Business Survival: Making Tough Decisions in the Midst of a Crisis

A summary of the discussions on April 3rd and 10th 2020 How Will Your Business Survive this Crisis? During such a crisis, small businesses are often hit the hardest with budget constraints and a reduced spending power. Inadequate preparedness can make it impossible for a small business to survive. In many cases, this causes businesses without adequate support to be unable to continue operating. We shared with you some business survival tips in the online session last week. Here is a review of what we discussed: 1. Cut down on expenses: Quick decisions are required during this time before your business sinks further into a financial hole. Consider if your next spend is really a need, a want or if you can forego it. Business premises: Negotiate for rent reduction (both home and office remises), consider shared office space or moving to a co-working space after this crisis. Considering we might be unable to resume work for the next 3-6 months, does it make sense to vacate the business premises until after the crisis? Or to vacate your home premises to a cheaper alternative? You will only be able to identify the wasteful expenses if you have been keeping a record of all your sales and expenses. Consider reducing salaries, telephone airtime, stock quantities, recurring bank transaction fees etc. Reduce on salaries: Consider placing staff on paid leave, unpaid leave, advance leave, half pay or having them on a contract basis until the economy improves. You however need to review the legal implications to your business on any of the actions taken on the employee. The employment contract is vital and you also need to get the employee’s approval in writing.

2. Increase Marketing: Increase sales through more marketing: In tight times, many small businesses make the mistake of cutting their marketing budget or even eliminating it entirely. Not realising that in lean times are exactly the times your small business most needs marketing. Your existing and potential customers are now online all day – they are restless which impacts their buying decisions. Some will buy out of boredom while others are cautious with how they are presently spending The customers who are buying, you need to help them find your products and services with ease and provide additional services such as delivery at an extra cost. The ones who are not buying, invest more in marketing so that when the customer gets money, they will remember your product or service (you will notice that most businesses stop marketing during a crisis because no one is buying, you should do the exact opposite) So don’t quit marketing. In fact, if possible, step up your marketing efforts and increase your marketing budget. For those businesses without a digital marketing plan or struggling with an online presence, Entrepreneurs Spot marketing services is able to assist you to advertise on our website and our social media platforms where we reach business owners who can purchase your product/services. This at a monthly fee of Shs. 5,000 which is now discounted during this crisis to Kshs 2,000. This includes lead generation from our audiences but excludes cost of advert buying. We have also partnered with a business that is providing the services of an online directory listing. 3. Offers/Discounts/Promotions Seek ways to get your present customers to spend more : Run more offers/promotions and consider bundling for the customer to spend more A great opportunity to make more sales without incurring the costs of finding a new customer. You may have noticed a lot of offers presently online. 4. Win the competition’s customers For your business to prosper in tough times, you need to continue to expand your customer/client base – and that means drawing in customers from the competition – who may probably be closed and not doing anything during this crisis. How can you achieve this? By researching who your competitors are and offering something more or something different than themfor example by improving your customer service, free delivery services or after sales service. Identify your proposition or uniqueness- What makes you different from the rest? Why should people buy from you rather than the competition? Be able to articulate the ‘why’ and ‘what’ of your business in a way that is truly effective. You should be able to do it in ten words or less. 5. Collaborations and partnership Consider collaborating with competitors or those providing complimentary services / goods. For example a business selling shoes may partner with one selling clothes or handbags, the target client is the same but for different products. After this crisis, competition will die while collaboration takes over 6. Negotiate with all suppliers Negotiate for longer payment terms with suppliers or get new suppliers who are cheaper. Most times they will agree and this will ease your cash flow 7. Collections Collect from your clients : This is the time to keep pushing for overdue payments. You may be lucky or not- but either way, it does no harm to keep trying. Typical human behaviour: We usually pay off the debtors who disturb the most. You can also engage debt collectors or a lawyer to do your collections though it will cut down on your profit since you have to pay a collector a commission of 5-10%. A lawyer is a more expensive option. You can also consider invoice discounting from financial institutions ( where they give you access to funds based on your unpaid invoices)

8. Manage your credit policy Usually it is better to have a very clear credit policy from the start of engagement with your customer. For example 100% payment upfront,50% on order & balance on delivery,10% interest for late payment, payment within 30 days from date of invoice If your business survives this crisis or you open a different one, having a clear credit policy will help to ease your cash flows after this crisis 9. Your Target Market Identify if your product or service is a want or need (are you part of essential services? Are your customers part of the essential services sectors? For example, if you sell handbags to a lady doctor, nurse, or banker this client still has a spending capacity to buy from you despite the crisis. How well do you know your customers? 10.Focus on employees Employees are a critical part of your business and a cohesive team is crucial for any business that is trying to survive a downturn. Communicating clearly about the state of things can help your team prepare for a downturn. At the onset, how you build your team at the start is very critical, in bad times is when you identify those who are loyal and those who are only fuelled by the pay check. While it’s tempting to expand employees during the good times, it must always be based on a clear business strategy. One of the toughest things any employers are faced with right now is letting go of hardworking people. Besides lowering morale, layoffs are painful for employees and also create disruptions for the employer’s operations. Employees are the most vital resource organizations have. Mental issues such as depression may develop during times of heightened anxiety, fear & uncertainty.

The ability of your organization to overcome the issues presented by this crisis will depend on the staff efforts to work well under very stressful condition. The biggest ill effect of this pandemic will not be the money lost but the mental health. By identifying a lot with our jobs or businesses, most people are left empty for not being able to work as they have done for years. How are you assisting remote employees to manage during this crisis? How are you encouraging them to stay positive and stay productive instead of the opposite? Those who are prone to depression and panic attacks, how are you helping them to cope? Are you providing counselling services? The Red Cross is providing free counselling by calling 1199- have you communicated this to your employees? Are you in constant communication with your employees? Have they created a productive daily routine? How are you enabling staff to remain productive? Have you introduced technology options? Are you having for face online meetings with employees? How are we ensuring the safety of the staff that are on duty? (Masks, gloves, sanitizers, transport, social distancing) Are you offering guidance on what to do in case of infection by the employee or their family? Do you offer support during this time? Britam has a funeral cover of Kshs 3,000 per year providing Kshs 100,000 in the event of loss of life. Do you have such options available? How are legal matters relating to employment being handled at this time? (Sick leave, Pay cuts, Paid leave, Unpaid leave with consent, Paid leave, Termination of employment, Service pay, Medical cover, Change of contract terms) If the organization files for bankruptcy/insolvency can the employees can file to claim from the consolidated fund from the labour ministry? 11.Commercial contracts How are legal matters relating to commercial contracts being handled at this point? How are you handling Non-performance of contracts? (incomplete delivery of services/products, No delivery of services/products, Payment to suppliers) Force Majeure clause does not terminate the contract; it allows the temporary suspension of your obligations or excuse liability for any loss or damage suffered during the event. Do we have force majeure clauses? Does this clause cover natural acts of God, pandemics & endemics? Check all your supplier, client and employee contracts for this clause, if it is not included be sure to include it. Taxation: How are businesses handling VAT after the latest changes announced by the Government? Tax returns deadline is approaching, are you ready with your records? Frustration: An event that has happened that has frustrated your ability to perform the contract. It is good practice to have this clause in the contract. Termination: What is the termination clause in times of breech of a contract and what are the guidelines to amending contract? 12.Lines of credit or savings: The best time to look for capital is always when your business does not need the money. When your business and economy are in good shape is the ideal time to lock down lines of credit. However, we notice that banks like ABSA (formerly Barclays) are still reaching out to Women Entrepreneurs to give them access to credit. They have also restructured all their existing loans. Notice that they are new in the market and this is a great strategy during this time to build their brand. During a downturn, access to capital is difficult with banks stopping or lending minimally to the sector forcing some to scale back on operations or to shut down. However, it does no harm to check if your bank is giving any lines of credit during this time that can help your business to stay afloat. If you have existing loans, request for lower interest rates and if possible to restructure or top up your existing loan( based on your repayment history) If you had saved an emergency fund, this is the time to use it carefully and stretch it as much as possible. It is also a lesson for others to learn how to set up a crisis emergency fund that can sustain the business for 3-6 months.

13.Emergency response fund This is the fund set up by the Government to help during this crisis. All contributions to help Kenya fight the crisis will be channelled through it…..Please Google more details on it and keep updated with it. So far, the Shs 7.4 billion from Central bank will be channelled through here, Shs 11 billion BBI funds will be channelled through the fund as well shs 5.2 billion from World Bank. We hope that some of these funds will be used to rescue businesses from distress. If you are not a member of any association, please explore how you can one that is relevant to your sector: Kenya Chamber, Kenya private sector federation, MSE association, Retail traders association and many others. It is anticipated that the funds to help small businesses will be channelled through the associations. (The annual membership fee to join the Kenya Chamber of commerce is Kshs 10,000 as an individual and Kshs 17,000 as a business) 14.Be creative and innovative Do not let a crisis go to waste as you do nothing just like everyone else. Think about how you can become innovative in how you deliver your products and services or if you can diversify your product offering. Create an ecommerce site if you are selling products. Or you can list your products on existing ecommerce sites such as jumia or skygarden Provide delivery services at a cost or free Get your book keeping and taxes done Keep your clients engaged during this time: create a database of existing clients and send them an email once a week, create a database of prospective clients and send them an email once a week, Have an online meeting with your existing clients just to check up on them. Simply talking to existing and past customers may generate more business now or in the future. Run a customer satisfaction survey Think of how to improve your customer’s experience: This is your customers’ holistic perception of their experience with your business. It is the result of every interaction a customer has with your business, from navigating the website to talking to customer service and receiving the product/service they bought from you. Improving your customer experience leads to an increase in customer loyalty. A customer experience strategy is an ongoing process that requires you to adopt a continuous improvement approach – Measure, optimize & repeat. Be prepared to continuously improve. Use this time wisely to reassess your business mission, vision & processes: You need a proper understanding of your business objectives – know where your business is NOW, where it’s going & how to know when it reaches its objectives. Create your business growth plan: Create a detailed plan that will serve as your business guide and roadmap that has the capacity to attract business capital, customers, partners and investors. Reassess your target market: Identify who your target market – you cannot be selling to everybody. Know about your industry, customers and competitors .Target clients who can afford your products or services so you don’t waste your time and resources trying to sell to the wrong people. Ask yourself: Is there a need for your product? How big is the need/potential market? Who are your competitors? What value do you provide that they don’t? What pricing do they offer? What is your pricing plan? Remember to join us for the next session on Friday at 2:00pm. Westcom point building, Westlands, Office Cell: 0732 494031 Email:

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