Self-employed individuals and small businesses: Move sideways to better move forward
There is a saying in French which goes, ‘reculer pour mieux sauter’, in other words a strategic withdrawal. The world continues to dance out of the tune with the Corona frenzy, a health crisis leaving in its wake the seeds of an economic disaster. In the latest Ipsos Global Advisor Survery carried out across 14 major countries, more than half of people (51%) say there is a high threat to their job or business from the coronavirus outbreak. (Source: Ipsos)
For self-employed individuals and small businesses, the concern is exacerbated due to uncertainty of regular pay checks or small-scale operations witnessing a plummeting bargaining power.
Words of caution: For businesses and individuals already veering on the brink of bankruptcy or severe cash flow handicaps, the following might not apply as drastic measures or severe cost-cutting steps remain paramount.
Understanding the current economic situation and how it affects the economic cycle
In a recently released e-book called Mitigating the COVID Economic Crisis, the authors urging governments to act fast and do whatever it takes to contain the contagion, both from a medical perspective and an economic one. The graphic from the same e-book explains how the COVID19 impacts the economic flow:
Streamline production and distribution
McDonald’s is one multinational that has reacted rapidly to the crisis, by focusing on the drive-through operations and announcing that it is phasing out breakfast-all-day menu.
Think about your own operations, what division or segment of your operations can be relegated to the backburner while weathering out the storm? What part of your business is heavy on resource utilisation but weak on performance?
In the same vein, what part of the business has been outsourced and can be reallocated to internal staff that find their jobs at stake? Or in the surge of remote working and many small businesses going digital, can some background responsibilities be delegated to a third party so that you can focus on essential stewardship?
The gift of time
While we struggle to maintain a normal working life from the comfort of our own homes, the fact is that we found ourselves with extra time on our hands. In pre-COVID times, weekdays will consist of commutes, shopping, dining out which we have been deprived of. Make the most of it by diving deep through your historical financials, personal or corporate.
Research what your peers are doing or look out for emergency government funding that has been put in place, either nationally or at a sectorial level. Reach out to your banks and ask them to keep you updated with new incentives or refinancing options that are being created.
Cash is King
For a company’s balance sheet, cash and cash equivalents will be the element to monitor. We need to be careful here about the meaning of ‘cash equivalents’; in normal times cash equivalents will be highly liquid assets, i.e. assets can be quickly converted into cash (e.g. commercial paper, short-term securities). The liquidity needs to be reassessed based on the credibility of the counterparty and how quickly can you access your cash.
Alongside your analysis, seek out government support schemes that have been created for businesses like yours:
Example : In the case of the United Kingdom
Self-employed: Self-employment income Support Scheme
Small businesses: Coronavirus Business Interruption Loan Scheme
Find out similar grant schemes in your own country. Should you not be eligible for funding, another option is to team together within your close network and write a customised letter to the concerned body listing out short-term cash flow issues and campaign for funding,
With the rise of social media, your peers or your next client can be a click away. Remember social distancing is only physical, networking has moved to a digital realm. Whether it is via linked-in, participating in webinars and making your presence known or creating a new email pitch that can win you new business, now is the best time to network. COVID19 is an unprecendented event, so if you struggle with networking in general, use that as an ice-breaker. Remember we are all in the same boat and share a common hurdle.
Your customers are the lifeline of your business. Keep them updated regularly with actions being taken for any delays in delivery or strive to maintain excellence. Every business is clamouring for cost-cutting measures and you need to be a step ahead by reminding your clients why they hired you in the first place. If possible, provide them services for free, identify areas where they are struggling and offer to help. If not now, they will remember you for future contracts. In other words, maximise your goodwill by showing what you do best, even if it has no monetary value at present.
In the current state of world affairs, temporary lay-offs abound. Staffs are being asked to take a 50% pay cut and struggling to make ends meet. Scrutinise your cash flow and payroll and endeavour to keep all staff onboard for as long as possible. In the long-term, the talent you recruited will push your business forward if they have been treated fairly. Remember recruitment cost time and money. Should you be facing short-term cash flow issues, speak to the team on a first-person basis and if the company is being forced to cut down on salaries, be ingenious in your methods by making it worth their while to accept such downgrade. For example, re-engineer their contracts with employee share options or simply offer to mentor them to upgrade their skills. Higher management usually have good intentions to coach their staff which becomes a shadow in the background due to their own workload. Use the time at hand now to train them and show them good leadership.
For self-employed individuals, it is absolutely crucial to refine or supplement your current portfolio of skills. There is a myriad of free courses online, from the YouTube platform to Yale university graciously putting some of their courses online for free, seek out further education so that you can show proactivity and necessary competitive advantage. The job market has always been a battlefield, going forward it is going to be a bloodbath!
The most challenging part of running a business or being freelancers in the current environment is to manage ongoing problems which show different faces daily, from supply chain disruptions to staff contracting the virus. However, these are short-term problems. As well as managing issues on the go, businesses also need to think about the imminent future and how it is going to impact their operations. The world landscape is changing day by day, as we breathe, as we spend another day in confinement. Habits are changing, business protocols are being transformed and social contracts morphing to adapt to a new era. If we want to pull through the pandemic starts fading in the background, we already need to maximise on the future. How digital can we afford to go? What new demands or markets will be created alongside this new economy that we can serve? What new problems can we foresee and already start prototyping solutions? How do we hedge future risks? As hustlers say, we were born ready. Once we have sustained our short-term survival, we need to be re-born ready to face the new world. Preparation is key.