Respond, Restart, Re-create – How SMEs can Survive Lockdown

The outbreak of COVID-19 has caused disruption across the globe and has led to two simultaneous crises. The first is the illness itself – with tens of thousands of fatalities globally and healthcare systems strained, or at capacity.

The second is an economic slump, resulting from the closing of borders and supply chain disruptions. Many countries have also imposed strict lockdown and social distancing measures. While vital to prevent the spread of the virus, it is worth remembering the very real economic impact measures like this can and are having in South Africa, and around the world.

Unlike large enterprises, which often have a level of resilience built-in, many small and medium-sized enterprises (SMEs) still rely on having customers physically present in the shop, restaurant, salon, or office.

SMEs often don’t have the necessary capital to survive being shut down for a week, let alone prolonged periods. This makes them incredibly vulnerable to the imposed lockdowns and social distancing measures currently in place.

Vodacom Business research shows that there are more than 380 000 formal SMEs and 1.7 million informal SMEs in South Africa. It is crucial then that South Africa’s small businesses are supported at this time, as they contribute significantly to employment, provide income for millions of South Africans, and form a key part of our diverse economy.

While the next few weeks and months will be challenging, there are things SMEs can do to help them survive this situation and emerge stronger, with a more versatile business on the other side of it.

Respond

To survive the lockdown, it is crucial that your initial response is right for the specific situation and position your business finds itself in. As no two businesses are the same, the correct response will be different depending on multiple factors specific to your current needs.

At a time like this, cash flow and other budgetary concerns are understandably top of mind. Here are a few tips to help your business respond appropriately:

• Minimise costs – for many businesses the lockdown has halted their revenue, but operating costs remain. Try to reduce these as much as possible by pulling back on costs or projects that are non-essential at this time, or speak to your bank and landlord about deferring payments for things like debt repayments and rent until a later date. The reduction of staff costs, either through unpaid leave or partial salary payments, should be a last resort.
• Go Digital – any part of your business that can be done digitally or online should be. Many SMEs in South Africa have not yet fully transformed into digital businesses. The lockdown provides the opportunity for you to look at your business processes critically and assess where digitisation can be implemented. This will vary depending on business type, but virtual consultations, helpful tips, or even the occasional WhatsApp message to check-in on your clients will keep your business top of mind and build trust with your customer base during this time.
• Business funding – banks and SME funders may be hesitant to grant loans to distressed businesses during this period. Re-engaging your customers and confirming which parts of your pipeline are still solid despite the lockdown (either through contracts or written commitments), as well as showing an evolution towards a sustainable post-COVID-19 business model, may put you in a more favourable position to obtain funding. Businesses that require funding for essential services may also be viewed positively.
• Leverage government support – the government has implemented measures to assist SMEs directly affected by COVID-19, ranging from tax subsidies to varying levels of financial support for different sectors.

Restart

The lockdown will come to an end, eventually. And when it does your business must be ready to operate in a business environment different from the one that existed before the lockdown. Supply chains will need to be restarted, and consumer behaviour could be fundamentally altered.

When restarting your business, it is vital to re-establish your supply chains quickly and figure out which parts of it have been disrupted. Make sure that any revised pricing can be absorbed or priced into your business model going forward.

Just like SMEs, consumers are also having to adapt to the lockdown. Many will come out ready to spend, but others will take a more cautious approach and may cut back on non-essential products or services. This is why your business must re-assert its value to customers quickly, either through promotional activities or increased advertising.

This will also be a good time to leverage off the digital processes put in place during the lockdown, perhaps providing clients with an entirely new product or service offering.

Re-create

Looking forward to a world post-COVID-19, digital can no longer be on the side-line of business. In fact, digital should be at the core of SMEs business models and should enable everything from back end automation to digital customer engagement.

Putting digital at the heart of your business process allows your business to be versatile, resilient, and agile in how it responds not just to crises, but to shifting market conditions. Done correctly, digitisation can also empower your business to compete with larger companies by getting your products and services to market quicker than they can.

By Kavir Bhoola, Executive Head of Strategy at Vodacom Business