The Competence Cauldron

The Morning After-Survival Strategies for Small Business

Ravi Kumar Pillai

Ravi Kumar Pillai

As the Nation prepares for a phased move out of the lockdown restrictions, most small businesses are in a state of confusion, bordering on panic, as to their next moves in the long haul back to operational normalcy. A crisis presents an opportunity to reset the way of working and rewind our emotional resilience.

The slogan ‘Break the Chain” applies not just to the need for social distancing to block the trail of contagion. The abrupt hibernation of the bulk of economic activities and their ensuing phased revival should be seen as a rare opportunity to break free from the ingrained habits and inhibitive workstyles. Most work habits are acquired by years of practicing, very often the wrong or unproductive methods and behaviours. “It has always been that way”, we would reassure ourselves when in self-doubt as to why we do what we do and why that way. I have found excellent drivers in India failing to get through basic driving tests upon moving to an overseas location. That is because over the years they have reinforced wrong driving habits which have become their ‘unconscious competence” or spontaneous response, very difficult to break away from. Just the same way is our affinity to crude, unhygienic social habits, picked up and internalised since childhood. The lockdown provides an opportunity to shift consciously to a new set of public behaviours that would foster healthier and supportive work culture.

The moot question is where do we want to get back to, when the dust begins to settle and the sky sweeps aside the dark clouds? To the legacy ‘normal’ or a ‘new normal’? We are today at transformational crossroads. We have a choice - to treat the crisis that caught us off-guard as a bad dream and get back to our chalta hai culture or to define and migrate to a new script and a beefed-up path to the future. History is replete with examples of both behaviours when exiting a crisis situation. Most players regress to the values, attitudes and behaviours they were comfortable with; a few who dare to change and adapt to new opportunities and challenges go on to be the winners. Here the Governments have a key responsibility to aid and encourage social transformation to a whole new civic culture.

Psychologists say that it takes anywhere between 18 and 254 days for a person to form a new habit and an average of 66 days for a new behaviour to become second nature. Habit formation results from conscious unlearning of old behaviours and learning of new ones. Consistency in follow through is a necessary condition for reinforcing the desirable changes in behaviour. At the individual level, it takes deliberate effort to shift to and stay with positive and enabling social behaviour. Not just to follow but to encourage others to conform to the new ways is a responsibility for us in the exit phase from lockdown.

Business holds the key not only to economic revival but also to the much-needed social transformation. The bulk of activities that support, sustain and grow the economy are in the private enterprise domain. While big business has the infrastructure, resources and talent to weather the storm, it is the Small and Medium Business (SMB) that really feels the heat of the current disruption.

Being the prime mover of employment and considering the spread and penetration of SMBs, they are of high strategic significance for the revival of the economy post the lockdown. Irrespective of the size and contents of the expected second tranche of economic package by the Government, the responsibility for pursuing the post lockdown revival would rest significantly with individual businesses themselves.

Just as no two individuals are identical in behaviours and values, no two businesses are congruent too. Each business entity’s response to the crisis needs to be customised to its own paradigm of constraints, challenges, capabilities and resources. There just cannot be a one-size-fits-all solution to the woes of small business. While prescriptive solutions can’t address all the challenges of revival and stabilisation of SMBs, there are broad action areas that small business owners and start-up entrepreneurs need to focus on priority basis as they resume and scale up operations. Let us look at five core themes for the revival agenda of SMBs.

Firstly, at the outset even as the firm-level revival strategy is put together, there is a need to comprehend the big picture of the economy, industry and the market. At this stage it is important not to be overwhelmed by the challenges and constraints. It is a time for composure and self-regulation. Only upon assessing the ‘as-is’ condition with objectivity would we be able to build a robust survival and renewal plan for the business. One should not rush into decisions based on partial understanding of the ground realities. Even in a critical situation, taking extra effort to gather all relevant facts and analysing them from a medium to long term perspective would provide a strong foundation to the revival strategy.

Secondly, having comprehended the big picture of the business and the external and internal factors that would influence the revival, one needs to take a hard look at the financial health of the business. The analysis should cover the core parameters of financial robustness such as costs, revenue and cash flow.

Following a realistic and dispassionate assessment of the financial state of the business, you are ready to focus on the most critical aspect of business revival strategy, namely a deep dive into your cost management practices. Especially in a crisis situation with implicit uncertainties, looking at each major cost element and identifying the scope for potential saving are your top priority. As far as finance goes, one rupee saved in cost is equal to one rupee earned. In fact, in a tough situation, savings are even more strategic than revenue stream resurrection. There are possibilities of “low hanging fruits” in any business due to the relatively less attention in normal times on cost optimisation. These are opportunities that can be tapped with relative ease. Attempt to trim and squeeze the cost profile would result in tangible short-term gains that are of immense value in the salvage phase post the crisis.

As for capital costs that were planned or in the pipeline, you could identify those which could be postponed or scaled down so as to result in an improved cash flow. All three major heads of cash flow such as operating expenses, investments, and financing of capital projects should be looked at to prioritise and reschedule the items to ease the business strain.

Operating expenses are the first port of call in cost optimisation. Wages, rent, consumables, work-in-progress, utilities, connectivity and communication are some of the cost items you can take a hard look at for possible savings. If there is scope to reduce the cost and shift to lower cost options that can be tried . If not, you can explore the possibility of deferment to tide over tight cash flow situations. Another aspect is to modify or introduce performance pay so that the productivity of wage cost goes up. Voluntary wage cuts or freeze, negotiating slashing, freezing or deferring rental outflow and enforced savings on administrative overheads such as travel, meetings and utilities are possible strategies for operating cost management.

Third area of focus in crisis-time financial management is the attention needed on receivables. In a business, somebody’s cost is another’s revenue, hence the receivables scenario in a crisis situation is indeed grim with collections being a major causality. Care should be taken to track and recover dues. Less reliance on cash transactions and encouraging the movement to digital transactions would be a good medium to long-term strategy for small businesses. This is particularly true of consumer marketing business involving channel sales and distribution where the last-mile strains are bound to be high in times of financial downturn. Digitalisation captures collections on real-time and plugs scope for diversions and delays in remittances. Cost saving can also result from improvisations in operating practices. Outsourcing, resource-sharing among peer entities and activating online channels for market access could be evaluated from a cost optimisation perspective.

Fourthly, the post lockdown renewal is an opportunity to review the structure, systems and processes of your business. Of all the triggers for change and adaptation, the most powerful is the survival instinct. When survival is at stake the urge for reform and restructure assumes an uncharacteristic readiness.

This is especially true of small business because in the normal course most small enterprises are too busy firefighting and ensuring operational routines. The smarter SMBs should explore possibilities to cut the flab, enhance the focus on execution and reinforce the culture, communication and process resilience. An objective look at the operating model, business processes as well as IT systems and platforms would help them to reboot for the challenges ahead. In small business, a flat organisation structure and simplified processes make enormous sense. In addition to enhancing operating efficiency, the flattening of the structure would also result in optimising staff cost.

Fifthly, the human element of the business deserves a holistic review. Empathy is at the core of business revival. Employees, customers, supply chain partners and other stakeholders are all under stress and strain as a result of crisis fallout. Hence treating everyone with sensitivity and understanding would result in cascading of mutuality and positivity. Review and reinforcement of the culture, competencies and customer experience aspects of the business should receive careful consideration during the transition to post-lockdown scenario. Benchmarking the process resilience and agility to the competitor’s best practices, scaling up digitalisation and reviewing the compensation structure to incorporate performance-based pay are some of the initiatives that would produce results in the near to medium term.

Here is a chance for breakout, renewal and refocusing that small businesses should grab. Such once-in-a-life-time opportunities for business renewal don't present itself often.

Crisis and opportunity are indeed two sides of the same coin. Take the initiative and flip the coin to see the possibilities waiting to be tapped in the wake of the lockdown.

*Ravi Kumar Pillai is a practising strategy consultant, trainer, coach and mentor based in Trivandrum. He can be contacted at ravikumarpillai9@gmail.com


The facts and views expressed in the article are that of the author