COVID-19 hit, what now for SMEs? SME South Africa approached a number of entrepreneurship champions and various stakeholders with the goal of providing strategies for small businesses to survive in what is our new reality.
Darlene Menzies is a pioneer in the South African tech space. An innovator and serial entrepreneur, she has often been one of the few women tech-preneurs in any room. She is the founder and CEO of Finfind, an online aggregator of lenders and funding solution offering access to finance for small businesses.
On the impact the struggling economy will have on how much small businesses will recover in the upcoming year – “The reality is that many small businesses will close”
Before the COVID-19 outbreak, the South African economy was already faced with weak growth, large fiscal deficits, sharply rising public debt, and loss-making state-owned entities, as well as an unreliable power supply. SMEs are disproportionately affected by the state of the economy – they are the most vulnerable to disruptions in demand and supply, as many do not have the cashflow to sustain themselves, which has been exacerbated by the national lockdown.
Small businesses face a difficult time for the foreseeable future. The impact of the COVID-19 lockdown has eroded sales, halted production lines and disrupted supply chains, forcing many employers to reduce the number of staff that they employ. Consumers have suffered loss of income and increased debt (payment holidays only prolong the debt period), and disposable income levels have dropped significantly.
The reality is that many small businesses will close, either because their industry sector has ground to a halt (tourism and event management for example), or because their business cannot operate online (hairdressers and beauty salons).
Without the reserves and resources of large corporates, small businesses are in for a tough ride. Many will need to devise new products/services to meet the challenges this difficult period has created. A few will do well, particularly those that can capitalise on the food and medical opportunities, as there are a number of funds available to specifically help these SMMEs.
For the rest, there will be a need to focus on cash flow and implement survival strategies that enable them to survive the anticipated rolling lockdowns, in the hope that in a year from now, business can start to claw its way out of the pandemic hole.
There could also be a move towards proudly South African products and services to save/support the local SME market
On turn around strategies for SMEs post Covid 19/lockdown – “Digitalisation will be important to attain operational efficiencies and increase access to markets”
2020 is turning out to be a year of business unusual. The key to survival now is to stay close to customers to understand their changing needs and seize opportunities to resolve these for them. This includes building online trading strategies, as well as developing niche products/services to address gaps in the market.
That said, the business focus of the SME significantly dictates whether a turnaround strategy is even a possibility. Certain sectors, like tourism and events, have been decimated by the pandemic. These sectors will have to wait many months before they can resume business. Small businesses that do not have alternative income streams will not be able to stay alive and in this case, it is worth considering starting a new business with a different focus or in a different sector, where the skills gained to date can meet an identified market need.
In order to increase productivity and reduce overheads, many small businesses should continue to adopt a virtual work environment, and allow employees to continue working from home.
Digitalisation will be important to attain operational efficiencies and increase access to markets. The use of digital work boards, digital productivity tools and task managers will become critical for reduced costs.
Localising and adopting technological advancements in the manufacturing sector should be explored, and the outsourcing of non-essential business processes to specialised organisations is likely to become important to contain increasing human capital costs.
On taking advantage of new opportunities – “There will be a fundamental rethink in supply chains”
It pays to remember that every good business starts by solving a problem, and problems are currently in abundance. The key lies in seeing problems as challenges that can be solved, rather than barriers to success.
There are many examples of enterprising entrepreneurs who have quickly recalibrated their businesses to maximise opportunities during lockdown: a shoe design company that is now supplying masks to hospitals; a dress designer who is now making masks for the general public; an organic food shop that is now selling online and delivering to your doorstep; a florist chain that is delivering grocery essentials during lockdown. All of these are examples of businesses that saw an opportunity and quickly pivoted their business to take advantage of market needs.
As the new normal becomes a reality for all concerned, there will be a fundamental rethink in supply chains. Many consumers will be willing to consider products and services based on their efficiency, personalisation and price.
There could also be a move towards proudly South African products and services to save/support the local SME market, as well as towards conscious consumption and consumer activism. Entrepreneurs need to assess the emerging trends and consumer sentiment to curate, match and facilitate goods and services.
When adversity strikes, an entrepreneur needs to seize every opportunity to survive
On ways to pivot your business model – “Grow your online presence and digital strategies”
Entrepreneurs need to adopt agile business models that can easily adapt to rapidly changing economic circumstances. The lockdown has forced businesses to change how they operate, and this means that entrepreneurs and their staff need to learn new skills.
Managing a virtual team requires a different approach to managing a team that is sitting in an office. Likewise, with customers, it is necessary to carefully consider how you communicate, as online conversations lack the nuances of face-to-face meetings.
Consider partnerships that are mutually beneficial and provide customers with enhanced products/services. Do your research so that you understand the challenges you need to solve and changing needs that you need to accommodate. Make sure you add real value to your customers and be prepared to go the extra mile to retain them.
- Grow your online presence and digital strategies.
- Master the skills to embrace the digital world.
- Understand the pain-points of your customers.
- Consider partnerships to enhance product/service offerings.
- Make your business relevant to customers by adding value to their businesses.
- Be prepared to go the extra mile.
On cost cutting versus innovation – “Innovation does not have to be costly”
The need to conserve cash is critical in uncertain times. Debt should be used wisely as a tool to provide the liquidity needed for business survival and innovation. Innovation does not have to be costly, particularly if you consider joining forces with other small businesses where the sum of offerings will enhance customer value.
Another useful tactic to build resources is bartering. In unusual times, bartering products/services can give you access to resources that you would not be able to afford. The key to business survival and growth at this critical time is to keep closely engaged with your team. Make sure everyone is focused on conserving cash, identifying new opportunities and solutions, and providing excellent customer service.
On the ‘coronapreneur’ – “If these opportunities can be leveraged and converted into sustainable businesses, then they should be supported”
I salute them. When adversity strikes, an entrepreneur needs to seize every opportunity to survive. Opportunity entrepreneurs (or currently dubbed ‘coronapreneurs’) are wired to identify gaps in the market, determine solutions and mobilise resources to address them – or some may say, exploit them.
If these opportunities can be leveraged and converted into sustainable businesses, then they should be supported.