How Small Businesses Can Survive Through This Prolonged Period of Hardship
The world has rather been in a state of flux, with the sudden outburst of social and economical destructiveness having become more recurrent and persistent. Learn how your business can survive during this difficult time.
The world has rather been in a state of flux, with the sudden outburst of social and economical destructiveness having become more recurrent and persistent. These years have perpetuated the perception that human civilization is crumbling due to human nature. The Beirut explosion, coronavirus pandemic, US-China trade war, and even the sanguinary skirmish between India and China, have prompted nothing but upheavals in financial markets and economies - not to mention also widespread social disruptions across countries, whether racial or political. The world is becoming increasingly fragmented in spite of technological advancements.
Up until the year 2018, people had known very little about the consequences of a trade war between countries as most of us had never been embroiled in such a circumstance before then. However, when the Trump government imposed first wide-ranging tariffs on imported products from China, things began to steer away from their normal course. It gradually changed the business landscape in the US while uprooting several facets of American life.
According to a survey conducted in late 2019 to measure the impact of the trade war on businesses in the US, there was a 37-percent increase in the cost of merely doing business and 47 percent of the respondents admitted that they had already started losing customers. Overall, the imposed tariffs were raising prices by as much as 20 to 35 percent, regardless of location, over the entire market at the time of the survey. Eventually, in early 2020, the US and China mutually agreed on a trade deal in an attempt to ease the tension. However, as the repercussions of this years-long trade war seemed to be about to wear off, there came a new episode of calamity - the coronavirus pandemic, which is currently still an ongoing global health crisis.
The coronavirus pandemic further escalated what was an already challenging business environment to an unprecedented level - a business climate that people had never seen before. It sparked off an influx of challenges that many people could not have prepared themselves for. Mass business closures, political and social instability, the enforcing of stay-at-home curfews, and a sharp increase in the employment rate were just some of the many upshots of the pandemic.
The outbreak has led to a wave of business failures; many well-known, large companies and fashion brands have resorted to filing for bankruptcy, such as Brooks Brothers, J.Crew, and even GNC. Just in the first half of the year 2020, more than 3,600 companies applied for bankruptcy. However, many small businesses had gone into this recession more vulnerable than their bigger cousins. Before the crisis occurred, half of them had access to only 2 weeks’ worth of cash; surviving through a long period of downturn while still having to cover typical business expenses was not possible.
Small businesses have been feeling the brunt of the COVID-19 pandemic, especially the one having employed between 5 to 99 employees. Speaking of which, even before the advent of the viral outbreak, the probability of a small business failing was relatively high. According to statistics by Small Business Administration (SBA), about 20 percent of small-business startups fail in the first year, around 50 percent of the remaining succumb to business failure within five years, and within just 10 years, approximately only 33 percent of the rest survive. Unarguably, those statistics may give rise to - or may have already brought along - an air of despondency in the world of small business startups.
This year, thousands or millions more small businesses have been facing mounting pressure just to stay afloat. It is going to change the statistics, making them even grimmer than ever. A survey was conducted on 5,800 small businesses in March 2020. At the time of the survey, massive layoffs and closures had already taken place - just a few weeks into the outbreak, casting light on the financial fragility of small businesses.
However, this is not to say that there is no way for small businesses to stay in business amongst the competition - albeit sometimes not physically. In fact, some have managed to sail through the storm, changing their business models as they have adapted to the changing nature of the economy. The strategies that they have employed range from merely setting up a digital presence to reducing operational expenses.
Gaining an online presence
The COVID-19 pandemic has essentially made visiting brick and mortar shops a less favorable way of getting essential goods or services. Statista conducted an online survey in May 2020, and only 29 percent of the 2,137 respondents indicated that they had not shifted to online purchases for any services or products, and the remaining had started relying upon the internet to have their daily essentials sent to the front door.
Therefore, it makes perfect sense for businesses, irrespective of size, to reach to their audience where they are most present. Because of the pandemic, many brands have now acknowledged the importance and benefits of creating a digital presence and providing delivery services.
Cutting with planned precision and looking beyond the boundary
One of the common cost-cutting approaches by big companies in difficult times is to adopt a large-scale cost reduction strategy. However, small businesses need to take considerable precautions in trimming their operational expenses - cutting too deep will make the recovery process difficult while cutting too shallow will not do anything good but push themselves over the edge of insolvency.
Commonly, small businesses tend to be concentrated on meeting local needs only, however, in financially-challenging times, these businesses may go beyond their typical boundaries, such as getting involved in international trading. Taking into consideration that the US dollar has been undervalued, quick-witted business owners have already realized that there is a higher demand for American products and services.
Investing in work-from-home technologies
Last but not least, many businesses have capitalized on existing communication technologies that provide super-fast internet speed. According to an internet speed test, the latest cellular network, 5G, is capable of reaching a download speed of 20 GB per second while 4G LTE has a peak download speed of only 1 GB per second.
The COVID-19 pandemic has triggered a rise in remote working as many businesses have shifted to remote work as part of their cost-cutting strategies and to also protect their employees from the virus. This latest communication technology has effectively facilitated this transition. With 5G, remote workers have more reliable access to cloud-based software so they can easily collaborate and keep in touch with colleagues.
The process of sharing sizable files in the cloud and even interacting with cloud-based applications has become much smoother and faster. 5G has not just made business processes more unified, but also enabled the reduction of operational costs resulting from having a presence in a physical space.