Usually, small businesses are not affected much by global problems, or at least it is not affected immediately. Their market segments are small and it is difficult to "hit the ceiling", as it often happens with large companies. If some of your customers go away, there is always an opportunity to approach new ones.
These days the situation is different. The business got isolated from the customers in three ways:
Imagine that most of your customers will change their lifestyle in some or another way.
- Economically - solvent demand has fallen drastically due to the increased unemployment rates and currency volatility.
- Physically - people are forced to stay at home.
- Legislatively - businesses, in fact, have been forced to close, some of them shortened working hours but some of them got a total working ban.
What should business do to survive? I would recommend to think of an anti-crisis action plan. Hopefully you will never have to implement it, however it's better to have one than not to have any, isn't it? This article consists of four parts:
1. MINIMUM CRISIS MANAGEMENT PLAN
- MINIMUM CRISIS MANAGEMENT PLAN: for those who are doing well, but want to be prepared.
- ANTI-CRISIS STRATEGIES: for those who are at the epicenter and understand that something has to be done right now.
- TO-DO LIST for a time when business is on pause: for those who have no more options but to freeze the business. Spoiler: this to-do list is not a list of books, TV shows, or household chores.
- THE LIST OF GOODS AND SERVICES for which, I believe, demand will be stable or increase.
For those who are doing well and want to play it safe.
1.1. In similar situations big companies convene an anti-crisis council and appoint a special person responsible for implementing the agreed measures. I'm not a fan of applying a lot of large business practices to small business, but this time I would do that. Even if you are the only member of the emergency board.
1.2. The main point is that people (customers) will tend to avoid public places and personal communication, so think about the alternatives you can offer them:
- Home delivery – for shop and restaurants it should the priority nimber one for summer 2020
- Online work/ via Skype / over the phone
- Locations convenient for your customers, especially if you have a car and the client should use public transport to get to your office
- Meetings in the open space
- If there is no way to transfer your work into online (for example, you have a beauty salon) offer increased security measures. That is, be sure to communicate it loud enough, literally using the following words: last month my employees didn't travel. We all are working in masks and gloves, and the room is disinfected with a quartz lamp once per hour, etc.
Take the example of Starbucks in China who is banning reusable personable cups as a precautionary measure against the deadly coronavirus, but still gives a 10% discount for anyone who brings their own cup or asks for a mug. Disposable cups are not eco-friendly you may say, but a human being is a part of ecosystem too.
1.3. Look through the list of your employees and think who of them could start working from home right away. Write down their duties and new schedule.
1.4. Consider all the measures listed above even if they have never been a part of your strategy. Consider them as temporary measures valid through, say, 6 months. This is a force majeure - just admit it. Yes, you were not going to develop your business in this direction but it is a matter of survival. For some of my clients even work with zero income (for some time) is a positive result . It's not necessary to implement your anti-crisis plan immediately.
Write it down, inform the employees and watch the situation. If your business is not affected than it is just perfect. If you feel that situation is getting worse - you have a ready-made plan and know what to do. 2. ANTI-CRISIS STRATEGIES FOR SMALL BUSINESSES
For those who are already in the epicenter. STRATEGY #1. COST REDUCTION
Cost reduction strategy is suitable for those businesses that continue to operate but experience sales decrease. This strategy is also good for those who are partially limited in their usual activities. For example, working hours have been reduced, delivery to certain regions has been stopped or due to epidemic restrictions a limited number of visitors is allowed to be served at a time.
Cost reduction is not only about the direct cut of some budget positions, but rather an attempt to reduce the cost of each particular line of your budget. For example, imported raw materials can be replaced by materials produced locally. Sometimes, of course, it may lead to quality decrease, but maybe for your product it's not critical.
It is not only the product itself that could be made cheaper, but its packaging too. You can also leave the quality as is but reduce the size of a piece. Review of terms with your suppliers or landlord is also helpful.
Cost reduction also means reduction of the marketing budget. But here you should be careful. To stop marketing activities in crisis is, actually, a bad practice. A good practice is to leave 60-80% of the activities that make you the main cash flow and focus on their quality.
When I worked in a retail chain, we reduced almost 15% of the marketing budget by a decision to use cheaper paper for promo catalogs. Customers' even noticed was that cheaper catalogs paper made the whole brand perception less expensive (which was good to us). We could have done the same earlier - but it is in human nature to act by inertia, not bothering of cost reduction on daily basis.
Staff reduction - yes, unfortunately, sometimes it is a necessary measure. HR professionals would help you to do this at minor expense. You can start with asking your employees to work part-time or freeze their bonus payments.
Here, I would like to draw your attention to the following:
STRATEGY #2. BUSINESS TRANSFORMATION.
- Just a reduction of employees' salary (even if you manage to make it legally, which is often very difficult) never leads to a good result. It definitely brings loss of motivation.
- Do not leave a position because it is occupied by a good employee. That is, if you have a cool specialist, but due to the crisis you find out that you don't need their service any more, offer them another position of equal value, so they could keep on working for your benefit.
- Do this gently, not as a directive from above. It is ok to admit that the company is going through tough times. It is ok to explain new working conditions and ask for the team's support. In Budapest, for example, many office employees are now working from home for 10-12 hours a day to keep the company afloat. They don't complain because some of their friends had been either fired or had been forced to put their business on pause.
If the demand for your goods or services has fallen to zero (this, for example, happens with travel agencies, hotels, restaurants, beauty salons and all the entertainment industry in Europe) - and you understand that it will not change for quite a long time, try to evaluate the resources, knowledge and skills you possess. Based on this analysis try to find a niche where you can use them the best and create a new product. It may be something similar, for example, if you used to work with passenger transportation you may try freight transportation now. Or it can be something new, for example, you used to be the owner of a travel agency and now you can become an owner of a translation agency.
A friend of mine from Cape Town used to work as a travel consultant for Russians travelling to South Africa. Now, to have any income, she wants to become an social media marketing (SMM) specialist. In the future, when she gets back into tourism industry her new knowledge of SMM will help her with business promotion. Usually, the decision to transform business into something new is extremely difficult to make, but another option is just closure of business.
Before adopting this strategy, I would recommend you to try diversification or waiting (see below) strategies first. If none of them shows any results in six months, then try to make a transformation. Anyway, it is always better to plan in advance, think of this strategy as of the plan C.
STRATEGY #3. DIVERSIFICATION.
The main idea is to create an additional, completely different product or find a new target audience, without cancelling your main product line. Say, one of my clients has a catering business for offices and all the offices are pushed to be closed. We add home delivery service and reach the target audience of B2C.
An artist-teacher from Budapest transferred all her group lessons to online and, unexpectedly for herself, found a new audience. Previously, she worked only with English-speaking customers from Hungary, now she has customers from other countries. Even when the quarantine is over she still will be able to teach people from all over the world. Isn't it cool?
The Olive Tree restaurant
in Budapest has introduced new menu items that are more convenient for delivery, which is their main focus now. This strategy is perfect when situation is not so bad but there is a risk of working at a loss.
This strategy is also recommended for seasonal goods. Say, you sell ice cream in summer and hot chocolate in winter. STRATEGY #4. INNOVATION.
You continue to sell your product, but with the help of technology you either change the way it is consumed, sold, delivered or make it much cheaper.
For example, I used to organize offline workshops in Budapest, but this spring I do online webinars instead.
Under one of my posts on Facebook a deal emerged between a mother looking for an online solution for her son's birthday celebration, and an art teacher who used to organize art parties online. May be online events of this format will become an integral part of our lives soon.
Some time ago I talked to a representative of a company that produces corporate trainings in a form of online games and simulations. I'm sure that such an innovative approach will allow them to remain in the market for a long time. Other companies specializing in trainings will also try this niche, I believe.
This type of strategy often "sticks" to companies and they go on using it even when tough times pass away. And the innovations it's the best what any crisis brings.
STRATEGY #5. INCREASING PRICES.
If it is not the sales that is affected by the crisis, but the costs - then a price increase is inevitable. Don't take it negatively. Do not apologize for raising prices, but think of how you can make this process go smoother.
For example, you can freeze the old price for your loyal customers for a certain period of time.
A months ago, CIS countries experienced currency devaluation which made the prices of my services go up for people living there because I charge in euros. But I've made a decision to keep the same price in rubles for some of my online cources. My loyal audience has an opportunity to buy these products at the old price.
This strategy is valid when you are firmly convinced that the customers understamd the value of your product. If your customers complain on prices even in normal situation - raising prices will not work. You have to either change the positioning or the target audience, first. STRATEGY #6. WAITING.
Yes, waiting is also a strategy and sometimes it needs quite some brave to take it. It must be developed for a strictly limited time period. It also requires to have a plan B (which usually sounds like one of the strategies described above). That is, this strategy sounds like: "If in 6 months this strategy brings no results, I will do the following:..."
To succeed with this strategy you'd better have some cash reserve that would allow you to wait for several months.
For example, in Europe, all private schools and kindergartens are stuck in a waiting strategy now. But many of them are introducing online learning - and this is an innovation.
By the way, while you are waiting, you can do a lot of useful things described below.
3. TO-DO LIST: WHAT YOU CAN DO IF YOUR BUSINESS IS ON PAUSE
Dead month/season or crisis.
No, you are not going to watch TV series you've missed or rest in the foam bath. Honestly, I would not recommend you to relax at all. Because if you do, your business will not make it to the end of the crisis.
Here is what I recommend: 3.1. Review the business strategy in general
, not from the perspective of the crisis, but from the perspective of "What would I change even if everything is going well?" Sometimes (oh well, always) we don't have enough time to stop, look back and evaluate the actions taken. We are always in a rush. You may be surprised to see how many spare actions you do. They are the ballast and it is just the right time to cut them off. At this point you can also make the assortment revision and find positions that do not bring you any money, but spend your resources (hanging on a website, in a warehouse).3.2. Complete the things that have been there in your to-do list forever
- review website pages, update your profile on LinkedIn, parse folders with accounting documents, clean up your Inbox.3.3. Write down the PROCESSES.
I bet 99% do not get their hands on this. And I'm not an exception. Even if you work by yourself, processes are very helpful. If you have at least one employee, they are must. Correspondence with your clients, advertisement planning, regular monitoring of competitors - all these activities have their particular workflow, so write them down and create templates.3.4. Revise terms of contracts with your suppliers.
Ask for a post-payment. Ask for a wholesale discount. Ask for all the special terms they provide to their regular customers. Remember that your suppliers are also under pressure of crisis and they will struggle to retain you as their customer, which means that they will be ready to discuss new terms of service with you.3.5. If you are an employer, then make an audit and assessment of the staff
, write a training plan, review (or introduce) a bonus system and KPIs. The crisis, might be the best time for you to pick up highly qualified employees from weaker competitors closing their businesses - if your strategy still allows you to recruit staff in current situation, of course.3.6. If you are your own employer - get additional training or education.
You = The Value of Your Product. Investing in yourself and your training is a 100% winning strategy.3.7. Keep in touch with your customers and maintain their loyalty
- for example, by sending them e-mail newsletters. Show them your interest in their affairs, ask them how they cope with problems during the period of stagnation and write down your new ideas. Tell them how your own life is changing: the latest consumer trend is the involvement of customers into product creation and renovation. Well, just keep letting them know that you are still there, on the market. 4. LIST OF GOODS AND SERVICES THAT, I BELIEVE, WILL BE IN DEMAND LONG-TERM
- Toys - children have settled at home, and many parents continue to work remotely
- Products for newborns - jokes of post quarantine baby boom are not jokes at all
- Household goods - people will reconsider "home" as it is after such a long time they have to spend there.
- Home electrics, especially the ones designed for comfort - humidifiers, music speakers, etc. Coffee makers!
- Laptops, printers and related products - companies will need to equip employees so they could work from home
- Frozen food
- Tea and coffee
- Home clothes and underwear – we want to look good at home more than ever
- Accessories for home manicure
- Board games
- Bicycles and scooters, especially in countries with mild climate
SERVICES AND JOBS:
The most important is to think of how you can help your customers to go through these tough times, not to try just make more money on them. One-time cash making is not comparable to customer loyalty.
- Courier services
- Restaurant delivery
- Payment and money transfer services
- Software and IT solutions for organizing webinars, online events and online stores
- HR consultants
- Legal consultants - right now there is an enormous number of lawsuits against travel agencies and airlines because of cancelled trips and flights.
- All types of helping professions - psychologists, coaches, etc. Now there is going be a throw-in to the online market of all in a row, so if you are their client be careful with your choise.Those of you who work in a helping profession - use this time to build strong expertise and positioning. At the stage of overcoming the crisis, when businesses will begin to actively return to normal profits, euphoria can overwhelm people, and such services will no longer be a priority. Demand will fall, only the best will remain in the market.
- All kinds of marketing professionals. Even those who work offline - you (and me), in fact, have the strongest base because the offline experience cannot be compared with the one you get online. It will be easy to retrain. But the warning about the stuffing of pseudo-specialists and the demand curve for their services is identical to the one described in previous point.
- Cleaning services for offices - this will be popular at the stage of quitting quarantine and return to the offices
- Domestic tourism - this will be vital at the stage of quarantine exit. People would be glad to go somewhere, but they will be short of money.
A few years ago next day after currency devaluation in Kazakhstan, we had an emergency meeting with management of a retail chain. And a unanimous decision was not to change the prices for products we already had on stock. While all the competitors closed for a "revision" and changed all the price tags by the next morning. They probably made more money at that time - I don't know, but at this point I am guided only by voice of my conscience. Because marketers also should be humans. And customers are not stupid at all. Blue oceans appear exactly in crisis situations, because of a great shift in demand and consumer behavior that occurs exposing of new areas that require their gardener.
Wish your loved ones and your business to be healthy.