Startups and SMEs mull over cutting costs to battle coronavirus impact, says survey

A survey conducted by LocalCircles has revealed that startups and SMEs have started to have a hard look at the entire cost structure in terms of employees, advertisements, and infrastructure to tide over the depressed business scenario due to coronavirus

Coronavirus has turned the world upside down for everybody, and it is no different for startups and small and medium enterprises (SMEs) in the country who are rethinking on the cost aspect on three fronts: employees, marketing, and advertisement and infrastructure, according to a survey.

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LocalCircles, a community social media platform, in a survey across startups and SMEs, which received more than 18,000 responses on the impact coronavirus will have on their business in the next three months, 30 percent said they foresee a decrease in demand for their products/services while seven percent said they foresee facing a supply disruption or an increase in the supply cost. About 41 percent said they foresee facing both of these issues. Only 11 percent said they do not see coronavirus impacting their business in the near future.

According to LocalCircles, most of the startups and SMEs have plan in hand to deal with this depressed demand environment as 26 percent of them who participated in the survey are talking about cutting down the discretionary expenses, which include non-essential supplier projects as well as employee costs. However, 37 percent said they do not see coronavirus having any negative impact on their business and do not plan to cut costs.

Some startups and SMEs have reported the exercise of Force Majeure clause by their customers and getting out of a contract. Others are reporting postponement of deliveries by Indian and global customers. Some SME exporters have reported being unable to find containers to ship as they are stuck at ports around the world.

Even though 32 percent of the startups and SMEs have said that there has been no business impact due to coronavirus, others are looking at various measures, which is likely to impact the employees like unpaid leave, freezing incentives, partial salary deferment, etc.

As many startups and SMEs go back to the drawing board to optimise costs, the venture funding for startups is expected to dry up as people are unable to travel to evaluate opportunities, seek or deploy capital.

(Edited by Megha Reddy)


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