SMEs (small & medium-sized businesses) are rightly regarded as the backbone of the UK economy, and especially critical are those SMEs which have employees. They comprise 24% of UK private sector businesses, but account for 43% of UK employment and 45% of GDP. Depending on their market sector and their financial resources, COVID-19 has impacted individual SME businesses very differently.
Some, surprisingly, have reported phenomenal growth. However, initially most have felt overwhelmed. Where should they focus their attention? As customer orders have dried up, how should they deploy their resources? These issues have been compounded by the depletion of their teams through sickness or furloughing, or through meeting unfamiliar challenges as owners pivot their businesses towards new channels - such as online and all the associated unfamiliar supply chain issues.
But out of crisis frequently comes opportunity. Some firms will emerge from the current situation stronger and more resilient. The government has urged businesses to build back better. If SMEs are to continue their role as the engine of the UK’s economic recovery, owner-managers and entrepreneurs should focus on three key areas:
1. Know your numbers
“Turnover is vanity, profit is sanity, but cash is king!” This old adage is as true as ever. Business owners need to scrutinise their forecasts line by line, to identify where costs can be reduced or cut out altogether. It is vital to know when the business will run out of cash, and to delay that from happening for as long as possible. By understanding this “defensive interval”, SMEs can make a considered choice: either to inject their own money, to seek commercial support, or to take advantage of the government funding currently available. Consider alternative scenarios: it is still unclear how long the economy will take to recover.
2. Maintain the team’s spirit
The leader sets the tone for the business. Research tell us how vital it is for the owner-manager to engage actively with the team. For desk-based staff still working from home, this could take the form of daily morning video conference meetings, checking in with them and ensuring they have clearly defined goals and tasks. For others, communications and updates can be delivered through social media, helping them feel connected and included. This helps to ensure team spirit is maintained and strengthened throughout the organisation. It’s a testing time for many people. Staff are likely to be worried about their health and their finances, and may well be emotionally drained. Entrepreneurship is a team sport – the stronger the team, the stronger the business. At the same time, like all leaders, owner-managers should not neglect their own health and wellbeing and ensure they maintain their personal resilience.
3. Rethink your market proposition
It remains unclear what the ‘new normal’ will look like. Now is the right time for SMEs to review their position in the market. If their sector is vulnerable to a downturn or even to long term shutdown, there may be opportunities to adapt their products and services to help their customers work through the current conditions. First in line are those customers with the biggest balance sheets. Agile companies will try to seize opportunities in times of crisis, and you should be at their side.
Now is also the time to do the difficult work within the business, the work that is always postponed due to time constraints. One of the very few upsides of the current pandemic is that it has given many of us the luxury of time. Take the opportunity to reflect deeply on your business and its future – what we at Cranfield call working on the business, not in it. The economy will at some point recover and regain its momentum. As Charles Darwin said: ‘It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change’.
You are not alone. As part of the newly-developed BGP COVID-19 Response Programme at Cranfield School of Management, we have found it very heartening to see how the business community is working together and sharing advice on a wide range of issues. 2020 will surely be a year to remember, but by continuing to focus on the three areas above, SMEs should improve their chances of bouncing back to support the recovery of UK Plc.
Dr Stephanie Hussels
Director Bettany Centre for Entrepreneurship & Director Business Growth Programme, Cranfield School of Management
Sabrina Sommer
Programme Manager BGP Response Programme, Programme Director Ready for Scale/Growth Curve, Cranfield School of Management
Note: The BGP Response Programme at Cranfield is a three-phased programme of activities. It is designed to help owner-managers of SMEs navigate their way through the specific business challenges of the COVID-19 crisis, and to ready their businesses for the recovery. It is based on our experience of working with owner managers for more than 30 years through the Business Growth Programme (BGP) at Cranfield School of Management. Find out more about the BGP Response Programme.