SMEs Use These Strategies to Survive the Economic Crisis
The pandemic has led to a global economic slump. Small and medium businesses have been suffering in the current downturn. Companies are presently looking for foolproof strategies that can help them survive these difficult times. As the situation goes intense, it becomes difficult for companies to timely respond and protect their business.
According to Statista, 7 per cent respondents said that there was supply chain disruption or increase in supply cost which was a direct impact of Coronavirus on startups and SMEs. While 30 per cent respondents stated the Coronavirus has begotten lower demand for products and services. On the other hand, 41 per cent respondents believe that pandemic has led both the above-cited effects on the business.
According to KPMG, India's real GDP growth decelerated to its lowest in over six years in 3Q 2019-20 and the outbreak of the COVID-19 posed fresh challenges. Steps taken to contain its spread such as the nationwide lockdown have brought economic activity to a near standstill, with impacts on both consumption and investment.
The KPMG report also shows that real GDP growth of India is 5.0 in quarter 1 (Q1) and 4.5 in quarter 2 (Q2). During these uncertain times, companies need not worry much and use effective strategies to lessen impacts of adversity. Here are some of the things that small and medium enterprises (SMEs) can do to aptly respond to the economic crisis.
1. Main Competencies
Every business holds speciality in a major thing that attracts customers and bonds them with the company. Hence, companies working in diverse fields have to digress and focus on one thing. Once they ascertain a product that is relevant to the market, then it should begin working on it. The product has to be modified so that companies can have increased return on investment (ROI) on it.
By doing so, companies will be indulging in immediate risk but also becoming closer to bigger rewards. They have to scale up products and services that are in high demand during the epidemic. They need not spend money on producing products and services that have less market demand. They have to concentrate on offering products and services to the current customer base and entice other potential customers.
Another way of increasing revenue is introducing different versions of highly demanded products and services. The organisations can offer different editions of the same product and also, render additional benefits to selected customers in the network.
2. Spend on Marketing
During the economic slump, companies cut down their additional costs and thus, count marketing as an expense. However, this practice is wrong as it reduces a company's prominence in the market. While recessions become stressful, organisations have to strengthen their bonds with the customers. They have to stay buoyant and for that, keep spending money in marketing activities.
If small companies are operating offline and serving the immediate local markets, then it has to digitise and step into the bigger virtual market. With this, the small businesses will attract new customers and manage to create effective marketing strategies.
Thus, firms have to develop funds for marketing, enter into the online realm and impress customers. Here are some of the steps that they should follow so as to catch customers' attention:
- Perform email marketing and focus on knowledge enriched content
- Do follow up with previous customers who did not show much interest in the product. During the pandemic, they may need the product and approach these customers before competitors put an eye on them
- Strengthen bonds with old customers, who have lately ceased buying products. Companies can give attractive offers to them and meanwhile, try winning them again
- Use social media as an effective tool for marketing and thus, indulge netizens by carrying out small contests and games on the platform.
While reaching out to the customer base, organisations have to show that they genuinely care about the customers rather than selling their products and earning revenue. They have to work on reinforcing brand identity in the market and also, keep customers updated.
By doing this, customers always remember the company and prefer it over other players in the market.
3. Preserve Cash Flow
One of the major effects of the pandemic is reduced profit margin and cash flow. Almost every company faces this problem and thus, struggles to maintain buoyancy. In the modern times, banks are not the only source of money lending but fintech and other financial institutes have also emerged.
Seeing this, the companies should feel dejected and opt for these options to get financial help. Some of the other ways to increase liquidity are:
- Trim Unnecessary Expenses
Check current spending of the business and identify if the company can sustain without taking some plans, services and resources. If yes, then predict the course of business in that case. Invest that unused money in other important things and ascertain for cheap products as a replacement.
- Negotiate with Vendors
The companies should remember that everyone along with them are sailing the same boat and thus, approach the vendors with a similar mindset. They try negiotating with the vendors and cut down expenses. Ask vendors if they are offering a good price or start flexible payment options until the market normalises. They can introduce discounts on early payments or something relatable.
The companies have to follow the above-cited strategies in order to survive the pandemic. As time is passing by, it is vital for the organisations to take strict measures to control losses and tide over the seastorm.
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