The year 2020 started with a lot of expectations for most businesses. Plans were put in place, goals or targets were set, budgets were prepared, reviewed and agreed upon by management. Infact, most businesses had plans on how they wanted to penetrate their respective industry and win new customers in order to meet their revenue or sales target. There must have been a general believe that this would be the best year for our businesses.
However, with the event of the past three months, most businesses have been forced to re-strategise. There is no doubt that the Pandemic (COVID 19) has affected and is still affecting most small businesses around the world.
In Nigeria, the situation is even more compounded by the increasing inflation rate and the exchange rate volatility. All these put together is having a negative effect on most small businesses. The question most business owners are asking is how to survive this period especially as revenue is not very certain and liquidity is drying up.
As a business owner, some decisions need to be taken some of which might be very difficult but in the same vein, you have to think about what the business needs to do to survive. Here are a few steps that can be taken in order to survive this period.
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Cashflow planing: Cash is very important in any business this is because you need cash to do or remain in business. It is therefore important to plan your cashflow as a business. Planning your cashflow will entail that you establish your current cash position (i.e where you are presently in terms of liquidity) and also doing a cashflow forecast. In doing the cashflow forecast, have different scenarios (You can have a best case, good case and a worst case scenario) but in your forecast, you have to be as realistic as possible. In planning your cashflow as a business, you can decide to allocate a certain percentage of your margin (i.e Grossprofit) to take care of your operating expense. You should also review your cashflow on a weekly basis. Always compare your planned cashflow with the actual.
Cost Cutting: This is the time to cut down on some unnecessary expenses as a business. Do an analysis of your monthly expense before the pandemic and look at areas where you can reduce cost. One thing that this Pandemic has taught us is that we don’t need to always meet physically before we are able to carry out our work and also transact business. In this vein, the business can take a decision that Staff should work from home on a certain day of the week. With this, the business reduces the cost spent on Fuel/ diesel or Electricity. Also with the volatility of exchange rates, it will be better to source for local suppliers for your business.
Reduce Payroll Cost: This is one area most businesses tend to look at when faced with a downtime. The decision to reduce payroll cost may be very difficult to make by many business owners as this will surely affect some employees negatively as it will involve laying off of some staff and also cutting the Salaries of others or those left. The business can also take decisions around telling Staff to go on compulsory leave without pay instead of outrightly laying off its Staff. Whichever strategy the business chooses to apply regarding payroll cost, it should be one that is best for the business given the current situation.
Investment Decisions: During this period, it might be very difficult to think about investing. However, if the business plans its cash flow properly, there can still be provision for some investment and take advantage of the interest rate or return on investment instead of having idle cash. Before considering any investment opportunities, it is better to look at the return on investment, the issuer and time frame. The business owner might want to consider short term investment for now and continue to roll over the investment.
In conclusion, with the new norm that the world is now faced with, it is very important for business owners to prioritise business survival strategy. There is a need to go back to the drawing board and review all plans and targets so as to conform with current economic and social realities. Now that most activities are done virtually, it is time to create an increased online presence of your business to reach your customers.
