How businesses can survive during the COVID-19 lockdown
How businesses can survive during the COVID-19 lockdown
By Ms Roma Priya, Founder – Burgeon Law
The unprecedented Coronavirus pandemic has majorly impacted businesses across the globe. Regardless of whether the businesses are established or are start-ups, they are reconsidering their business strategies and the way they function on a day-to-day basis. Several businesses are finding it to be a challenge to maintain the workflow and keep the financial wheels rolling during the lockdown period owing to lesser revenue and profits. The country’s growth rate in FY 21 will likely reach a mere 2% from a range of 4.7%-5.2% as predicted earlier by the ICRA.
For start-ups and small-scale businesses, unfortunately, the impact of the pandemic can prove to be more hard-hitting. This is majorly due to already low cash flow and a lesser margin of funds being set aside for such unexpected scenarios. Businesses across verticals have been witnessing low revenue generation due to a hit in sales, supply chain, and logistics.
In such challenging times, entrepreneurs will need to adapt and help their organizations adapt to the new routines and abide by the new rules imposed to alleviate further downfall. Here are some strategies that businesses can implement to sail through the crisis.
Planning in advance
A forecast of the time it will take for the pandemic to pass is a debatable one. No matter the time, it would do well in the long run for businesses to be prepared with a plan in place. This plan can be devised from a period of 3-18 months depending on the nature of the business, and the time it takes for the economy to return to normalcy. Depending on a rough estimate of how long the pandemic would last, strategies can be made. For instance, we assume that the crisis will last for 3 months then certain flexible expenditures such as hiring, travel and marketing expenses can be paused instantly.
If the crisis continues for more than 6 months, then the business would need to reassess a majority of their strategies and focus only on the essentials. Focusing on aspects such as sales (online vs. in-person), renegotiating fixed expenses (rent, salaries, equipment lease payments, etc.) would be ideal. If the pandemic continues for more than 1 year, then businesses would need to seriously reconsider their plans and pay attention to keeping the business afloat. This holds true particularly for emerging companies. Businesses would require a revision of revenue goals and manufacturing timelines along with creating a new operating plan.Leaders and management of an organization must keep the communication transparent and update their employees and investors as frequently as possible.
Keep track of expenses
Crisis scenarios tend to impact revenues and during such times, it is necessary for companies to keep a track of the expenses and properly assess fixed and variable expenses. Assessing the expenses will offer a clearer picture of where the company stands and help devise strategies accordingly. Even after the pandemic has settled, companies can follow this to constantly keep themselves updated on where the organization stands, thus giving them an upper hand to be prepared for any unexpected downfalls.
Reassessing the business modelWith the current market being unreliable, businesses must take a step back and assess their business models. Checking if the current business model the organization follows is feasible will allow the business to re-evaluate the model, thus avoiding any further crisis. Regularly tracking the financial metrics and the bandwidth is the key to maintaining business continuity during such times. Businesses will also need to take into account any potential bad debts, new sales, revenue collection, and credits.
Capital is what fuels every business. For entrepreneurs, one of the most important questions might be where the capital will come from given the current scenario. There are many funds who have enough capital to deploy for the coming years and they may not shy away from it. However, we might witness a dip in VC/HNI funding in the short run. Investors may become more vigilant and may take longer than usual to make funding decisions after following stringent diligence procedures.Taking a leaf out of history’s book, we can see that the market bounces back after any crisis. To raise their bandwidth, organizations can still approach the existing investors for additional funding to keep the business going in an unhindered manner. Existing investors would be more likely to offer a helping hand since they are aware of the business model and have invested previously.
The current focus for businesses must be to weather the storm and sail through it smoothly. Here are some tips to stay connected and keep the business up and running during such arduous times.
Transparency is key
Customers are the ones who keep any business running. Needless to say, without customers, a business would not be able to exist. Since the pandemic is a problem that we are all facing collectively, staying transparent with your customers and keeping them updated is crucial. Communicating clearly with your customers will help them understand the situation better and be empathetic.
Maintain healthy relationships
Understandably, making payments to vendors/suppliers might turn out to be more challenging considering the lockdown and impact on businesses. However, this crisis has impacted almost everyone in the world. So, providing your vendors, suppliers and landlords with sufficient notice would prove to be helpful for them to make arrangements accordingly. This will also avoid any bitterness in your relationship in the future.
For larger companies having to consider difficult decisions such as employee layoffs, the primary option can be to cut the salaries of the higher paid employees and try to retain those who can least afford to lose their jobs. However, when the time comes to make the tough call, it’s advisable to do it with compassion, look out for government directives, and offer extra compensation as and when required.Such implementation should be carried out only once and not in stages so that it does not affect employee morale.
Keeping the team engaged
As an entrepreneur, your organization relies on you to guide them through this time. It is an entrepreneur’s responsibility to ensure that the team is engaged, and productivity is maintained. The lockdown may take a toll on the mental health of some employees and assuring them and accommodating their needs will allow them to bounce back sooner. Raising morale within the team is of utmost importance. Stay connected and collaborate with them digitally through applications such as Skype, Zoom, Google Duo and Slack.
Keeping stakeholders informed
Last but not least, stakeholders play a pivotal role in an organization’s success. Seek advice from investors or external experts to plan and create strategies to proceed further. It is essential to communicate the impact of the situation on the business with various stakeholders clearly.
During such times, standing united as one and helping one another is important. Remember that the priority right now is to stay safe indoors. Some of the best solutions are created during trying times, so do not lose hope and keep your spirits high!