It has been around seven months since the time, the lockdown was first implemented in India, to control the spread of the Coronavirus. And since then, small businesses have had it very rough. Falling consumer demand, supply-chain disruptions, and lockdown restrictions have significantly squeezed their bottom line, apart from ensuring employee safety and restoring production lines. According to the Institute of Competitiveness, 71.31% of small businesses in India faced a liquidity crisis and reduced cash flows, with the manufacturing sector being the worst hit. As a small business, surviving during the pandemic is critical. Here is a 6-point small business survival plan for dealing with the pandemic.
1. Secure liquidity and ensure access to capital
Liquidity is at the core of your survival strategy when income disappears. You should first get an overview of your cash flow situation. Measures to improve liquidity include opening up communication lines with all stakeholders, cost-cutting, shifting distribution lines online, optimising your cash reserves and reallocating work to staff. With these options in mind, you can then figure out how long your survival runway is and how far will your cash position take you.
2. Provide credits over refunds
Providing credit over refunds is a savvy way for small businesses to tide over the pandemic. If you are already cash strapped and facing a huge liquidity crunch, you are in survival mode. Providing credits to customers is a good way to survive dormant conditions. You can also use non refundable deposits to pay salaries, operational expenditures and keep your venture running. One way to make credits attractive to your customers is to give it a 20% mark-up and tell your customers that their credits would help several employee families.
3. Extend payment terms and renegotiate loan terms
Another way small business owners can tide over the pandemic crisis is to extend payment terms to suppliers and renegotiate loan terms with banks and lenders. In this context, a top priority for CFOs is having sound working capital as it ensures solvency of the small business, goodwill and ensures smooth business operations. This can be done by incorporating flexibility while calculating payment due dates, setting a beneficial payment cycle, enabling the implementation of supply chain finance, swift billing, collection calling and dunning, reducing credit term and factoring.
4. Be aware of government initiatives
Engaging with policymakers and being aware of governmental initiatives and support for small businesses is another way for you to stay on top of your finances during the pandemic. Small business owners can influence policy making through advocacy programmes and through associations. You should also keep pace with government initiatives and support for small businesses via loans at attractive interest rates through NBFCs and Fintech lending platforms.
5. Strengthen existing relationships cost-effectively
The biggest power of a small business lies in maintaining customer relationships even during tough times. This can help you survive even if you cannot do much to reach out to new customers. Sending personalised WhatsApp messages or emails can be a smart way to go about strengthening such relationships. You can also promote your best products through such channels and take up orders easily. Making calls or texting can help too. These communication or marketing methods are inexpensive and require minimal effort.
6. Use a B2B platform
As a small business owner, using B2B marketplaces is an efficient way to market your products and services and find buyers. Through B2B marketplaces, you can also gain access to new suppliers offering products at better prices, thereby improving your margins. B2B platforms also offer several other advantages like credit, inventory management, timely payments and hassle-free logistics.
To wrap up, the 6 pointers mentioned above can help you maintain a healthy cash flow, boost brand visibility, acquire leads and improve your revenue stream. Even if it takes some time to implement all the tips; you can pave the way for better days ahead, despite the pandemic.