The FT published two articles last month, one about the availability of loans for small businesses in the UK and another highlighting the need for debt-free solutions like small business grants in response to the pandemic. Whilst small business owners scramble to preserve cash flow and keep staff with little to no sales, the government’s offer of loan funding is met with mixed reception; with struggling businesses running the risk of taking on more debt than they can truly afford. The expansion of the support program to include grant funding is welcome as it provides vital funds to keep companies in business, but the question remains. Is this enough for SMEs to survive? Maybe in the short term but the idea that finance is the only solution is limited. There are still thousands of ineligible businesses who do not qualify for grant funding or debt borrowing. For self-employed, co-work space start-ups slipping through the cracks there will be no choice but to sink or swim. The employee furlough scheme adopted by many governments across the world offers some relief with staffing costs whilst reducing workforce losses; but the current climate is almost guaranteed to result in a longer term shift in supply chain management, and consumer behaviour affecting supply and demand for many sectors even after the world fully re-emerges from lockdown. As nations begin to ease restrictions, data shows some recovery with the number of business deals being closed increasing by 6% across Italy, Germany and Spain. Concerns about a resurgence of the virus still exist but the underestimated concern lies in lifestyle changes- the goods and services we have learned to live without, for instance fast food businesses may need to work harder to retrieve customers who have become more accustomed to home cooking or manufacturers forced to find new more efficient ways of sourcing raw materials; how quickly they will return to old habits is questionable. EU funded initiatives like the Global Business Innovation programme designed to help SMEs innovate comes close to addressing some of the unique challenges faced by leaders of small businesses. Access to the programme however is limited and current events suggest that more initiatives like these are needed globally; the more business leaders begin to think like investors, the quicker the economy can recover from crisis.
Staying afloat is not the only priority for businesses in 2020. The economic crisis sheds light on the need for a focus on contingency and survival planning for small businesses and an ability to look into the future beyond local analysis with a lens on global threats and how events may trigger a need for change in strategic management of small businesses. There is a need for a more connected ecosystem of solution providers as well as the need for technology that allows small businesses to more easily access international customers. This change is the real solution; willingness to innovate, ruthlessly edit business processes and seek new opportunities. By investing in programs that address the need for change and divergent business thinking we can reduce the impact of economic disruption, reduce the need for debt and force CEOs to be more decisive with finance. The cash splash solution is short term, a temporary remedy that will not repair fundamental problems with management, out of date processes or faulty business models. The eerie look of empty high streets and shopping parks are an indication that mediocrity will not survive in the new world. This can also be said for digital businesses and service providers who will need to go beyond widely used tactics to offer real groundbreaking results for their customers. There’s a strong belief that digital technology, automation and artificial intelligence will solve the world’s problems; a narrative digital business and service providers have been championing for years. The case for a reduced workforce has gained ground as firms seek new ways to carry out business as usual from a social distancing standpoint. Despite the massive opportunity that continues to exist with digital, the need for consolidation and efficiency is greater than before; something that could spell the end for me-too software subscriptions and digital tools that duplicate functionality.
Then there is the growth gap for startups and micro-businesses; startups considered pre-investment do not qualify for funding and larger small businesses whilst easily able to access funding, may lack the innovation mindset. We can’t afford business as usual. My 2019 study of preparedness in 5 SMEs in the retail, food, medical devices and manufacturing sectors with Bradford School of Management revealed that whilst marketing and sales were high on the agenda, business leaders were not in a position to focus heavily on strategic innovation due to operational overload. 20 years ago the message for many businesses was ‘go online or go home’ today the message is ‘innovation or insolvency’ The search for sustainable farming and reliable food sources saw a peak in interest as producers scrambled to meet demand for food supplies at the height of the virus outbreak in February. Aerofarms, a business that set out to transform agriculture by building fully controlled indoor vertical farms are seeing the benefits of disruption pay off. How many more breakthroughs is the world missing out on because we lack the resources to innovate at the lower end? Investors love disruption, but what about the millions of viable businesses that just need an injection of radicalism.
Access to finance is essential but when it comes to the money it’s not size that matters but how budgets are used to boost customer confidence and how management can inspire workforces to develop a culture of change and innovation. Economic policy can stimulate the economy but it will take more to stimulate the boardrooms and the minds of CEOs across the globe.
Malisa is a Business Consultant at Groath Agency/Author and Content Creator Specialising in Marketing, Innovation & Startups.
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