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Business Tact to Win the Pandemic Gloom

Business Tact to Win the Pandemic Gloom

The social distancing and a nationwide lockdown imposed due to Covid-19 have caused businesses to experience a major setback. The worst hit in this exercise are the start-ups and small businesses that are undergoing low revenue generation and/or closure due to an eventual halt/slump on the sale of products and/or services. ICRA Limited, an Indian independent and professional investment information and credit rating agency, has predicted that India’s economy is likely to witness a sharp contraction of 5 % during FY 2020-21. [1]

ICRA forecasts that India’s growth rate in FY20-21 will fall to 2% from a range of 4.7%-5.2%, and that “the purchasing power erosion due to job losses or pay cuts and trickle-down effect of demand deferral will have a longer-lasting impact on some other sectors, especially where demand is discretionary in nature” [2]. In such a scenario, companies are pushed to look at options for operating differently to effectively manage the crisis and business leaders are driven to rethink strategies to not only survive the crisis but also thrive through the course.

During these testing times, experts suggest that businesses, especially start-ups, to conduct a proper assessment of their fixed and variable expenses as well as the actual revenues. This would give a clear picture of the company’s financial standings and help to strategize future progress in the unstable market. As the nations of the world could not gauge the span of the epidemic, planning short-term and long-term business policies for the “next 3 months/ 9 months/ 18 months” [3] is suggested. In the plan for 3 months an instant halt on variable expenditures like hiring, marketing, travel, etc. can help. “However, if the crisis continues for 9 months to a year, entrepreneurs will have to reconfigure their business strategy to reduce the variable expenses, renegotiate fixed expenses (rent, salaries, equipment lease payments, etc.), and focus only on the crucial essentials for survival” [3].

Notwithstanding, if the effect of the pandemic continues for 18 months or beyond, some serious reconsiderations would be required to revise and strategize sales revenue goals and product timelines along with a new operating plan. In all these cases entrepreneurs and leaders are advised to keep the communication transparent as much as possible with their investors and employees. [3]

When it comes to assimilating the capital to keep the business afloat, it is proposed that the businesses approach existing investors for additional funding because they are more likely to help out during this time, “since, they are already invested and have their skin in the game” [3]. Further, based on the precedents from the economic downfalls of the past, it is observed that the market has eventually bounced back after the end of an epidemic crisis. Maintaining a healthy relationship with contracted parties despite difficulties to pay out vendors/suppliers during the lockdown is another expert advice. Tendering sufficient notice in case of the expected delay in payments would help vendors, suppliers, and landlords to be prepared and avoid “bitterness in this already difficult time” [3].

As far as managing employees-related optimization, rather than layoffs, it would be fine if the primary option is to “cut the salaries of the higher paid exec/employees to try to retain the people who can least afford to lose their jobs employed” [3]. In the entire course of action, it would be great to keep the team actively engaged through video conferencing tools and “keep them updated about every development”. [3]. It would certainly “maintain high spirits within the team” and help them understand the general mood among the remote workforce.

Last but not the least, digital transformation has to be brought about by deploying the most relevant and trending digital options for the business. Companies should become more tech-savvy and quickly adapt to digital solutions to increase their speed and productivity. By establishing “an internal digital-factory with cross-functional teams dedicated to matching business priorities”, [4] the core business could be reinvented to capture new opportunities.

It is a popular notion that “some of the best initiatives are built in trying times” [4]. All existing businesses and upcoming business ventures are all in this together, and a strong crisis management strategy based on the expert views briefed above can help businesses to perform optimally even in the face of the odds that are stacked against them. In the process, such business management policies shall also protect the well-being of their people and their resources.

References:

  1. https://www.icraresearch.in/research/ViewResearchReport/3060
  2. https://www.nationalheraldindia.com/business/economy-likely-to-contract-by-5-in-fy21-icra
  3. https://economictimes.indiatimes.com/small-biz/hr-leadership/leadership/survival-strategies-for-businesses-during-covid-19-lockdown/articleshow/75371157.cms
  4. https://www.pwc.com/us/en/library/covid-19/crisis-management.html