Blog: 10 Lessons from COVID-19 for SMEs

By Jonathan Tan

With the Prime Minister extending the Movement Control Order (MCO) for another two weeks, it looks like Malaysian businesses will need to brace another harrowing month of sales decline.

We too are now experiencing our fair share of project delays and cancellations. Some clients have also opted to defer or cancel existing contracts. However, we are thankful that our situation is not as dire as our contemporaries in the toursim, retail and manufacturing industries (yet).

Having had time to reflect and listen to the struggles of SMEs and entrepreneurs, I have penned down 10 lessons as a personal reminder. Perhaps they may also prove useful for other business owners and/or aspiring entrepreneurs.

    1. Save for a rainy day: Probably the first advice my parents gave me. Always ensure healthy cash reserves because it is the lifeblood of your business. During good years, ensure a large proportion of profits remain in the business. I try to save or re-invest at least 75% of profits each year towards the goal of a 6-month float. This means, with zero revenue, salaries can still be paid for 6-months. But it’s tough. To date, we have achieved approximately a 3-month float mark.


    1. Don’t overextend financially: Unlike manufacturing or retail, we are not overly dependent on financial leverage to expand or scale, as there is no leasing of machinery, retail space expansion, or upfront cost of goods. However, we had injected some RM200k of capital expenditure into renovations to accommodate a rapidly growing team. Had we not spent that money; we would be a lot closer to our float goals. Always invest with long-term business sustainability in mind. It can be tempting to scale fast, but the long play is the safer route.


    1. Learn the numbers: As entrepreneurs, we prefer to focus on the core business rather than dealing with administrative, accounting matters. But possessing a strong grasp of financials (ratios, controls, benchmarks) are fundamental to realistic, accurate forecasting. One must then maintain discipline to review forecasts month on month, curbing leakages and ensure documents are filed properly. If you can’t hack it, hire a full-time or part-time accountant who would not only do the books but provide some financial advisory.


    1. Be transparent with your team: Open and honest communication is the bedrock of public relations, and it’s no different with how we operate as a business. During town-halls, we openly share our financial position so that the whole team has greater awareness and ownership of the business. It also holds us accountable: if you’re going to give back 30% to the people, they can do the math themselves; if we have RM X in the bank, they know how long until we must resort to cost-cutting measures.


    1. Keep positive but pragmatic: It can get lonely for leaders because we toe the line. We have the responsibility to keep our personal fears in check, and lead by example. Surround yourself with confidants and wise counsel. Be prepared mentally and emotionally to plunge into the trenches at personal cost (life savings), to make difficult decisions (pay cuts, unpaid leave) for the greater good – to live, battle and fight another day.


    1. Build alliances: Invest into friends in good times, so that you have friends in bad times. The act of goodwill should be genuine in business, because small businesses need partners, alliances, and networks to thrive in good times. In tough times, it is a key ingredient for survival. Find synergies for efficiencies or collaborate to offer clients value-add when they too are wrestling with budget cuts.


    1. Plan to recover: By now, you should have been thinking/discussing on a restart implementation plan post-crisis. For us, this means active planning with our clients on action plans with clear timelines for campaigns kicking-off immediately after pre-defined milestones. There’s a lot of catching up to do.


    1. Re-forecast: The 2020 budget has probably gone out the window. It’s time to review and chart a new 2-3-year course, bearing in mind your interpretation of the economic outlook post COVID-19. Personally, I believe Malaysia’s fundamentals and domestic demand will aid in our recovery, but this will be marred by the Western markets as U.S. and Europe unlikely to recover as strongly as Asia.


    1. Re-energise: Whatever the outcome of COVID-19, life goes on. Find ways to celebrate and rediscover joys. Help your team rebuild their morale and lift their spirits. Help them recover mentally, emotionally, spiritually, financially. Remind them to find the silver linings of gratitude amidst the rubble, and to look forward.


  1. Re-learn: Like our parents and predecessors who underwent the 1997 Asian financial crisis and 2008 global financial crisis, COVID-19 will be one of many ‘life lessons’ in our journey as business owners. Let us learn from mistakes; using them to improve ourselves as people and leaders. Finally, to better safeguard ourselves against the next cyclical crisis in the next 10-12 years (if we’re lucky).

To all other SMEs, let’s keep the fight! Gambatte!

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