COVID-19 pandemic across the globe is no longer a news. In fact, news is not complete without mentioning COVID-19 or Coronavirus. Mainly, Coronavirus has proved to be a threat to mankind all over the world, whether you live in under-developed, developing or developed country.

Apart from many lives that have been lost to this pandemic, the economic effects of COVID-19 is unimaginable. There is no doubt that many SMEs were unable to generate revenue all through the period of lockdown. But unfortunately, there are certain costs that are fixed. That is, whether you operated or not, businesses still incurred certain costs. Examples of such costs are rent, salaries and loan interest. Now that the lockdown is being eased out gradually, it is high time that SMEs adopted some strategies that can help them overcome the challenges at hand.

The two major challenges we shall be focusing here are; inability of SMEs to generate revenue and the problem of rising costs.

Revenue generation

Every business is set up to either sell products or services. At times, a business can sell both products and services. Of course, before a business can sell its products or services, certain infrastructure must be in place. For instance, you need certain resources such as human, materials and financial resources. In most cases, you need to invest in these resources before you generate revenue. So, what happen when a business could not generate revenue? Well, employees may not know the implications. But if you are a business owner, I will assume you already know the answer.

The period of lockdown actually denied businesses from generating revenue. Besides, some of the sales made on credit are still outstanding because customers also did not open. If your customers didn’t open for business, there is every possibility that they couldn’t process your invoices for payment. The exception may be few businesses that get retainers fee automatically every month. So, inability to generate sales and getting your money from your customers will definitely create liquidity gap. Even after the lockdown is over, it will take some time for businesses to cover this liquidity gap. And we all know that cash is lifeblood of any business. A business can survive for some time if it couldn’t report profitability. In fact, there are businesses that couldn’t report profits in their first three years and still survived. But this is not the case with cash. If a business is having liquidity problem, it is just a matter of time, the business will collapse.

Since cash is very important to business, the question is how can businesses generate cash? When a business runs out of cash, there is temptation for the owner to run to the bank to get a loan. This can be like a life line but it could be dangerous at the same time. When a crawling business resorts to getting loans to survive, such businesses may be digging its own grave.

What should you do then? Well, it is actually safer to focus on how to generate revenue. Possibly, this COVID-19 can also turn to be an advantage if you can look within. If you are selling products, you may consider offering complementary services. In most cases, services don’t require much costs. While you may be getting just about twenty percent margin on your products, you may be getting as high as ninety percent margin on your services. For example, if you sell projectors, you can consider renting as a service.

Secondly, you shouldn’t be thirsty in the midst of water. If you are having a huge receivables in your accounts, it may be the time for you to chase after your customers. Of course, we know that things are generally tight for businesses. But the truth is that, if you don’t disturb your customers, they may as well assume that you are comfortable. You don’t need to harass them. But putting calls across to them on a regular basis to remind them about their debts may make a lot of difference. No one likes to be disturbed. I can assure you that if the customers have some cash, you will be among his priority.

Challenge of Rising Costs

Hmmm! Costs can sink a business. I feel for businesses especially during this period. As a business owner, it could be painful to pay rent for office you don’t use for a month. It could be annoying paying staff that didn’t contribute anything all through the month. What of the interest you need to pay on loans you got from lenders? The list can go on and on.

In this post lockdown, I will be quick to point out that it can’t be business as usual. If you think contrary, you may soon be out of business. Every business needs to adopt cost control strategies. But unfortunately, in an attempt to control costs, some of the businesses usually end up creating bigger problems. The reason is that, some businesses don’t know how to go about it. What they do is to just cut costs. You need to understand that cost cutting is not synonymous to cost control. You must have heard a saying, “Penny wise, Pound foolish”. Regrettably, this is what some businesses do. They cut costs only to incur more costs at the end. On the other hand, some cut costs, which in turn, jeopardize their revenue generating ability.

Cost control is not an exercise to do hastily. You must be tactical about it and it must be done strategically. A good cost control strategy will not only save you costs in the interim, it will help you save costs in the long run.

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Source: https://www.otnconsultinglimited.com/index.php/list-of-resources/92-overcoming-covid-19-effects