Small businesses are at crossroads and they will either come out of this crisis stronger or perish
All the businesses - big and small - have been deeply hit by the outbreak of Covid-19 all on a sudden. Nobody could understand the very emergence of this outcome and so the time for preparation was impossible.
But the sudden and unprecedented presence of this sort of economic havoc has taught people the walks of life, especially the people who are involved in businesses.
Every businessperson, mainly the small and medium business owners, are in unimaginable anxiety and vulnerability owing to limited economic activities and business transactions in the past months.
Because of their unpreparedness and lack of management skills, they are now suffering from liquidity issues
The personal finance experts have always emphasized that a family should keep at least 3-6 months operational expenses for a rainy day so that they can meet the uncertainties if there is any.
It's equally important for the small and medium businesses to face the unwanted shocks to remain in business.
The Covid-19 pandemic has made around 70-80 percent people in the informal sectors jobless and a larger number of small and medium enterprises who were not availing bank credits are in dire straits.
The contribution of the small and medium enterprises to the GDP is 20.25 percent in Bangladesh, whereas it's 80 percent in India, 60 percent in China and 69.50 percent in Japan.
The sector accounts for 35.49 percent of the total employment in Bangladesh, according to a study conducted by the International Cooperation Organization for Small and Medium Enterprises in Asia (ICOSA), Japan.
The study found that Bangladesh has 17,384 micro enterprises, 15,666 small, 6,103 medium and 3,639 large scale enterprises, engaging a total of 5.02 million people.
The government has already taken some steps to rejuvenate this sector and if these initiatives get implemented appropriately, it may bring positive outcomes however patience is required to witness such changes.
Their adherence to business will add positive value and their fallout will create multiple negative consequences in the economy, affecting poverty, unemployment, contribution to GDP and causing social imbalance.
These entrepreneurs can take the following measures to protect themselves from this crises:
Making the business efficient
The entrepreneurs need to focus resolute attention to the business.
Corona has endowed them with a plenty of time to think and re-think on many issues of their business.
They can work to enhance business work flow, can concentrate on cost minimization, focus on increasing the skill sets of the employees, increase efficiency and ensure optimal utilization of resources.
Making the business lean and agile should be their main objective. Optimizing and making the team efficient should be their prime focus to sustain in this critical time.
It is needless to mention that one of the key challenges for small businesses is access to cash. Running any business is a risky endeavor; however, small businesses are particularly vulnerable.
According to USA federal government's Small Business Administration, only about half of small businesses last longer than five years.
Overhead costs such as rent, payroll, and utilities leave very little liquid cash to owners, especially in the early years.
Add to that the lack of revenue from slowing services and the shock stemming from the pandemic, and our entrepreneurs will be devastated.
In order to combat this short-term challenge, small business owners should advocate for efforts to provide immediate liquidity and keep businesses solvent.
They should now focus on the government stimulus the banks are now working on, arrange fund for business and make judicial use of it Maintaining a very low inventory of raw material and ready stock would be a cost saver now.
Updating themselves and bringing diversity in thinking
Businesses need to focus on capacity building of their employees, which is usually compromised. This will enable businesses to bring out the best from their employees.
The world is changing very fast and Covid 19 has changed the world in a drastic manner and the new world order will be very different.
The businesses need to change their mindset and business style in accordance to that. There is no alternative to updating their employees to cope with the new business trends of the post pandemic era. It's the time to think, rethink and take action. As we know, an ounce of prevention is worth a pound of cure.
In this pandemic, this wisdom is just as much for small business owners as it is for their stakeholders.
The businesses need to stand and survive and pass this rough patch of the economy.
A new sun will appear with its pompous light but till then the businesses need to retain with the wave.
Hopefully the small and medium businesses will sustain and start preparing themselves in a manner such that they will not b unprepared for any upcoming unwarranted business trauma.
Shaiful Hossain, is an economic analyst, is founder and CEO of Finpower Leadership International