Planning a way forward for SME’s in the current Covid-19 crisis

SMEs are an essential part of the economy, they are often financially fragile with little cash on hand or resources to buffer financial shock. Businesses have furloughed staff or made staff redundant, reduced or stopped trade or even shut shop. The government has provided various lifelines in order to keep the majority of companies afloat so that they may come back into the economy when this is over. However, it will be years before we fully understand the economic impact of the coronavirus epidemic, one thing is very clear that is SMEs are finding it very tough. 

The Situation: 

1. large numbers of businesses have shut down and laid off staff
2. most SMEs are cash-strapped with generally less thentwo months of cash on hand to deal with shocks 
3. not all SMEs think there will be able to reopen by the end of 2020
4. nobody knows how long this crisis (Covid-19 and the resulting economic crisis)
5. not all SMEs are certain government grants and loans will work for them

Huginn & Muninn suggest the following recommendations:  

1. Don’t rush decisions but do make plans. People are more likely to make mistakes when they are cash-strapped and primed to think about financial stresses. Here are some strategies to help make decisions when the world is in turmoil. Firstly, give yourself time to decide. In the current climate it can be tempting to run out and make big decisions — to just do something. Many entrepreneurs like action and refuse to leave something sitting on their desk when they can help it. But that’s a bad strategy when every day reveals a bit more about how the Covid-19 crisis and how it will play out. Everyone makes better decisions when they have better information, and you will have more information tomorrow than you do today. Before making any big leaps, take a cooling off period — and maybe even having a trusted third party such as a friend or colleague look over things with you, this might help you avoid doing something you’ll come to regret. Secondly, start making detailed contingency plans in order to “save the business” which should be broken down into incremental tasks so as not to feel overwhelmed. 
2. Ensure you have accessed all the help available to you from the government, which can be a much-needed lifeline for many SMEs and self-employed, whether it be furloughed staff, loans, grants, etc. 
3. Figure out how your customers’ needs have changed.Almost all of your customers’ lives are different than they were a month ago, and they will probably be different again in six months. They may never be the same. Your short-term cash flow depends on providing them with goods and services during the crisis. Your long-term viability depends on understanding how their needs will be different when the pandemic is over. The first thing to consider is that people are building new habits right now. There are millions of isolated businesses, suppliers and households whose normal routines have been upended, and just like them you have to experiment if you want to remain a part of their lives. This means you need to understand your customers pains and how to solve them. Some of their new habits will persist after the pandemic, which means it is particularly important for you to figure out how to continue to offer services that deliver value during the crisis. Think hard about how the post-pandemic world will change your business model and bring your customers into your planning process. Many of your customers will be poorer, but they will also be eager to enjoy themselves after the long seclusion. Many will still be scared about the risks of contagious disease. Some of them may have decided that they like using technology to get things done, such as ordering online or even undertaking online meetings whether social or business. Reach out to them to learn how their lives have changed and figure out the most exciting thing that you can offer your customers. Ask them what they are looking forward to and help them look forward to the day that they can buy from you again, whether it be services or goods. 
4. Do some realistic accounting.Maybe you can reinvent your business and keep revenues up during the pandemic, maybe you can thrive in the post-pandemic world. But most businesses are suffering, and after you’ve searched for creative solutions and have given yourself time to plan, you’re going to need to make some hard decisions. Try to form realistic estimates of your cash flow both during and after the pandemic. Compare that cash flow with your fixed expenses and with those expenses that you can cut. Remember that sometimes it makes sense to cut the more flexible expenses early, so that you can keep paying the more vital expenses later. Next, figure out which expenses can be delayed. For example, there is a three month freeze on landlords’ ability to evict renters and small businesses. Be transparent with your landlord, bank or whoever you need to pay, about your situation. But be aware that it might not be easy to catch up. Finally, stay abreast of other forms of assistance and other ways of bridging the gap as they become available.  
5. Keep your best employees loyal.Your people are always your most valuable asset. If you lose your best people during the crisis, rebuilding your operations is going to be even more difficult. Even if you have to reduce labour costs dramatically during the crisis, you want to maintain your ability to onboard your best workers when the world is open for business again. The key here is to focus on the long term and to be human. Grants, the furloughing of staff and business loans are designed to stop you from making people redundant. Talk to your employees about choices such as furlough, reduced pay, reduced hours, pay without leave, using annual leave etc, but make sure that the decision feels mutual and temporary. If you do have to make some tough decisions about who you want to keep, focus your attention on retaining people who feel like the best fit and who really care about being part of your company.  

This is a time to be human with people. No matter what happens with your business, this is likely to be a devastating time for employees for all kinds of reasons. Many of them have elderly or vulnerable relatives. Do everything you can to make sure that they are safe and to show that you care about their well-being. Generosity during a crisis can strengthen relationships and promote loyalty. 

Huginn & Muninn believe in order to navigate the current crisis, it is necessary for owners and managers of SMEs to act both with a sense of urgency and with forethought. It’s important to understand the broader landscape and it’s critical to be aware of avoidable mistakes in decision making. By taking steps to avoid such mistakes, and by thinking through the broader set of options available right now, it is possible to navigate this complicated landscape.  

Contact us for a free no obligation discussion.