Coping with COVID-19: How businesses can thrive in adversity
The reality of the coronavirus pandemic is upon us and the outbreak is on course to upend business operations, profitability and continuity, inducing a steep recession. There is hardly any business line that will escape the pandemic’s one-two punch (i.e. social disruption with economic consequences), and how they respond will have far-reaching implications for their survival. Below are a few tips to help businesses sail the brewing storm:
Defer new business ideas: A recession is probably not the best time to start a business. As such, any new business ideas may need to be put on hold. Continue to research new ideas, and look for new ways to improve them. You can even commence negotiations with potential investors/business partners.
Reduce redundant assets: Recessions are characterized by businesses pruning excess capacity in their business operations, to raise the average quality of their stock of capital (technological, physical and human). Selling of unused physical assets or letting go of underutilized employees are some of the strategies business can adopt to remain afloat. However, business owners should not make short-term cuts in their capital accumulation, in compromise of the business’ longer-run competitive ability, for the alleviation of current distress.
Review credit terms: This is necessary to improve the business’ cash flow, and can be achieved by reducing the average collection period from debtors and/or increasing the average payment to creditors. Businesses can also reduce their credit offers to clients, to reduce the risk of bankruptcy.
Inventory management: Inventory-dependent businesses can adopt a just-in-time (JIT) approach to inventory management in order to increase efficiency and decrease waste, by receiving goods only as they are needed in the production process. This reduces storage cost and ensures capital is not tied up in unused stock, at the expense of other business operations that may require financing. Managing your cash flow efficiently can make the difference between survival and failure.
Employee retention: Look beyond layoffs. Laying off some employees may seem to be the fastest way to ease cost pressure in the short-term, the long-term opportunity cost will be costly post-recession. Hiring and training new staff is quite expensive and businesses who cut back on staff strength could be forced to bear that cost once the recession-tide calms. Rather businesses can reduce work hours, introduce furloughs or negotiate to reduce compensation.
Ensure employee safety: Employee safety should hold tremendous importance for every business. Employees who feel safe are likely to be more productive than employees who have fears and anxieties or those who may become sick. Also, a business’ reputation could be tainted if an employee contracts the virus due to the employer’s negligence. Therefore, if possible, businesses should enable remote work as the pandemic persists.
Improve your customer service: The phrase “customer is king” is true now more than ever, as such businesses should hold on to their best clients. Take care of your clients’ needs – as much as you possibly can – and stay in close contact with them. Offer them special discounts and freebies to keep them on your side of the fence, and stave off competition.
Increase market presence & visibility: Be strategic and creative with your marketing and advertising. Take advantage of your competition relenting (if they are). Go out there and outshine your competition.
Keep expenses on a tight leash: Cost containment is key at this time. It is important to incur expenses, only when they are absolutely necessary. However, it is important to ensure that the deferred spending won’t harm the business later.
Take advantage of support programs: Both the government and the Central Bank of Nigeria (CBN) have made funds and other concessions available to businesses that may be adversely impacted by the outbreak, if you do qualify for any, do not hesitate to take full advantage of them. You, most certainly, need them to ease pressure on your finances.
Every business will experience their own unique challenges in the coming weeks, and businesses should be preparing to face the challenges. A recession is temporary and businesses can weather the impending economic stress through deft financial management. Business owners should ensure that they stabilize their businesses, and ensure that it has the liquidity necessary to weather the crisis.
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