SIX THINGS SMALL AND MEDIUM SIZED ENTERPRISES (SMEs) CAN DO TO SURVIVE THE COVID 19 PANDEMIC AND THRIVE THEREAFTER

We carried out a poll during a training program for SMEs and the outcomes were pretty revealing. The three top most challenges for SMEs during these COVID times are Financials (cashflow) 40%, customer retention and loyalty 21% and a very close third was technology (17%). While the finances and liquidity would be expected to be top priority at the moment, SMEs appreciate that without a solid customer base there can be no business at all. SMEs are also struggling with how to leverage and harness the power of technology in their businesses. Interestingly, suppliers and taxes are the least of an SMEs concern at the moment. As you think through these “big ones” let me volunteer some thoughts around this that will ensure that an SME does not find itself in A “crunch” in the days ahead.

First, financial issues are usually cumulative. In other words, it is hardly ever true that a business has been auctioned at the first sign of inability to repay monies it owes. By the time a business is being auctioned it may have gone through several major financial salvage efforts before it is finally placed at the mercy of the auctioneer’s hammer. This tells me that prudent financial management is critical to surviving the “crunch” times. How much liquidity does the business maintain in its day to day operations? How much does it keep in reserve in terms of treasury management? What profit margins does the business ensure to remain afloat? It is said that an employee should have enough money to keep him or her afloat for six months after losing a job. How long should a small business be able to stay afloat without an income? These are interesting questions and the ideal answers would be; ensure you maintain sufficient liquidity in cash to fund your working capital, ensure you build up treasury reserves to grow your business by skimming off 10% of your earnings and  grow your treasury to ensure you are able to survive one year in a crisis. This of course is a tall order; however, I think you will agree with me that these measures would have helped at a time such as this.

Second, SMEs are worried about customer retention and loyalty. But do you even know who they are? My question is do you have a relationship with them? Do they know you? Or do you know each other. Many SMEs maintain a shallow walk in clientele whom they hope to come in each day, week or month with regular order. The operative word is “hope”. In a crisis the customers disappear leaving the business with stock that cannot move. It would be nice to study your customers and customer base and develop a relationship with them so you don’t have to worry about whether they will come back or not. Which brings me to my third reflection on investment in available technology.

The world is moving on in the tech world and a lot of technology for business improvement is now available to SMEs. But are we using it? Are we willing to adapt and change?  Maybe not quite as fast as we could or should. In crunch times you need to know who you can rely on, but that is difficult if you done have their contacts. A barber who conducts his business under a tree may have a cell phone and a stream of regular clients. Indeed, he knows each by name and can tell you the time of the month they come for a haircut. This information would be very useful for him to create a cashflow statement of projected earnings and earning times. However, three things limit him from doing this. First, he does not know what cashflow is, second, he does not keep a record of when each customer comes for a cut. And third, he does not have their contacts. All of these things would be easily accessible to him if he learned to use the low-cost smart phone he owns!

Finally, the survey revealed that the business that would survive and thrive after the COVID season would NOT be those that have rich cash reserves. Nor would the “lean, fit and mean” machines reign in the market. And neither will swashbuckling entrepreneurs willing to take business rule the roost. For the record all of these scored nil votes. The enterprises that will survive and thrive into the future have the following characteristics. First, they must remain flexible and adaptable. Second, they must be able to re-invent themselves and thirdly they must maintain a handle on market intelligence in order to respond to trends and remain relevant in their chosen markets.    

Allan Bukusi June 2020