The COVID-19 pandemic has hit the global economy very hard. The necessity of strict lockdowns has impacted the global business community adversely. The worst-hit are the small-scale businesses that make up the lifeline of any nation’s economy. Supply chain disruption, forced closures, staff getting infected and loss of business are the major effects of COVID-19 on small businesses.
10 Tips for Small-Scale Business
Now that the lockdowns have been relaxed and economic activities are picking up even though the pandemic has not ended, it is important for any small-scale business to mitigate risks and gradually find its footing. Below are the 10 tips for a small-scale business to grow faster.
An assessment of its financial health is a basic requirement for a small-scale business in order to translate the financial damage caused to the business by the pandemic into hard numbers. The various parameters such as debts, outstanding payments, cash flow, sales, profits, and others must be analyzed thoroughly.
The hard figures should be compared with that of previous years in order to get a clear picture of the damage caused by the pandemic. The damage may be more or even less than expectations. Altogether, a clear picture of the finances enables the business owners to plan better for rebuilding.
Credit management is another important task for a small-scale business in the post-Covid world. The government has already provided the facility to SMEs to restructure their loans. To this end, the business can ask the bank for a moratorium on EMI payments or reduce the monthly payments by increasing the tenure of the loan.
Fall in revenues makes fulfilling debt obligations a very difficult task for a small-scale business. In this scenario, the above-mentioned steps give some breathing space to the businesses when it comes to managing debts.
Incoming cash flow is crucial for any small-scale business to rebuild its operations in the post-Covid world. To this end, it is necessary to clear outstanding payments from the debtors. Drawing a list of debtors and asking for payments from them is the first step in this direction. The facility to make periodic payments can be given to debtors who cannot pay the entire amount at one go. The goal should be to recover as much debt amounts as possible.
It must also be ensured that new debtors are not added in significant numbers. To this end, the business should encourage customers to pay the entire amount upfront at the point of purchase by the way of discounts and incentives.
Reduce Cash Outflows
A small-scale business should seek to reduce cash flows by cutting down on unnecessary expenses and scaling down the infrastructure. A review of the expenditures enables the business owner to identify the wasteful expenditures and eliminate them.
Renegotiating contracts is also an important strategy to reduce cash outflows. For example, the rent contract with the landlord can be renegotiated to get some benefits such as reduction in the rent amount, rent-free period, rent deferment, or service charge reduction.
Employee Centric Strategies
Schemes benefiting employees should be implemented by any small-scale business to compensate for increased working hours and reduced pay. Group Health Insurance is a good employee benefit that can be considered by the business owner. Medical expenses can financially cripple any individual. In this scenario, a comprehensive group health insurance plan keeps the employees free from the tension of meeting unexpected medical expenses. The premiums of group health insurance plans are lower as compared to individual health insurance and the business also gets a tax deduction on the premium.
It must be ensured that the employees have all the equipment and tools to communicate virtually by the way of video conferencing, emails, and other digital means. This ensures that the whole staff is connected irrespective of their locations. In the uncertain times of COVID-19, the digital communication tools ensure that the employees can work from home easily in the event of another lockdown. Online meetings must be encouraged.
Change Business Model
The business model of any small-scale business should now include online selling as well. Online selling has picked up pace due to the pandemic because more people are preferring to stay at home and reduce contact with others as much as possible and are using online stores to make purchases.
Businesses especially the SMEs which have not ventured into online selling are set to lose customers and find it difficult to attract new ones because customers are not likely to abandon online purchasing in the future. Thus, a small-scale business should adapt to the new normal and invest in the required infrastructure and supply chain for online selling. Alternatively, small-scale businesses can sell their products to online retail giants.
Finance for Working Capital
Having enough working capital to purchase new inventory or invest in new technology or hire or train the staff is necessary for any small-scale business. To this end, an MSME loan can be taken or the overdraft limit facility with the lender can be increased. Adequate working capital helps the business in grabbing new opportunities and expanding.
Prudent Stock Management
It is not advisable for any small-scale business to accumulate inventory in the current times. Thus, the first step should be to reduce inventory until the demands pick up in the future. The products that are more likely to be purchased by the customers in the post-COVID-19 world should be stocked in more numbers. The products which are in danger of becoming dead stock should be sold off as soon as possible by the way of discounts and other schemes.
Working in A Time-Bound Manner
Any small-scale business must adopt a step-by-step process for rebuilding with a specific timeline for each task as per its importance. The first step can be securing capital for your business operations and then moving to other aspects such as training or hiring employees, stocking inventory, etc.
The backup plan should be ready for a small-scale business to avoid damaging impacts of another Covid wave or other emergencies. It can be in the form of liquid cash savings, digital infrastructure to enable work from home, or a lean budget to cut operating costs.