- Date : 17/03/2021
- Read: 4 mins
Despite the challenging events of 2020, small and medium business owners have learnt a lesson or two on how to stay afloat during economically difficult times.
There is no doubt that 2020 was tough on businesses. With lockdown measures imposed worldwide, micro, small, and medium businesses (MSMEs) felt the harshest blow of the economic slowdown caused by the pandemic. While some companies were forced to shut down completely, other small business owners that survived learnt some important lessons on successfully pivoting in a crisis. Let’s see what they are:
1. Insure the business:
With the economic ups and downs in 2020, it is only right for MSMEs to protect themselves from economic disruption. Investing in an insurance plan that covers against unforeseen risks is one of the cornerstones of running a business smoothly. An insurance plan for MSME is essential as it not only provides you financial security but also lets you nurture your business as an asset. Having adequate insurance helps minimise your losses and escape the disastrous aftermath of a financial crisis.
2. Curb cash flow:
Maintaining a sufficient cash flow is essential for your business to run smoothly. Evaluate your operating expenses and take measures to see where you can cut them and maximise your operating income. Focus on a sufficient turnover of your receivables accounts and collect cash from customers in a timely manner. Managing cash flow also ensures you make timely payments to your vendors and creditors. For any temporary blips in cash, banks offer working capital loans in the form of business lines of credit to small businesses; this can help ensure uninterrupted operations. You can use the loan amount for inventory purchases or other operating expenses, but make sure you are able to repay the loan on time.
3. Safeguard cash:
‘Conserve cash’ is an oft-repeated but eminently wise advice for MSME business owners. Whether it is for personal or business use, having cash on hand helps you tide over difficult times. As you strive to rake in more revenue and profits, also pay attention to your cash outflow. Evaluate your operating and other administration expenses and minimise any non-essential ones. Wherever possible, set aside cash generated from your business. You can plough back the profits into your business so that you are not tempted to spend it all.
With change and uncertainty comes opportunity for businesses. This is the time to tap into your resources. Look beyond your existing business offerings and expand by diversifying into other products or services. This will ensure you don’t go out of business during a slowdown. Diversifying reduces the inherent risk of dealing with just one product whose demand is vulnerable in times of crises. Identify customers’ changing demands and fill the gaps by catering to those needs. You can easily avail of a business loan or a line of credit if you need funds for diversifying your business. Most banks offer small business loans at affordable interest rates and a flexible repayment schedule.
5. Embrace innovation:
Being flexible and incorporating new and different ways to do business when the situation demands is essential to stay relevant and emerge relatively unscathed during tough times. For instance, 2020 forced some traditional businesses to adopt technology and move largely online – from taking orders online to accepting only digital modes of payment. Business owners who react and adapt quickly, rather than being rigid, will not only survive but thrive in a transformed marketplace. Those businesses that don’t make the shift could face grave consequences.
Business cycles are unpredictable. The only way to insulate yourself from the consequences of a sudden disruption is by being prepared and resilient, and having adequate resources. Focus on creating a business culture and model that are built on trust and appreciation of your team, your vendors, and your customers. Ultimately, strong relationships are the main ingredient that will ensure your business flourishes even during unfavourable conditions. Look at these initiatives by the Indian government to boost startups in India.