Coronavirus: Clix Capital Founder says these steps can help in a tough business environment
The rapid spread of coronavirus and the resulting fatalities has sent several nations scurrying for cover, forcing them to impose lockdowns and close borders. While such measures, including the following of social distancing norms, have been recommended by epidemiologists and other health authorities, the world economy has taken a big hit, raising recession risks.
With businesses staring at steep losses, forcing them to lay off staff, cut costs, and suspend earnings forecasts, experts have raised concerns over the deteriorating situation.
“It is completely unprecedented. The aspect that will compound it is the fact that we don’t know how or when this will end,” Pramod Bhasin oftold .
In such a scenario, he advises small and medium businesses to adopt a five-point approach.
- Cash is King: Bhasin asks companies to preserve as much cash as possible. Businesses will need cash as going forward, the collateral value of assets such as land will fall.
“Small businesses have to preserve cash and think about what will happen over the next three to six months. This is not a one-month event,” he said.
- Revenue sources: With revenues likely to drop by 50 to 70 percent in the next three months or so, Bhasin advises companies to take drastic and dramatic steps to cut down on costs. One must go back and look at costs and determine the right cost number, given the circumstances.
“This is a time where you use a very blunt instrument and go after it.”
- Rethink business model: Bhasin believes this is the right time to recalibrate and move into the domain where you can really get focused on those elements that are cash flow-positive.
“This is an optimal chance as you see much slower business.”
- Make yourself efficient: The current time is an opportunity to refocus on your strengths and weaknesses. Bhasin advises on thinking about areas that are not working well for the business and ask questions on whether it would make sense to jettison them.
- Teamwork at its peak: Bhasin believes extraordinary times like these brings the team closer. He advises companies to constantly build and encourage their teams, remove fears from their minds, and give them security and comfort about the situation.
“… (you must tell them) This will pass… Build a camaraderie which will then carry you through everything else and build a culture that is unparalleled.”
Having said that, there are structural challenges that will arise out of the situation. For instance, the huge number of job losses will be a huge task for employers to take care of.
“The structure of employment in India needs a change desperately… The government has to incentivise companies to create jobs,” Bhasin said, referring to incentives that places like China, Romania, and Hungry would offer for every hire, which would represent training costs, among others.
Going forward, he hopes countries such as India clinch the opportunity if and when businesses seek to reduce their dependence on China. Bhasin cited how Bangladesh, Myanmar, Sri Lanka, and Indonesia had stepped up earlier when garment manufacturing moved out of China due to higher costs.
“We have to create speed with special economic zones, with incentives for people to set up easy ways to export and manufacture and finding ways to kill red tape, among others,” said Bhasin.
If this happens on the ground level, he said, companies will come looking for ways in which they can diversify their sourcing and supply chain bases across the world.