customers and try to limit physical contact as much as possible through introducing home delivery and other digitized, innovative measures.
If you don’t have the resources, partner with a third-party or profit-share with individuals who can lend a hand in delivering products or services, thus keeping your core competency intact. When it’s inevitable, make sure physical distancing and hygienic measures have been taken strictly.
For example, use a simple, yet visible signboard that clearly communicates to customers that this business place is well-equipped to ensure the best possible safety practices for customers.
Manage quick cash flow while keeping customers in the core: The biggest challenge an MSME will face is maintaining the cash flow. They will be in need of fresh working capital to restart operations. Even if an entrepreneur manages incentives from the government or attains loan from MFIs and banks, it would not be treated as a permanent solution when it comes to maintaining the sustainability of the business.
On that note, entrepreneurs should identify products and services that can be offered at discounted prices -- this can help generate quick cash as conventional sources of funding are drying up for MSMEs. Remember, surviving this pandemic situation itself is worth the equivalent of making profit for this year.
Because of the interruption on regular income, people will prefer saving money rather than spending it on “non-essential things.” If possible, try to stock and sell products and services that go with basic needs labels rather than luxurious one. Also, try to identify items that can be offered free of cost for a limited period of time. This will help you reach out to new clients; you can then convert them to profitable clients when the appropriate time comes.
LinkedIn, Zoom, Google Hangouts Meet, and edX are examples of a few global brands practising these policies and reaching new customers. A few online shops with discounted prices and free delivery offers are successfully marking the same footprint in our country.
Retain existing customers with empathy and by staying relevant: In this unprecedented time, people will tend to buy products and services from known and trusted sources which they had good experiences with. So, giving more effort into retaining customers rather than spending the marketing budget on attracting new customers will be a wiser move.
In that case, showing empathy and engaging with existing clients in various forms will help business come back even stronger. For instance, declaring to your customers that a small percentage of the profit you make will be spent on a charity which delivers food for the extremely poor will stimulate customers to buy products or services from you. This will also give you a noble platform to start conversation with your customers in this crisis situation.
IPDC is following something similar to this and getting good responses. Or sales products and services are either on credit, or digitized payment systems are arranged for customers so that chances of getting infected by handling hard cash is reduced. If the nature or current status of business does not permit you to do so, then go, volunteer, and keep updating your regular and loyal customers about the contribution you are making in society.
If you can manage to instill hope in your customer to stay positive in this pandemic situation, you are in a more secure position from where you cannot be uprooted in near future.
Keep paying your employees and landlord through profit sharing: By this time many small business are now running out of money and they have a team to pay salaries and a landlord to pay rent. Keep them updating and consult with key stakeholders and be honest with your situation. One way out would be paying salaries and rent on the number of units sales make and not on a per month basis.
This will give all parties a breathing space. Have an honest conversation on the situation and its impact on your business and make a realistic way out plan as a team that you have never done before. Any message regarding postponing payment should be delivered with utmost empathy along with transparent reasoning.
Have an idea to solve newly emerged pain points -- best time to start a business: Starting a new business in the midst of a health and financial crisis might sound crazy, but this is the only way it might work better than any other situation. This pandemic’s affairs would leave us in problems that have never been attempted by any entrepreneurs. This will allow new entrepreneurs to get an untapped market to serve.
And if your idea is great enough to solve one of those real problems, then you have already got a ready customer base. Moreover, this year’s competition will be weak, especially considering that many established businesses will fail to pivot to stay relevant.
Third, finding the funding for a great idea will be easier this year. If you are lucky enough, you can get loans with low interest rates from the incentive packages declared by the government. If not, then there are some NGOs like Brac who are ready to finance promising ideas to revive the MSME sector.
Fourth, hiring employees during a recession will cost you less than any other time. And finally, by the next few years, you might find yourself as a great entrepreneur if you can endure the initial struggles with focus and determination.
“If you ever dreamed of playing for millions around the world, now is your chance. Play inside, play for the world.” This is how Nike is encouraging people to stay inside through social distancing campaigns.
Many other small and large brands are coming up with creative ways to stay relevant and to stay on top of their customers’ minds with positive gestures. Let’s stay creative and apply deshi (local), doable strategies, not only to survive this global crisis but also to help others to revive.
Md Maruf Hossain is a Divisional Manager, Microfinance Program, Brac Bangladesh.