Coronavirus pandemic: 7 ways to keep your business thriving in tough economic conditions
It is crucial for business owners to prepare a survival kit for their businesses to cushion the impact of the economic slowdown.
March 30, 2020 / 03:50 PM IST
The outbreak of COVID-19 world over has impacted India as well, forcing the country to go under lockdown, affecting normal life and the economy. Businesses, especially the micro, small and medium enterprises (MSMEs), are severely hit due to a halt in their manufacturing and production operations.
Thanks to the complete shutdown across the country, MSMEs that are labour intensive and with major export and import operations, are finding it difficult to keep up with the present situation. According to a survey by SOLV, 90 percent of the MSMEs interviewed are negatively affected by the coronavirus pandemic.
The survey further stated that the MSMEs lost around 35 percent of their businesses, and if the current situation prevailed for a longer duration, many businesses won’t be able to survive for more than three months.
Since MSMEs are dubbed as the backbone of India’s economy, if the lockdown period is extended, the losses could go up to lakhs of crores, hurting India’s GDP majorly.
Against this backdrop, it is crucial for business owners to prepare a survival kit for their businesses to cushion the impact of the economic slowdown. If you are an MSME owner, here’s what you can do to keep your business thriving in tough economic conditions:
- Monitor your cash flows: It is important to protect your cash flow during an economic downturn. You can keep your business running as long as you have the cash flowing. Thus, review your company’s policies, put a stop on not-so-urgent expenditure, identify the areas where you can trim costs, review inventory, keep an eye on your payments and prepare cash flow projections for the following months.
- Get aggressive on receivables: During tough times, you have to take strict measures for the benefit of your business. In case you are yet to receive huge sums of money from your customers, follow up with them regularly for payments. Let them know your financial position and accordingly chart out a plan to receive the outstanding payments.
- Focus on your strengths: To keep your business thriving, you should focus on your strengths, double up on the communication with your existing customers and partners, and get aggressive in the market. You should re-examine your marketing strategy and stress on quality products and services.
- Talk to existing lenders: If you think you will be unable to pay to your lenders for a certain time period, talk to them. You must strengthen your relationship with the lenders, give them a clear picture of your current position and either seek more time to re-pay the loan or ask them to re-structure it.
- Get a Line of Credit: You can approach banks for a line of credit to overcome any shortfall in the cash flow and work out a maximum limit, loan tenure and moratorium period. To increase the confidence of the bank, you can showcase your business’ creditworthiness through CIBIL Rank and Company Credit Report (CCR) by TransUnion CIBIL and even negotiate on lower interest rate. The CIBIL Rank and CCR give lenders unbiased insights about your business’ credit behaviour to evaluate the business more objectively, which may lead to lower interest rates and faster loan approvals. The closer an MSME is to rank 1, the better are its chances of securing a loan. It is noteworthy that 70 percent of all companies that have been sanctioned loans had a CIBIL Rank between 1 and 4.The CIBIL Rank, thus, helps a lender in making prudent decisions when it comes to providing faster credit to your business. Hence, the CIBIL Rank and CCR can be a saviour for your business, especially during a slowdown.
- Look out for government announcements: In times of distress, the government announces several measures such as a moratorium on loans, deferment on interest on working capital, ease of cash credit, overdraft, etc., to safeguard businesses. Look out for such announcements and take action.
- Diversification: Since tough times will be for your competitors as well, look for areas where you can launch new initiatives and diversify your business. You can introduce new products and services and edge out your competitors. Seek out new opportunities aggressively and re-align your sales team to make the most of the situation.
While tough economic conditions can certainly take a toll on your business’ health, you can keep your company thriving by taking proactive measures, becoming leaner and cost-effective. This is a partnered post.