MSMEs should have a crisis management strategy to survive crises like COVID-19, experts say
MSMEs have realised that they need to be armed with a crisis management strategy to face the umpteen challenges in the long-term, to not just survive the ramifications of the COVID-19 pandemic but other business shocks as well.
The nationwide lockdown induced by the COVID-19 pandemic crippled the already staggering Indian economy. The country boasts of 60 million micro, small, and medium enterprises (MSMEs), that contribute about 30 percent to India’s GDP, creating over 11 crore jobs.
During the time, production across the country froze, leading to job losses, supply chain disruptions, as well as raised liquidity concerns in the market.
According to a report by Global Alliance for Mass Entrepreneurship (GAME) titled, ‘MSME Transformation Task Force,’ about 70 percent of India’s MSMEs have cut back on their workforce to survive the unprecedented crisis. The report, in fact, claimed about 20-40 percent of the MSMEs could permanently shut shop.
For this reason, policymakers, as well as the Indian government, have been working towards the revival of small businesses, which is imperative to uplift the larger Indian economy.
Ravi Venkatesan, Founder and Chairman of GAME, says, “All said and done, there's no doubt that without the SME sector flourishing, India cannot have a balanced economy or a real and sustainable growth.”
On the other hand, MSMEs have also realised that they need to be armed with a crisis management strategy to face the umpteen challenges in the long-term, to not just survive the ramifications of the pandemic but other business shocks as well.
SMBStory spoke to a few experts and entrepreneurs to find out what kind of crisis management strategies should MSMEs come up with during their business cycle to survive such bleak times.
Keep your cash flow in check
Ketan Gaikwad, Managing Director and CEO, Receivables Exchange of India Limited (RXIL), asserts that managing cash flows would be the biggest challenge for any business in times of COVID-19.
Referring to the stimulus package announced by the Indian government, including the Rs 3 lakh crore collateral free-loan for the sector, Ketan says, “MSMEs need to make use of the applicable schemes available under the stimulus package to ensure the availability of funds.”
Managing cash flows judiciously at a time like this, can make or break businesses, says Sanjay Jain, Director of Gurugram-based commercial refrigeration company Elanpro. “Business is all about cash flows. If you manage your cash flow well, you will never have a problem,” he adds.
Sanjay says that keeping the cash flow in check over the years, ensured Elanpro didn’t face any major disruptions during the lockdown. He also claims that the company has not laid-off a single employee amidst the pandemic.
Do more with fewer resources
Since March, many companies — big and small — have laid off many employees. In the Indian startup ecosystem as well, unicorns like and have laid off as many as 1,400 and 1,100 employees respectively.
The hunger for profitable growth in a measured manner is what MSMEs expect, unlike in the Indian startup ecosystem, says Chaitanya Rathi, COO of — one of India’s biggest wine manufacturing companies.
He says, “Businesses must be run in an efficient and frugal manner, and raising a big amount of funding is not an indicator of success.”
Conservative spending and deploying strategies to cut down on unnecessary expenses is essential for MSMEs to survive and thrive in such crises.
Meena Ganesh, Founder of healthtech company Portea Medical, says that businesses tend to spend a lot. “Entrepreneurs should analyse their cost structures. For instance, if digital marketing services are not needed, then the business should cut down on that.”
Building resilient supply chains
One of the biggest drawbacks of the lockdown was the disruption of the supply chain. While many business owners started looking for alternatives for the short-term, experts say the supply chains need to be more resilient in the long haul.
This is where the financing of supply chains can help in reducing the impact of such calamities. Additionally, with the economy gradually opening up, technology can be leveraged to bring back the entire supply chain ecosystem to life.
MSMEs can digitise their business operations, including their supply chains, by coming up with a ‘logistics stack’ similar to the UPI payment, and by consolidating data to avoid amassing dead stock. Businesses also need to focus on building local supply chain networks for faster delivery and avoid discrepancies in communication.
Mehul Sutariya, Co-founder of Biz Analyst, says that even after the pandemic is dealt with, remote offerings will remain critical to the systematic changes in consumer behaviour.
“Technology is going to play a big role in the post-COVID-19 era. It is going to strengthen businesses and make them better. MSMEs must focus on identifying digital tools that will help them access real-time business data, enabling them to work in a location independent manner,” Mehul adds.
Mindset of the entrepreneur
Entrepreneurs have a lot on their plate. In fact, the pressure of keeping a business afloat can often take a toll on their mental health. Coming up with a crisis management strategy can help them better prepare to face future calamities.
Sharing a personal experience, Vikas Bagaria, Founder of personal hygiene brand , says, from the dot-com bubble burst to COVID-19 recently, he expects challenges to come. However, over the years, he has learned that the biggest crisis management strategy is for entrepreneurs to lead from the front. “Prepare well and project well,” he says.
COVID-19 is an opportunity for MSMEs
Ravi says that COVID-19 is a giant reset for most economies, including India. And, the way the MSME industry views the pandemic will further influence the steps taken by businesses to survive it.
He points out that the GDP growth projections are negative, which is unthinkable. “But, let's use this crisis as an opportunity to get many more entrepreneurially-minded people thinking about opportunities,” Ravi adds.
Edited by Suman Singh