The behaviours entrenched now could benefit businesses for years to come. Small businesses in particular are well-positioned and nimble enough to adapt to this unprecedented chapter in our history. After all, some of the world’s most successful ventures have come about from a crisis.
So says Anthony Ginsberg, Chairman of YPO, a global leadership community, Founder of GinsGlobal Index Funds and author of South Africa’s Future. At this point, he, like many economists, anticipates a U-shaped recovery – a gradual rise back to recovery over 12 to 24 months.
He offers some suggestions for our business sector:
1. Embrace new technologies:
Young businesses with thin margins are particularly vulnerable right now. But there is an opportunity for those that can embrace technologies and move online to diversify their earnings in the longer term. COVID-19 could fundamentally change the way we work, and radically transform some industries. Remember, Uber, Lyft and Airbnb were all businesses born from economic crises. In healthcare, the use of telemedicine, AI as a diagnostic tool, chatbots, wearables (to monitor patient wellbeing from afar) and other innovations have already been taken to the next level out of necessity.
2. Get lean:
Focus on the essentials and trim fixed expenses. Variable costs are more flexible – you can scale these up or down depending on your business’ level of output. A US example is Marriot Hotels. Sadly, with 90% unoccupancy, the group has had to make the decision to put some staff members on furlough, which means they will temporarily not work, but may receive a portion of their salaries.
3. Reduce your offering:
Having broad-based product lines may not be the best idea right now. Consider your 80/20 – does 80% of your profit comes from just 20% of your offering? Can you strip down to just these services? For example, if you have a menu of 50 items, but the bulk of your profit comes from ten dishes, pare down to these. While diversification is often positive, be very careful. You probably don’t have the luxury of launching new lines or branches that don’t take right now.
4. Keep your business top-of-mind:
Reach out to your customers and consider ways to up your online presence and marketing efforts. When the lockdown is lifted, connect with your most loyal customers. Facebook’s traffic has doubled recently. That shows the opportunity social media holds as people seek information and escapism.
5. Consider how to keep your people:
The message across the board is that everyone might need to ‘take a bit of pain’ right now – and that should start from the top. Sacrifice should be equal across the board. Businesses may have to consider measures like reducing people’s hours and pay, and implementing forced leave. These are some of the alternatives to lay-offs, which come with significant costs. The loss of staff slows everything down – including business recovery. Training new hires to replace lost team members is extremely expensive, once companies are in the position to recruit again. Honesty and openness are key. A team must be kept in the loop every step of the way.
6. Get your financial house in order:
Ginsberg’s advice is to sit tight and not ‘panic sell’ shares. He says to start selling is to realise losses right now. He believes the external shock is different to 2008 as banks are not under the same level of threat. His general advice is to be more diversified and to consider offshore investment due to the size and fragility of South Africa versus the global economy.
7. Have a rainy-day fund:
This might seem like a tall order at present, but Ginsberg’s advice is to have a cash reserve if possible. A rainy-day fund should ideally have sufficient reserves to cover the next three to four months. Be tough and tactical with budgeting. For example, if necessary, consider using money meant for bonuses to bolster the rainy-day reserve.