Crises can be highly detrimental to Micro, Small and Medium Enterprises (MSMEs). The abrupt negative changes destroy company value, erode trust, exert pressure on management, threaten business goals and may even lead to business closure. The COVID-19 pandemic affected organizations and more so MSMEs as they were faced with limited credit from suppliers, challenges in liquidity, lower sales and defaulting customers.
The COVID-19 pandemic was unprecedented and caught many businesses unawares and unprepared for the repugnant effects it was to have. As a result, MSMEs suffered monetary losses and cash flow difficulties, reduced sales volume, inability to meet contract stipulations, reduced employee numbers, and even business closures. The effects of the pandemic also brought psychological and emotional stress to some MSME owners as they watched their businesses disintegrate.
Although COVID-19 has impacted the world’s economy negatively, MSMEs must be resilient and look for ways to renew their strategies in order to navigate and survive through the pandemic.
To get back on their feet, MSMEs must always be ready to counter crises and should have a crisis plan. When you have a crisis plan, chances of survival and recovery are higher than when you don’t. To ensure resistance during a crisis, MSMEs should ensure that they have a crisis plan and certify its timely implementation in case of a crisis.
Crisis planning involves both financial and non-financial aspects of the business and MSMEs should be able to build a crisis diagnosis that will help identify a possible crisis at an early stage. These enterprises should learn to map out their strengths, weaknesses, opportunities and threats so as to come up with strategies to recover quickly.
MSMEs with effective leaders, who are smart at decision making and encourage teamwork, always ensure there is an effective crisis response. The businesses should also train their employees to ensure they have the ability to resolve conflicts and offer timely communication during a crisis.
To survive a crisis like COVID-19, MSMEs should also be very robust and flexible. This means that they need to promptly customize their strategies and timely reorganize their next key steps. For example, if an MSME was selling from a physical store, with COVID-19 the business should consider introducing online shopping so as to reach out to customers who can no longer visit the physical store.
MSMEs should invest in business development training and seek networking events. Training and learning can be done in an informal way through networking, mentoring, or coaching, which can significantly lower the costs involved. KCB Bank offers these learning experiences through webinars, clinics and visits to offer training opportunities to the KCB MSME customers.
The Bank has also partnered with the government to offer loans and provide guarantee for qualified bank loans, and entrepreneurs should leverage on this to ensure business continuity.
Another measure that can be taken by MSMEs to ensure survival through a crisis is reducing operation hours in order reduce inventories and cut down non-essential operating costs.
Entrepreneurs can also diversify their products so as to meet the needs of more customers. Having options for your customers by adding products and services will drive in more interest to your target audience and therefore increase the sales. MSMEs are also encouraged to use social media platforms and boost or promote their posts, as well as offer discounts as a renewal strategy. Customers have moved to online shopping where they enjoy shopping at the comfort of their homes, and marketing products online will encourage an increase in sales.
MSMEs show higher flexibility in making decisions on labor cost cutting and price reduction for survival and it is therefore easier for them to adopt resilience strategies such as product diversification and relocation of the shop to lower rent expenses. This is mainly possible due to the low bureaucracy in small businesses.
Self-driven determined MSMEs with strong dynamic and innovative capabilities that are willing to learn from crises, will recover quickly.
The Writer is Head SME Banking and Agribusiness at KCB Bank Kenya