Small Businesses Strategic Response To COVID-19: What We Have Learned So Far

Small Business Canada

The recent pandemic has shaken away strategic business models for small and large businesses alike. Many business researchers and practitioners have made bold calls to change existing business approaches and processes so that companies could build their own resilience capabilities and become more adaptive to the new realities. Small businesses are commonly viewed as being vulnerable to external shocks because of their resources’ constraints. Yet, they are considered to be flexible, which can help them to make fast and efficient responses to crises. As we have already entered year two of the pandemic, it is important to see if there are clear patterns about how some small businesses successfully responded to the current challenging times by first overcoming their resources’ constraints and survive, and second using their flexibility advantage to find the silver lining.

Financial Sustainability

One common response that many small businesses applied during the pandemic was to achieve financial sustainability.

Many business owners’ first response to the crisis was to implement relentless cost control measures, especially when it comes to non-revenue generating expenses. They have minimized their payroll costs strategically by reducing working hours and suspending working benefits to avoid major layoffs. Having said that, one should bear in mind that over-cutting, especially when it comes to revenue-generating activities, might limit small companies’ abilities to rebound when the business conditions improve.

Entrepreneurs also paid more attention to working capital management. They spent considerable time chasing unpaid bills and managing their cash flows. They have also leveraged their relationships with banks, suppliers, and buyers to manage their liabilities. Some researchers suggested that small business owners should take a step further and start implementing risk management practices. This could be done by preparing contingency plans, scenario analysis, and revising their cash flows continuously.

Use of technology

State-of-the-art technologies are becoming increasingly important for businesses to survive global competition. Such technologies were perceived by small business owners as expensive or restricted to tech-savvy individuals.

After COVID 19, entrepreneurs became more aware of the numerous cloud-based solutions that are affordable and easy to use. Many small businesses used these technologies to maintain their existing customers and to reach out to fresh prospects. Evidence from developing countries also illustrated how micro-businesses defeated many operational challenges by using social platforms such as WhatsApp and Facebook.

While there is enough evidence about how the use of low-cost technologies enabled business owners to generate income and remain operational, one should pay attention to whether a new generation of tech-savvy entrepreneurs would resurrect out of this pandemic bringing new digital ideas into our world. April Brown and Sarah Sklash, the founders of The June Motel, quit their jobs in 2016 to pursue their dream of re-imagining the local hospitality experience. Having opened two motels in Prince Edward County and Sauble Beach, April and Sarah had to deal with the declining demand that hits the hospitality industry during the pandemic. They both thought of bringing their motel experience to people’s homes by expanding into e-commerce. Their online shop now offers a variety of products that are usually experienced at their motels such as wine, candles, throwback blankets, and even decorating wallpaper. In a recent interview with the Financial Post, Co-founder Sarah Sklash stated that working with cloud-based systems made their decisions to pivot to e-commerce much easier, allowing them to build a new offering while maintaining their existing business.

Thrive it your way

There is no doubt that the current pandemic is far more tragic than other crises that we have encountered before. However, there are still many lessons that could be distilled from previous tragic events that damaged many businesses in the not distant past. Professor David Smallbone, who was the president of the European Council for Small Business and Entrepreneurship, concluded that there is not a consistent story that explains small business resilience during a recession. Entrepreneurs can select their optimal strategies by paying more attention to their own contexts. For example, small businesses that were considered as ‘essential businesses’ had to deal with challenges related to supply chain issues such as increasing demands, shortages of supplies, and new hygiene regulations. Such businesses are more likely to be concerned with addressing uncertainties associated with having to operate in a risky environment as well as balancing supplies and demands. Businesses that were deemed as ‘not essential’ in a pandemic context were forced to examine their internal resources and capabilities, and then diversify into sectors that are experiencing increasing demand.

Companies that were already considered as ‘digital natives’ found an unprecedented opportunity in the pandemic and are in a perfect situation to thrive.

In addition to understanding their own contexts, entrepreneurs should remember that their strategic choices are not mutually exclusive. On the contrary, they should consider implementing a hybrid strategy that enables them to follow more than one strategic path simultaneously. As concluded by Professor Smallbone, many small businesses followed an ambidextrous strategy by reducing costs and conducting revenue-generating activities to survive the financial recession of 2008. The first task that small business owners should do when designing such hybrid strategies is to think of the optimal way to reconfigure their existing resources and processes, perhaps with the use of low-cost technologies, to increase efficiency and open up to new opportunities.

About the author:

Karim Tabah is a Toronto-based entrepreneur. He holds a Doctor of Business Administration Degree from the University of Liverpool. His research focus is on small business profitability strategies and survival.


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