THRIVING IN HARD TIMES: COVID-19 IMPACT ON NIGERIAN SMEs AND START UPS
The world was hit by a huge blow in December 2019, when a cluster of pneumonia cases from an unknown virus surfaced in Wuhan, China. Further laboratory findings named the disease Coronavirus disease 2019 (abbreviated as COVID-19); this disease was described as an infectious disease that is caused by severe acute respiratory syndrome coronavirus 2. The COVID-19 outbreak has since spread to more than 198 countries and territories in every continent.
Asides the health implications, the weather of uncertainty has hit the economies of the world, crippling major financial and economic activities, pushing not only the feeble but also the mighty economies into recession, leaving no room for discrepancy in power and status. Many businesses, especially in Sub-Saharan Africa are confronted by many issues ranging from staff physical and emotional well-being, to their companies’ sales, supply activities and salary payment.
Since the pandemic begun, Nigeria’s Central Bank has announced a 50 billion Naira (US$ 128.5 million) targeted credit facility “to support households and micro, small and medium enterprises affected by the COVID-19 pandemic”. The House of Representatives on March 24, 2020 passed the Emergency Economic Stimulus Bill, to provide a 50 percent tax rebate for employers and business owners who agree to not make staff cuts in 2020. Though the bill, if it goes into effect, may prevent job losses in the formal sector, it contains no provisions for informal workers.
In the month of March 2020, Work in Progress sent out a survey to understand the challenges and responsibilities SMEs and Start-ups face in this Covid-19 Pandemic. We wanted to check-in with the supported Startups & SMEs under the project, to know how their businesses are faring and what kind of support they may require. From the survey responses, 71.43% of businesses are experiencing market decline, raw materials supplies have declined by 57.16%, 57.14% are experiencing challenges with importation, and about 47.62% of the companies have stopped all forms of production. One might wonder what the forthcoming months will bring and the magnitude of economic issues that would emerge across the world. To this end, we have compiled some strategies that will serve as a thriving measure for startups and SMEs during the pandemic.
- Cost Reduction
Seek rent concessions – Rents take a huge chunk of budgets. Though there might be certain uncertainties, find a win-win situation with your landlord if you run a physical space. You could try asking for deferred payments with interest or any other option that will not impact your budget once the pandemic is over. Whatever you choose to do, it doesn’t hurt to try and negotiate.
Budget cut - As crazy as it sounds, you must make “big cuts”. Budget a 40% revenue reduction and the costs necessary to be able to stay profitable or break-even. Another “not so pleasant” option is taking pay cuts across the board. It’s better to keep great employees at a lower salary than lay them off and never see them again. However, give stipends that will serve as palliative for them.
- Revenue Generation
Stay in touch with your workers – Teleworking is the best option to cut recurrent costs and ensure staff safety. Create weekly meetings/hangouts to check in with your workers on virtual platforms like Zoom, Google Hangouts, etc. This will reduce loss in staff strength to COVID-19, and keep your workers active.
Turn your expertise to money – You can organize paid webinars to share your expertise at large. You can even organize DIY online workshops where other business owners and consumers can learn from you for a fee. This will be another stream of income.
Pre-sell to existing customers – When in need of cash, pre-sell your products and services. It might be tough to get customers to buy, especially at times like this, however, you can give them irresistible offers such as discounts, added value or private coaching on product or service use.
Home deliveries – Clients might be reluctant to move around due to the COVID-19 disease. If you’re making products and selling at your local store, you can start delivering the products yourself or make use of delivery bikes. Extra money for delivery, more cash flows in.
Up your skills - It is important to stay competitive in today’s marketplace, hence, your business has to be adaptive, and ever-changing. Learn new skills, obtain new knowledge that will improve your business. New skills = more income streams.
Innovate – Create new products that are in serious need. For instance, Pad Up, a SME under Work in Progress recently added the production of face masks to the usual re-usable pads they produce. The company has since then reported a huge increase in revenue. Look around and identify the needs!
Guard your mental health - Being mentally healthy has been proven to help promotes positive feelings at work. Taking care of your mental health helps you to remain strong, healthy, and positive so you are able to carry on in spite of inevitable problems. Dear entrepreneur, breathe!
Identify your cash cow - Re-work your business and production model. Identify the products or services that have fetched higher profits, improve on them and make more money.
N/B: Pandemics are bad for businesses, however, there are opportunities amid chaos. The key to thriving is to brainstorm creative ideas and act on them. Choose whatever is appliable in your context. And above all, remain calm. You can do this!
Compiled by: Dolapo Olaniyan
Sourced from: forbes.com; hbr.org; nextbillion,net; nairametrics.com