By Lim Kee Yeong

Lim Kee Yeong, Director of SME Banking, Affinbank
Lim Kee Yeong, Director of Enterprise Banking, Affinbank

A recap of what happened not too long ago: COVID-19 hit all of us – like waking up with a sinkhole appearing right in front of your doorstep, striking us fast and furious. Governments worldwide instituted lockdowns and movement restrictions, both domestically and internationally. Globally, a series of economic stimulus packages was announced implemented to shore up economic activity. Hundreds of millions of people were affected negatively due to all these disruptive activities. In a nutshell, most are caught in an unprecedented event: ill-prepared and spending time adjusting to the ‘new normal’.

SMEs have undeniably been one of the most affected lots during the current COVID-19 crisis, struggling to survive while looking for answers on numerous business-related issues. By now, struggling entrepreneurs should and must have browsed countless websites, read numerous commentaries and viewed many webinars for advice and feedback.

As the COVID-19 situation continues to develop across the globe, some places seem to be managing well, easing movement restrictions with economic activity regaining momentum. With this, SMEs are slowly resuming business activities. But the question is, what can and should be done in the short to medium term to recover, get stronger and minimize further impact? In essence, never too late to act.

In light of any unexpected disruptions to commercial activities, it is only natural for businesses to adapt and transform to remain relevant. Regrettably, SMEs are unlikely to have big budgets to revamp their business or deep pockets to withstand a protracted business drought. SMEs are concerned mostly about their daily bread and butter needs given any crisis; management theories and bomb-costing revamps may not be immediately feasible. Effectively, a million micro or mega efforts by SMEs can be formulated for recovery, but do consider the summarised pointers herein over the short to medium term, while work on more concrete pivoting endeavours for the longer term needs to be supported with a sound business plan.

Digitalisation Can Make a Difference

Firstly, going digital is the overwhelming theme as advised by many. Over the course of this unfortunate pandemic, SMEs that invest and successfully operationalise within this space will have weathered the situation better, especially those embracing digital as a core part of business. Going digital is not for every SME, but it is likewise not complicated only by virtue of being an SME. There are literally thousands of items, activities and commercial operations that can be digitalised. But SMEs should not be overly confused and hasty when the whole world is recommending digitalisation. Start by picking a handful of activities and areas that are deemed critical and most impactful, perhaps prioritised by budget, intensity and speed-to-market.

Digitally, solutions can be built in-house or latched on to what is available in the market. Among the immediate options include online or social media sales channels, web-related marketing and fulfilment activities, cashless payment and communication avenues, as well as cloud-based business software (i.e. accounting, inventory, etc), to name a few. To transfer all business activities to digital may take time; do look at what can be done quickly and to be progressively added on.

Along the way, consider also if a traditional physical presence is to be retained, shrunk or right-sized taking into account revenue, cost and overall business impact. A combination presence, known as “phygital” can always be a pleasant experience to customers when executed properly and seamlessly. Every action comes with its pros and cons, so be aware as going digital comes with other dependencies, including infrastructure stability and skillset suitability.

To Get Paid, Fulfilment is Everything

Secondly, satisfactory or complete fulfilment seems to be one of the core issues facing SMEs during the COVID-19 crisis. Business activities are affected in the course of the pandemic and its recovery process. Whether in production, packaging, order taking, communication, delivery or a combination of them, there remains a fulfilment gap in delivering what and how customers expect due to general activity slowdown and restrictions. While some customers can be forgiving due to the current unusual circumstances, it is to the disadvantage of any SMEs if competitors can come in to fill the gap. Understandably, as it is impossible to operate totally uninterrupted, SMEs must have a clear picture by now what are the concerning business issues over the last several months. Such understanding should lead to remedial actions to close the fulfilment gaps and better prepare the business for another disruption in the future; it is never about “if”, it is always about “when”.

Depending on nature of business, always have alternatives and arrange for permanent additional options or back-ups to fulfil customer requests. Among them may include on-demand delivery provisions, digitalisation or automation of activities, special purpose mini outlets or outfits, online communication, outsourcing of activities, tie-ups with third parties and customisable, client-specific arrangements. It is noteworthy to mention that SMEs should very proactively take incremental actions, when movement restrictions are eased, to “please” supportive customers of the past months with creative courtesy gestures, including simple messages of gratitude or discounts for next purchase.

Pick a Fight, But Not All Fights

Thirdly, make concerted efforts to really excel in selected areas or activities most relevant to the business and your customers specifically. It doesn’t have to be something fancy or new, but every business has to excel to be profitable, ideally in everything where possible. From product quality, customer service, defect management, delivery timeliness to after-sales service; all in the name of customer satisfaction and more sales. To excel in business, common sense tells us resources have to be invested, people have to be trained, processes have to be perfected and services have to be upgraded.

Timing and recourses are of the essence, but can SMEs do all these well, and quickly to boot? Given the bruising condition post COVID-19, do a critical internal assessment in what the business has done well over the past 12 months and perhaps forward potentials; as well as what customers appreciate most. Pinpoint a few major items and several minor ones. Decent product and service quality are hygiene factors, and other identifiable items and areas can be anything from cost management to on time delivery to tip-top follow-up with customers. Plan with resources and effort to gradually make these identifiable areas really stand up as differentiating elements for customers to talk about positively, and at the same time maintain decent performance in related supporting activities.

Lean & Mean with a Simple Formula

And fourthly, get really lean and mean. The JAWS ratio can be used for this purpose. This is a common or perhaps over-used business management formula in the corporate world but likely not a “priority” to most SMEs. A positive JAWS means revenue growth is more than cost increase, meaning better efficiency and/or productivity. Cutting expenses is a norm in managing cost, but growing revenue faster than costs is an alternative view.

The JAWS ratio may not be significant and perhaps unnecessary to small SMEs and start-ups, but it should be made as a pulse and reference check mechanism for mid-sized, fast-growing SMEs and is definitely recommended as a management tool for larger SMEs or businesses. A sharper look will be into specific products, channels or segments as commercial judgement can be potentially misguided when being masked by a larger or overall company results. It can unknowingly become a burden in the long run.

Special circumstances, events or specifically planned expenses aside, logic tells us revenue has to be more than expenses for a business to be profitable. SMEs should constantly look at ways to have a higher revenue growth versus cost increases year-on-year – or simply a positive JAWS ratio, especially as the business grows where proper financials and record keeping become a must instead of nice-to-have. Being lean and mean will be the core part of any survival process and can certainly prepare SMEs for economic shocks.

Beyond the above pointers, it is imperative for SMEs to have a long-term business growth plan, be it a proper write-up or few meaningful scribbles on the white board. Constantly and regularly pick the brain of those involved or stakeholders in the business on the topic of “what’s next”, including employees, customers, vendors and suppliers, directly or indirectly. This is where the much talked-about business sustainability and continuity plans come into the picture. Chart the route on how the company will pivot ahead, and what is it required to move forward resiliently, while being mindful of how to handle another unexpected disruption as well.

Lim Kee Yeong is Director of Enterprise Banking, Affin Bank Berhad.


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