The Covid pandemic has changed the landscape for business operations and the Small and Medium Enterprises (SMEs) are especially hard hit with the difficulties of getting their products off the grounds.
Covid restrictions have put them further into debt which in turn affects the country’s economy as SMEs are considered the backbone of any economy.
 Dr. Dilesha Perera |
The challenges industries face are varied but in general, all of them face cost and finance challenges, and disruption of SME activities amid the pandemic, said Dr. Dilesha Perera, a business consultant whose research interests are consumer behaviour, branding and SME.
“Managing cash flows with the cost involved in changing business strategies and offering alternative products and services to adapt to the new normal, paying salaries, rent, and bank interests as usual and collections from debtors given the reduction in revenue due to the pandemic are major challenges,” Perera said.
Banks also consider the SMEs to be a high risk to lend in a pandemic and provide less support for them to manage cash flows.
The lack of retained earnings to fund the shortfall to continue the business as usual is another concern. The disruption of the supply chain, price hikes in raw material and delays in production may further worsen the situation and result in high cost, Dr. Perera added.
Other major challenges are raw material and labour shortages, depressed demand for most goods and services, and declining market share in certain industries, she said.
Overcoming challenges
While the SMEs have a tough time in the day-to-day running of businesses, they have the additional burden of competing with large businesses which have better apparatus and marketing platforms and use all means to bring back their volumes and margins, according to Dr. Perera. This would no doubt sideline smaller businesses.
“The SMEs need to get their act together to reclaim their space by winning back a significant market share. They need to think out of the box and rediscover themselves in unprecedented ways. They need to develop creativity and build resilience that might help SMEs in sailing through the toughest crisis of their times,” Perera said.
To do this, harnessing technology is a major step for SMEs to survive and cope with the consequences of the pandemic.
According to Dr. Perera, Facebook and Instagram are the best platforms for businesses to reach potential untapped markets. Twitter, TikTok and Pinterest can also help a business gain and improve interactions with their followers, depending on the industry and product or service offering.
“Most importantly,” she added, “having a linear business model is healthy for the survival of SMEs in any season, so that they can adjust to a new situation, and this would be an advantage over large businesses. Further, personal entrepreneurial competencies have helped certain SMEs survive amid the pandemic.”
Adapting
A positive impact of the pandemic is that it forced many sectors to go online and paperless, and this includes government offices that stubbornly followed traditional methods of interaction for a long period.
It is time now for the SMEs too to adopt the same, if they haven’t done already, and get onboard the online bandwagon fast.
“Online platforms play an instrumental role in connecting users to markets, suppliers and resources which has mitigated the economic crisis on SMEs. This opens up a certain segment and new market. The online platform has no demarcation unlike a physical store.
For sectors like the apparel, the entire world became a marketplace. Hence, new opportunities opened up due to the pandemic,” Dr. Perera said.
She added that innovative practices in times of crisis would help increase performance and ensure the survival of an organisation.
Successes
Although the SME sector is faced with many challenges now, the future is not as bleak for them as some predict. Success stories are also emerging from the sector where businesses have successfully adapted to the present conditions and are thriving than ever before despite the pandemic.
For example, many garment factories have assessed the present demands and converted to produce PPE kits rather than their usual clothing lines bringing in better revenue than before.
“Newly-minted entrepreneurs quickly discovered that despite the national and global circumstances, there were plenty of pandemic-friendly business ideas that could be successfully executed,” Dr. Perera added.
“There are enormous opportunities for digital marketing firms and individuals who assist emerging online businesses to better market their products and branding.
Online delivery services are very successful in running their businesses as this became the only channel to obtain products during the pandemic. They have shown exponential growth during 2020/21”, she said.
Dr. Perera said that certain businesses use a hybrid approach where they have their own delivery channel to deliver their products to customers, while tying up with third-party online platforms.
For example, business lines such as restaurants, bakeries, clothing shops, and essentials/ pharmacies are using this hybrid approach which is a very successful model to operate during the pandemic.
Opportunities
Due to the many challenges, aspiring entrepreneurs are discouraged and fearful to launch businesses during the pandemic.
However, this should not be the case if they are equipped with the right skills.
In this digital age, IT knowledge is a priority for any kind of business and Dr. Perera reiterated this.
“There are plenty of opportunities created by the pandemic in services such as social media, digital marketing, app developing, culinary delivery, online resellers, consultancy, virtual tutoring, online fitness and wellness and online entertainment to name a few.”
“In my opinion, businesses that start in worst market conditions are more resilient than those starting during the best socio-economic conditions.
This is because they would have better awareness of the adverse situation and can be ready to face challenges. The mindset is more open for changes.
They can be more careful and vigilant. They can also identify opportunities and study the best models to operate the business, and use innovative marketing strategies for reaching out to the target market.
They can have proper customer segmentation, right pricing, innovative products, and services proposition which will suit the prevailing situation due to the better understanding of the internal and external environment.
Basically, the entrepreneur can align the business to face a worst-case scenario at the start.”
Branding
Dr. Perera also highlighted the importance of branding for SMEs, stating that it influences all aspects of a business.
“Many small businesses make the mistake of overlooking branding as they view themselves as a business rival than a brand. Branding could receive less priority amid the day to day running of businesses.
It is much easier for small scale businesses to keep branding aside considering its long-term commitments and challenges in measuring impact in the short run, and address immediate and more pressing business concerns.
However, branding has always been a vital part of a business. Hence, investing time and resources to develop the brand is crucial to achieve long-term success”, she said.
In an age where the online location of a business matters more than the physical location, there is a better chance of survival when the business has a recognisable brand.
All in all, despite the dire picture of the economy painted by naysayers, there is hope for entrepreneurs if they are creative enough to harness the new vistas opened up with the pandemic.