6 Things Businesses Can Do To Recover From the Adverse Economic Effects of Covid-19

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Covid-19 has ravaged economies across the world, including Kenya. As of today, most businesses were still closed, with most unsure how and where to start. Some industries, like the transport sector, hospitality, education, and sports, have been completely grounded. The overall outlook says at least most other businesses have been affected, even those categorized as essential service providers.

It is evidence of the widespread impact of the pandemic on the economy. Given every business has been affected, it is important to consider some recovery options as the government gears up to open the economy in the near future. Some of the thoughts I will express here are exit strategies from the pandemic that can help the business get out of its current state and start to rebuild.

Assess the Financial Impact on Your Business

The central nervous system of any business is money, and with this resource, most can easily find the way out of almost any problem.

Unfortunately, money is also the most elusive resource for any business. I presume that most SMEs were doing well before the pandemic, and that has not been the case since the pandemic started. If sales dived by 50 percent, it is possible that the business is no longer able to honour its financial obligations. Large businesses like Tuskys have issued warnings to landlords, creditors, and suppliers that it will experience challenges settling their short-term payables. Yours may not be exceptional.

That is why assessing financial impact is essential. Doing that should inform you of the business’s financial position. If the businesses will experience trouble paying rent, creditors, bank loans, or any obligation, it is time to determine that and engage the specific stakeholders. There is a painful thing the financial assessment may reveal; the inability for the business to continue operations post-Covid. Businesses that are highly leveraged (having more debts than equity) are particularly vulnerable. If this becomes a reality to your business, and a quick exit plan will help you. If the business is not in a position to remain open immediately after, it will be critical to ensure it stops accumulating more liabilities with immediate effect. Closure to limit additional expenses like rent, salaries, and other expenses should be a good exit move.

However, a business only fails to continue operations after it falls short of working capital, and as per its capital structure, it is unable to secure additional financing. In that case, the owner may also not be able to refinance the business. It can be painful but avoiding more expenses will be a good thing. But that is at worse; at best, the business may be able to resume and withstand the current crisis. The next thing to do is re-examine the business plan.

Take a Look at Your Business Plan

The hospitality industry was the first casualty in this crisis, and some businesses designed some new methods to keep surviving. Some methods, like home delivery, drive-through sales, and online sales, are becoming a norm. Working from home is another option. While these innovative options have enabled businesses to keep recording sales, they have also provided an avenue to cut costs. For instance, you may learn that numerous office employees are unnecessary, and most can work from home. This realization can help you cut on expenses like office space, salaries, office supplies, tea, and other essentials that are provided when employees work from the office.

Use this opportunity to study the business and realize new sales channels like online sales, home delivery, and working from home. It is a one-time crisis, but to some, it will be an opportunity to see the other side of the business. Every lesson should be integrated into the business plan. Some specific areas to look include finding new opportunities in the market, narrowing down the target audience subject to business ability or efficiency, and coming up with different pricing structures.

Use the Current Period to Make Changes You Have Been Planning

Some businesses are busy 24/7 but have been shut down due to this crisis. These are businesses that have been planning to do renovations, redesign their working space, and make some other major changes that would have demanded they shut down. If you run a club and you had been thinking of giving it a new look, this is the time to do it such that by the time the businesses resume, everything will be ready. Do everything that you had been thinking to do now, and when businesses are back, customers will not just be streaming in to see the changes, but you will also not need to close to make the changes.

Create a Post-Covid Recovery Evaluation and Monitoring Metrics

A financial impact assessment may reveal that you will need to default rent, negotiate for a bank moratorium, and even ask creditors for more time. Remember, when negotiating with the bank, you provide a specific time to resume repaying your loans. That means the recovery plan should also have a timeline. You can create a new financial projection and do a simulation to determine if you will be able to meet financial goals.

The evaluation and monitoring plan makes it possible to determine what will happen and start engaging key stakeholders earlier. You do not want to be auctioned with banks six months after the crisis. A recovery plan can tell you three months earlier and start negotiating with banks, rather than waking up on the sixth month to discover you cannot honour repayments. While doing the financial project, I’d like to warn businesspeople against being overly optimistic. The economy has been on a slowdown even before the pandemic and will not pick immediately. Some industries may take up to two years to return to levels they were before the pandemic. There is no business that is likely to return to pre-Covid-19 within six months after the end of the crisis if such happens.

The Health and Safety Measures are Not Going Anywhere, Plan for Them

Wearing a mask, social distancing, and even testing employees will be here for long. Include those as part of the recruitment plan, and train staff on the same. Plan how to get employees tested and understand some customers will be extremely strict. Your objective is not to have a confrontation with employees questioning your seriousness on health and safety measures, just be ready to meet all health and safety standards. That will restore confidence in customers and can benefit your business. Re-looking at client needs is critical for recovery efforts.

Create a Mitigation Plan for other Crises

Crises are common, and a scenario like the current one can recur. The major risk is the second wave of Covid-19 crises after the current one ends. Closing again can hurt the business if you have no mitigation strategy. This is the major reason I said the current strategy the business has used to survive should not be abandoned after the crisis. Some mitigation strategies can include long term plans on settling rent, more flexible terms with creditors, and many others. Also, most businesses with huge debts will definitely be in serious trouble, by all means, cut debts in anticipation of another crisis. With low debts, you can access more loans and even secure additional funding from other lenders based on equity level. Also, an employee testing for Covid-19 can force the entire business to close and employee quarantine. That can happen long after the crisis is over.

Just have a plan on what to do in that case since the landlord will still be waiting for rent, banks will be waiting for you. Nothing interesting, leaving quarantine to think what to do, just have a strategy at hand. It will help the business restart immediately despite whatever happens.

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