Top Things to Consider for SMEs to Grow Financially Stronger in 2021
The covid-19 pandemic has brought some ground-breaking and tectonic shifts in the way SMEs conducted business and their effect on related ecosystems. The majority of the business units were forced to close down while a few lucky ones were able to cut down on non-profitable revenues and keep their operations lean. For the majority of the SMEs, the roadblock to recovery was a shortage of working capital.
Consider this: A recent government think tank survey reported to the highest levels of government that 9 out of 10 small and medium enterprises are facing a severe cash crunch resulting in structural disparities in their business cycles. And as the bells tolled for the new year 2021, one of the major priorities in front of the financial sector including the banks and other financial institutions is to extend a reinforcing hand to bring the SMEs back on track and revive their old glory before the pandemic.
Growth is a precursor of prosperity and enterprises are no different. The following is a list of incisive recommendations made by some of the economic experts to bring the SMEs out of the morass and get the ball rolling:
- Dynamic relief initiatives are taken by the government
The government has been opening up relief initiatives in the financial packages in the form of an emergency credit line guarantee scheme. Banks and NBFCs were directed to extend stimulus MSME loan schemes of a total of rupees 3 lacs crores to eligible borrowers to kick-start the economy.
- Initiating the face of accelerated digital adoption
Consumer behaviour has undergone tectonic shifts due to the economic vagaries of the pandemic. Since the last decade customers are turning towards technological solutions and embracing digital transactions like never before when compared to cash purchases.
- SMEs should understand the writing on the wall and should take adequate steps to digitalise their entire department of business operations.
- This change will make them more aligned to the consumer demands on every step of recovery.
- Business processes which can be automated and generating a robust online presence are crucial for the digital transformation of SMEs.
- 2021 is going to be a monumental year in which SMEs and small businesses will be in a complete embrace with digital adoption.
Advancements in technology will make sure that there are no bottlenecks in the seamless integration of digital payment software. MSME loan schemes can be granted to those deserving small businesses who are finding cash shortages to ramp up their systems to the present technological normal. The MSME loan interest rates are also kept very low so that small businesses are able to repay the credit without compromising on cash flow.
- Feed into new industry verticals
- Individuals must constantly upgrade themselves to remain relevant in the job market. This is also true for small businesses that need to expand into hitherto unknown market frontiers to maintain relevance and not be completely extinguished by the competitive forces.
- The pandemic has brought in some out-of-the-box ideas regarding the need to develop new products and at the same time engaging constructively into falling into new industry verticals.
- This will not only ensure business stability in the long term but also increases the resilience of the entire small businesses.
- MSME loan schemes can be availed by small businesses once those plans are ready to expand into industry verticals. One good example of tapping into the industry is the production of face masks, as the spread of Covid-19 is increasing.
- Substantial profits can be made at the opportune time when the small businesses identify profitable industrial verticals in which they can merge into.
- Adaptability to change
Agile framework is applicable to all types of businesses and has proven to be a very
powerful business strategy since decades to ensure the business does not go insolvent. The strategy is basically to be ready for a change and embrace it to the levels where the whole business procedures and protocols might need to be reformed while at the same time coming up with new alternative solutions and business models to survive in the market. SMEs need to make it a habit to continuously reform their ways of doing business as per the industry demands.
Agility not only helps SMEs to survive in the market but also ceases the unrequired expenditures due to the old school methodologies, resulting in addition to the ROI percentage.
- Modern marketing tools
Small businesses need to find new ways and adapt to them accordingly to reach existing customers with their brand messaging, which will bring in new customers in the future.The traditional boundaries are eliminated by the internet. This fluid internet space can be occupied by small businesses by creating excellent content on well-designed websites.
Social media managers need to be recruited and cast with the responsibility of keeping their customers engaged with informative posts and containing the negative consequences. Designer websites with informative posts on LinkedIn, Reddit, Facebook, and Twitter will go a long way in expanding their current operations to different markets.
Here’s a list of the marketing strategies that need to be followed for the small business to bounce back in a post-pandemic world:
- The lesson that small businesses learn from this time blazing events of the past year is that they need to build strong foundational structures to avoid a repeat of this in the future.
- Entrepreneurs and small businesses alike are saving for a rainy day. Soaking up the savings to meet for any emergency situations in the future is being considered by small businesses and entrepreneurs so that they can meet any catastrophic failure in the supply chains.
- Not only that the financial side of the past year is a lesson, that all small businesses in the future should display financial prudence. Companies are considering the highest salary remuneration packages of CEO and there is a global call to reduce their pay packets.
- Small businesses also need to grow out of an over-dependence on credit. MSME loan interest rates are low, but whenever good cash flow management is possible to avoid credit, efforts should be made to do so. The funds spent on paying interest can then be redirected to make improvements in the organizational structure.
- Coming back to the organisational structure of the company there is a feeling among the board numbers that quarterly financial check-ups of every department need to be conducted and on the identification of an anomaly, a self-correction course can be set.
The way ahead
The storm of financial instability may have subsided and the worst of it might have been weathered, but the ramifications will be felt across global markets for some time to come. It is not all doom and gloom for small businesses, as government leaders are infusing trillions of dollars into the global financial system to kick starts a massive economic revival. But small businesses need to use this wake up call to improve their organization and financial management skills because the almost ground level MSME loan interest rates will not be available forever. Small business needs to take a pause, regroup with strategies and never lose hope. SMEs, as a symbol of the pioneering spirit of enterprise in India, should be leading the way with an eye on innovation and always be on the foot to embrace the emerging trends.