Economy, Entrepreneurs and Corona virus!
Contributed by BYST Mentor, CA Rajkumar Kattimani, Pune As the Corona pandemic continues its disruption, the livelihood of many entrepreneurs and business owners has been threatened. It’s obvious that even after the lockdown overall economic situation is going to be challenging and businesses will see tough times. However, normalcy will be restored slowly but steadily, and one will surely see the growth rates that is aspired for but need to have the patience for the time being. For small and medium businesses, here are some measures that can help in reviving your business during and after the lockdown Review your business plan Most of the time “People don’t plan to fail, they fail to plan”; If you’re the one who never believed in business plans, this is the best time to make one for your business. A business plan is a blueprint for your business. It also depicts action points on a monthly, quarterly, and annual basis, so as to achieve the business objectives. Borrowing funds in the current scenario will be easy but will surely add the burden to your liabilities, and hence financial planning at this point is really a crucial part of the business. For the regular business planners, this is the time to critically review the plan. Review your plan, not only for this year but the next two years as well. It may call for systematic and large-scale changes in operations, change in pricing policy or delivery terms, etc. To do – Invest your time in planning your business and take the help of BYST, mentor, your business partners, and consultants wherever and whenever required. Align your business with the theme of recovery Post lockdown, a large chunk of the population may have a lower income level, businesses across the globe will be in a recovery mode. So, realign your business by offering your customers anything that will ease and support the task of recovery. It will result in customer delight and will win customer loyalty. You may be required to reconsider/review profit margins. Find out more about variable cost and fixed cost of business for a better decision. To Do Negotiate with your suppliers to reduce the variable cost, if possible Try to convert the existing fixed cost into variable cost by outsourcing the activity Try to reduce the fixed cost per unit Brace the challenge with some solid preparation so that you can be on top of your customers’ minds. Reach your customer online Keep in touch with your customers by using online platforms. If you have any then this is the right time to have one. Take the help of digital marketing experts and try studying the online supply chain till then. Make use of this lockdown time, to speak to your customers, suppliers, and employees also. Try to have video conferencing with them. Take your business online in true sense. Make all your stakeholders feel that they are important to you and you stand with them at this time. To Do Reach out to your customers to tell them that you’re available online and what you can offer them. The digital economy is vast, make the most of it. Restructure your business models In case lowering/reducing profit margins is not possible then think of alternative pricing models – Royalty-based pricing, Razor and Blade model, profit-sharing model or outcome-based model – these are some of the value-pricing models that you can discuss with your valued customers who will like your out-of-the-way business thinking and reward you handsomely. Let’s take an example of a Royalty-based business model: Let’s assume you are providing R&D services to a mobile manufacturing company that is developing a new model. Your minimum cost is INR 10,000 per hour of project work. You may bill at INR 11,000 per hour (only 10% margin) and royalty of INR 1000 for every piece of a new model sold by the company. This model is not only appreciated by loved by customers and they will become your long term, business partners. To do Remember that, value capturing will be a tougher challenge than value delivery in the next few quarters.