Survival of the smartest and most resilient. This is where we are at in the current economic landscape. It has been reported that the impact of COVID-19 may drive us into a global recession if the current uncertainty continues beyond the second quarter of 2020.
Among the most vulnerable are the Small and Medium Enterprises (SMEs) that make up more than 99 percent of enterprises in Singapore. Many SMEs often face challenges like cashflow, resource and talent constraints. Due to their smaller setups, it is often tougher for SMEs to obtain financing for business. In turn, with less funding, SMEs have less budget to market their businesses or to make adjustments to their operations in order to weather adversities. A survey undertaken by the Singapore Business Federation and Experian, capturing business optimism for the second and third quarter in 2020 among Singapore’s SMEs, revealed that sentiments had sunk to a historical low (a reading of 48.3). The survey of 3,000 SMEs was conducted during the early onset of the outbreak between mid-January to late February 2020, which means that sentiments are likely to be even lower now.
The Singapore Government, through its supplementary budget packages, introduced some support measures to help small businesses with their struggles. These rescue packages may serve as a temporary relief for SMEs. However, as global economy indicators plunge and global trade continues to slump, SMEs need to do much more to get back on their feet and prepare for business recovery in the dawn of a post-COVID future.
Manage and tighten cashflow
The key to surviving uncertain times is to watch cashflow like a hawk. Businesses can run regular cashflow forecasts to estimate how much money is coming in and going out, discover where expenses can be reduced, know where resources are available and find ways to avoid negative cashflow. It is imperative that SMEs have these kinds of software tools to help them to gain insights into their business to act swiftly and address cashflow issues.
SMEs who are suffering from a cashflow issue should rethink their policy of selling on credit, especially if they are liable to incur goods and services tax (GST) on payments to suppliers. For businesses in industries that cannot avoid giving credit – for example, supplying legal services to corporate clients – they need to be meticulous and assertive in collecting payments by the due date.
Cost cutting, obviously, can be an effective way to manage cashflow, especially in the short-term. For instance, SMEs may want to explore the opportunity to run a more virtual business, which helps to reduce costs on things like travel and marketing events.
It is also prudent to watch spending daily during this time when business environments can change in an instant. We have all seen how many SMEs in non-essential industries had to suddenly close when the authorities put in the ‘Circuit Breaker’ measures to control further virus spread.
Finally, businesses should keep their ears to the ground for available business and SME working capital support. For instance, on 31 March, the Monetary Authority of Singapore and Enterprise Singapore introduced the MAS SGD Facility for ESG to provide SMEs with government-assisted bank loans with a lower interest rate of 0.1 percent per annum over two years.
Focus on customer experiences
Customers are likely feeling the pressure from the downturn as well. As much as possible, SMEs should not let the current situation affect the customer experience they offer. SME leaders need to ensure that they keep up on product and service quality – the very key to maintaining brand integrity and trust.
Faced with a trade-off between maintaining standards and meeting the customer price expectations, SMEs can communicate openly with their customers and convey why certain decisions were made. For instance, a hair salon owner who is affected by higher cost of hair treatment products may want to inform customers upfront on the price increase or offer a more cost-friendly alternative. If possible, offer customers the option to choose which product works best for them, rather than just force the price increase on customers who may decide to forgo brand loyalty for something more affordable.
Pivot to a similar business model with revenue-generating opportunities
SMEs may want to use this period to pivot towards a new mode of business which leverages their current products and expertise but in a more recession-resilient business.
A supermarket operator may want to evaluate the pros and cons of getting into the bulk-discount food supplier game. A car dealer can step up focus on repairs and second-hand sales rather than pushing new cars. An interior design firm can explore opportunities in home staging by making homes or interiors spaces look their best in a challenging market.
Resiliency will be key for SMEs. Shift your paradigm of what your business can turn into, so as to leverage purchase opportunity gaps, which could help SMEs to manage through this time of change.
Tap on technology and build business resilience
As workers worldwide shift to working from home amid the lockdowns, communication and collaboration tools have come into the forefront enabling millions to stay connected with their co-workers, customers and partners while remaining efficient and productive.
SMEs that were not technology ready before the sudden turn of events were caught out when they had to equip their workers to work from home in a matter of days during the early stages of the lockdown.
As early as 2018, the Infocomm Media Development Authority (IMDA) introduced GoCloud to help SMEs move to cloud-based applications. The initiative provides consultancy and training to equip SMEs with digital capabilities. Grants are also available, such as the Productivity Solutions Grant that provide up to 70 percent in funding for companies adopting IT solutions to enhance business processes.
SMEs need to also look for technology offerings which drive increased productivity of their staff, starting by eliminating time-wasting administrative work, especially in HR and Finance.
SMEs, like all other businesses, need to plan for business continuity and resilience and in the future, maintain the productivity of workers. Now is not too late to look to technology as businesses learn from current challenges and strengthen their organizations for future disruptions and risks.
Value most important assets
Where SMEs should adopt a longer-term view is on their most important assets – their people. Much of the Government’s rescue efforts have been designed to save jobs and SME leaders should explore all options before resorting to retrenching staff.
Business leaders will need to review their operations and actively explore how employees can provide more value. They may need to look into reallocating staff to support the more demanding areas of business, such as delivery or customer service. One interesting example we saw recently was when more than 1,000 ComfortDelGro taxi drivers were being onboarded and trained to support Redmart delivery services to meet the demand in online grocery orders.
At this time, visionary leaders will be thinking of creative ways to prepare their employees for a post-COVID-19 future where the workplace or even entire industries may be transformed.
Emerge from challenges in a stronger position
SME leaders are driven and motivated individuals, and many will come out of this period with an even stronger resolve to build their businesses. They may find it somewhat comforting that many businesses can do well in gloomy economies and some will not just survive but thrive during downturns.
Challenging business environments often present hidden opportunities. They allow business leaders to develop good habits and put their operations in stronger positions to grow when the economy recovers.
Take up the challenge – and become one of the many SMEs that will emerge from these tough times stronger than ever.