Proven cheat sheet for SMEs to get through 3 months of lockdown
A few years ago, one of my companies went through a rough patch. At the time it was the only organization I was involved in. All our directors had to cut back on salaries and other benefits, and at its peak, I was running for 6 months only having 20% of my salary. Now, this was a time when there was no global economic recession, no pandemic, and no immediate economic downturn in the country. But we always tried to keep our employees’ salaries up to date with no benefits lost. Eventually, we pulled out but through that period we have learned how-to run-on fumes for an extended period and not go out of business. We did not even lose one employee. So, learning how we survived back then will help SMEs today to survive Covid19 as well.
So, the main goal must be to secure enough working capital to run for 3 months.
Cutting costs
Obviously. No more pizza parties at the office. No more unwanted stationery shopping.
We were mainly pushing to re-negotiate rates from our suppliers. Since we are an IT firm our suppliers are mainly server providers and online advertising platforms, we asked them for monthly promo codes (basically a short-term discount) and also, we discontinued servers that were on low usage and combined them into a couple. Saving about 250-500 USD every month. That was the top end. From the bottom end, we have even reduced the frequency of the cleaning services to save what we can there. We talked with the landlord to let us have a 3-month grace period (which he agreed, thank you Mr. Nihal) and we have also renegotiated the rates for outsourced tasks like bookkeeping and accounts. Even, if it is temporary that is fine. Take the deal.
Looking for new sources of revenue
Well, since we were in a financial slump there is no money to advertise. So, we applied the 80:20 rule. Instead of looking for new prospects, we turned toward our existing customers. We started pitching to them on the phone on the new services we offer and how they can benefit. We landed a few extra gigs by doing this. Also, we had to turn down many requests which were not helping up to make a quick buck. You cannot go for long term contracts in this situation when the ground beneath you is falling apart.
We also approached a few of our best clients, who were with us for a long time requesting to help us out with a service advance. Which they agreed. You cannot do this with every client. Only with the ones, you have built a great relationship with and most importantly they must be doing well to help another.
Half salaries
To reduce the hit on cashflow we started to release employee salaries in parts. So, 20% on the payday, Another 20% a week later etc. This helped immensely to cushion the fall. In order to do this, you need to be upfront, honest, and close with your team. Luckily, we had that in spades. However, we always managed to keep employee salaries up to date at the end of the month.
By Sanjaya Elvitigala
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