Small business faces a higher risk of permanent closure.

Four months of full or partial lockdowns have a profound disruption to micro, small, and medium-sized enterprises (MSMEs). Reports say that more than 55% of all businesses worldwide have been strongly affected by the pandemic. Services sector enterprises like hospitality, retail, and food services have a significant impact during this period. 

When living with social distancing, always wearing masks, and sanitization has become a new normal, it’s a critical challenge to do business in these restrictions. 

How pandemic is affecting the small businesses

MSMEs are the backbone of the country. It has suffered the most during this pandemic situation due to not enough capital and a lack of profit. Companies are planning to move towards a complete shutdown or cutting down their employees. 

According to a survey report conducted among SMEs in 90 districts of India says 47% of Indian startups and SMEs have less than a month of cash left. Out of which 61% are planning to scale down their business and 13% might go for a complete shutdown. Let’s take a deep dive to understand further. 

Loss of Jobs – Companies like Cab aggregator Ola, Uber, Zomato, and Swiggy has laid off over 1000+ employees. on this situation Ola founder and CEO Bhavish Aggarwal said

“They expected the crisis to be short but it had became increasingly clear that things won’t go back to normal soon.” 

Deferment of salaries – The Indian Government has mandated under the Industrial Disputes Act 1947 that all commercial establishments must pay wages without any deductions. This act covers only employees who earn less than 15000 per month salaries. 

The Ministry of home affairs mentioned that

All the employers, be it in the Industry or the shops and commercial establishments, shall make payment of wages of their workers, at their workplaces, on the due date, without any deduction, for the period their establishments are under closure during the lockdown;”

However, various private companies have already decided to trim down their employee’s salaries up to 30%. Even the state governments of Telangana, Maharashtra, Odisha, Rajasthan, and Andhra Pradesh have declared to deduct employee wages to 30%. 

Double poverty rate – According to the UN’s International Labour Organization (ILO), about 400 million workers from India’s informal sector get impacted by the Covid-19 lockdown. Financial express using the National Sample Survey Organization (NSSO) and Planning Commission data determines that India’s poverty level may extend to nearly 623 million, which is almost double the current poverty rate.  

How to strengthen the Small and medium businesses in the post lockdown

To provide some relief for MSME enterprises in this pandemic period, Government and RBI have taken specific measures to help.

Easing the burden

Monthly EMIs of loans and credit card dues have deferred until May 31.

Prime Minister Narendra Modi unveiled a comprehensive package of Rs 20 lakh crore under Atmanirbhar Bharat Abhiyan (Self-reliant India Mission) to make India self-reliant during this COVID-19 pandemic phase. .it is almost 10% of India’s GDP. This package is inclusive of already announced packages incorporating measures of Pradhan Mantri Gareeb Kalyan Yojana and the MPC (Reserve Bank of India’s Monetary Policy Committee) at the beginning of lockdown. Atmanirbhar Bharat Abhiyan also expected to encourage manufacturing products in India. Its key highlights are:

  1. Two lakhs MSMEs will likely get benefited from this financial package.
  2. To improve their liquidity position, RBI announces a unique liquidity scheme for the Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs). 
  3. The definition of MSMEs enterprise has now revised. This new definition defines manufacturing and service MSMEs under standard metrics. As per the revised definition, Micro units are those businesses that have an investment of up to Rs One crore and have a turnover under five crore investment; Small businesses are the enterprises that have invested under Rs. Ten crores and has a maximum turnover of Rs. 50 crore, medium enterprises have investment under Rs. 20 crore and have turnover under Rs. 100 crore.
  4. The government has extended the last date of filing Income tax to October 31, 2020.
  5. Rs. 4000 crore will be provided by the government to CGTMSE(Credit Guarantee fund scheme for micro and small enterprises) to provide partial credit guarantee assistance to the banks for MSME lending.
  6. All the due payments MSME will be released within 45 days by the government and central public sector enterprises. 

Survival strategies for businesses

Business model and the habits that made you successful in the past may not work in the post-COVID time as it is a time of uncertainty where the future is unpredictable, and uncertainty impacts the business strategies. It would be challenging to follow past models. It seems high time for businesses to adopt a new set of rules and be mindful of the following aspects to mitigate risks and survive in this slowdown.

Tracking expenses against the revenue status- Business should do a thorough assessment of fixed and variable costs and the actual revenues. Do a comparative study and see what all is working for your business and what need to change. Explore and dig into the market, and get the intent data about its potential customers and their needs. This assessment will help you to get a clear picture of your company, where it stands financially, and help you to plan for the future. 

Investment in Marketing strategies. 

After taking care of all your necessary expenses, you can take a long-term view of your business goals. If you have an appetite to take risks, you can invest your time and money in the marketing strategy and get competitive advantages in months to come. I would suggest understanding and using social media’s power and moving to digitize your marketing. 

New strategies for Delivery business

Change of delivery method may increase your sales as well as the relationship with your clients, for example, orders through phone and home delivery services, discount on products, product clearance sales these facilities will impact the business. for example

  1. Providers, financial advisors, and other professionals may offer consultations using video chats instead of in-person meetings.
  2. Retailers can deliver goods to customers’ places instead of people coming to their stores. 
  3. Saloon and Spas can promote their products and services at home.

Non Cash Compensation

Maintaining cash is one of the prime challenges of business during this pandemic. Employee Stock Option Plans (ESOPs) would be a better alternative to immediate crunch. An ESOPs will help reduce of iteration rate and build a sense of ownership in employees. 

Proactive communication with employees

working from home is a new trend that is getting forced to live. It will be going to stay in post-COVID as well, not sure for how long. It is required to have regular interaction with the employees using video conferencing, provide guidance, and keep them motivated while working remotely. To successfully have this interaction, the company should provide infrastructure and the internet’s expenses to work effectively from home. 

Points to remember

As change is the only constant, and we need to accept it wisely. Earlier adopting new strategies and skills will be beneficial to become successful after the pandemic.

Please let me know your thoughts & comments about this blog. and If you have any suggestions to survive in this pandemic or improving this blog, I am all ears.