Plan well for sustenance for your small business after...

Small and Medium Scale Enterprises make up a large part of Sri Lanka’s economy, accounting for 80 percent of all businesses.

These are found in all sectors of the economy and an essential source of employment opportunities and are estimated to contribute about 35 percent of total employment.

Covid -19 pandemic is changing the business life as we know it, and for many entrepreneurs, big and small, lives will take an even stranger turn over the next few weeks, months and maybe even another year.

Things will not be the same, particularly for those who dared to invest their savings or obtained loans and started small and medium businesses. In some of these businesses, the owners are already faced with difficult, immediate choices. These choices are difficult ones, and even more demanding decisions will be on their way. One thing is certain: What happens next will likely be quite different than what came before.

Unlike most of the other developed countries, because of our free and high-quality medical service, our Covid deaths remain low. This means, we have the possibility of recovering faster than many other developed nations. Its something to be happy about.

But, on the other hand, our country’s small businesses are not competitive employers. It is because they cannot sustain paying workers’ salaries, and other expenses and dues when there is a lock-down. So, it is obvious that the impact of coronavirus on small businesses will be huge. It will change the way they do their business and it could even reverse the trend of globalization.

What will happen next?

Talking in the TV a couple of weeks ago, a big-time businessman commented; “It’s quite unfortunate for small businesses. There is nothing they can do other than waiting and carefully watching what is happening”.

Of course, it is not an acceptable argument. The short-term outlook for small businesses varies greatly by the type of business. For example, a pharmacy and a salon owner will face two different outlooks. Yet, it’s important for you to consider what recovery mode will look like once the economy begins to return to a state of normalcy - or establishes a “new normal.” Having an exit strategy in place for after COVID-19 can help you be prepared to hit the ground running and rebuild.

Assess financial damage

The first step in developing a strategy for rebuilding plan for post- Covid -19 is determining just how deeply your small business has been affected.

There are different angles and layers involved, starting with the numbers. For example, your profit and loss or cash flow statements, your creditors, debtors etc. It’s helpful to do that now. You can then compare them to last year’s numbers to see how much your business may be down. If you are lucky, it’s possible that the damage might not be as bad as you think.

Apart from numbers relating to sales, profits and cash flow, consider other ways in which your business has been affected. For example, if you’ve had to lay off some of your employees, you’ll need to factor that into your projected strategy. Or, visualize what costs can be cut down and what quantities. Those are things you’ll need to account for as you identify financial resources to help you recover.

Take a sharp look at your business plan

You wouldn’t have a so-called business plan but at least you should have had some idea what your plan was. It may have worked perfectly fine pre-covid-19, but coming out of it may mean you have to do some fine-tuning.

Specifically, you may need to consider how your business can pivot to adjust to a new normal. For example, you may need to look at a digital expansion to accommodate the higher numbers of people who are shopping from home.

You must also analyze how your overall industry has been affected by Covid -19. It also is helpful. When looking at your competitors and the industry as a whole, you must pay attention to the trends and focus on finding the opportunities. Try to find a gap or a need that your business can fulfill that’s been neglected up until now. If you succeed, that will be a critical point for your revival.

Get some help and go through your business plan again. If you do not have a plan, prepare a basic one. It is not difficult. Go over your plan; get clear on your business’s strengths and weaknesses. Then, look at what was working before that may not work as well now and see where you can adjust or improve to remain competitive. Finally, don’t forget to revisit your business goals to make sure they’re realistic, given the current circumstances.

Check whether you’ll need funding to recover

Unless you had a large amount of cash on hand going into the pandemic, it’s likely that you may need some working capital to jumpstart your business operations coming out of it.

When it comes to financing your small business during a COVID-19 rebuilding period, there are several options to consider. Go to your bank, show your business plan and ask for assistance. If you have done continuous business with the bank, they might consider you. Of course, they would request some sort of security.

However, in today’s circumstances, the funding is limited. It’s entirely possible that funding may be depleted before your application for a loan is ever reviewed. For this reason, it’s important to consider other sources of small business funding.

But all of them require that you have something to leverage, i.e., outstanding invoices and credit card sales, respectively. If sales are slow or non-existent, you might have a hard time getting approved. Reviewing your business and personal credit scores, as well as your business and personal financials can help you gauge how likely you are to get approved for funding.

Revamp your budget to account for new spending

Coming out of the COVID-19 pandemic, you may have to spend money before you can make money. Inventory may need to be purchased, and you might have to rev up your promotion budget again to start building fresh buzz.

As part of your coronavirus recovery, you should have a clear idea of what you need to be budgeting for and what you can cut to make the most of the revenue you do have coming in. The goal is to eliminate the monetary waste and get your operating budget as lean as possible so that when the chance to invest in growth comes up, you’re able to take advantage of it.

Develop a time line for rebuilding

You may have several things you need or want to do to recover following COVID19, but doing everything at once may not be realistic. What can help is having a time line to follow that prioritizes your most important actions first.

For example, your immediate goal may be securing funding for your business. Once you’ve done that, you can set a time line for restocking inventory and, finally, reopening your doors if your small business closed as a result of the pandemic.

As you take individual steps toward recovery, remember to track your progress. This is particularly important if you’ve secured loans to fund your business, because you don’t want to waste time on activities that aren’t delivering a solid return on your investment.

In the next few weeks, we will discuss in detail what your Covid exit plan should include. We will also guide you how to get your business back on track.