The World Health Organisation declared COVID-19 pandemic on March 11th, which sent shockwaves across the globe. No one was prepared; governments, companies, and households were in shock.
No one could have imagined the full scope of the crisis caused by the pandemic. The disruption has pushed companies around the world to make unprecedented organisational changes within a matter of weeks just to survive.
A broad spectrum of industries is still haemorrhaging money: entertainment, retail, travel, and hospitality have so far been hit the hardest, with the true effects on real estate and construction yet to be understood. These sectors employ millions of people whose financial future remains uncertain.
The retail sector in particular has faced fierce competition from e-commerce businesses in the last few years. The businesses within this sector will either have to adapt quickly to government mandated lockdowns or die.
European consumption of petrol has fallen by 88%, with the auto market coming to a complete shutdown. European and Asian car manufacturers are overwhelmed by sprawling lots of cars no one wants (or is able) to buy.
China was the first country to impose large-scale lockdowns and is seeing normal economic activity slowly coming back.
However, with risk of a second-wave of outbreaks being a very real possibility, no one can say with any degree of certainty when things will get back to “normal”.
Maybe this is the “new normal”.
Even when a cure is found for COVID-19, it will take time for production and employment rates to reach pre-crisis levels.
In short, the COVID-19 pandemic has brought about the worst economic crisis since the Great Depression.
It is against this background that companies are pivoting to survive.
Shut-down orders and social distancing measures have prompted many companies to send their employees to work from home. This has been a boon to some businesses, like the video-conferencing company Zoom, which is enjoying a huge spike in demand.
Working remotely, at-home fitness courses, and contactless delivery are some of the solutions companies have adopted to cope with the measures meant to slow the spread of the coronavirus.
As of now, it’s apparent that there is no quick fix to this crisis, and companies will continue to face challenges.
Let’s see how businesses can adapt to the on-going pandemic and compete in the current volatile market.
How Businesses Survive the COVID-19 Pandemic
COVID-19 has caused a massive disruption with the situation evolving on a daily basis. It’s no longer “business as usual” and many brands have had to come up with innovative solutions.
Companies that have innovation in their DNA will be the first to spot opportunities to develop new capabilities and acquire new customers with the lowest cost.
A study by the Leibniz Centre for European Economic Research (ZEW) concludes that businesses which opt to innovate during a crisis acquire an edge over those that choose to cut all “unessential spending”.
The message is simple: adaptability is a competitive advantage.
Companies can use this crisis to test whether they can meet immediate demands or if they can upgrade themselves with new technologies or solutions.
The COVID-19 pandemic will bring about both short-term and long-term consequences to businesses and the global economy. The short-term consequences have seen the owner of luxury brand Louis Vuitton producing hand sanitiser in their perfume production facilities, as an example.
In the long run, companies will need to identify new markets and customers, develop new capabilities to shore up their core businesses and/or diversify their revenue streams. Perhaps factory equipment will have to be repurposed, products or services might have to be restructured or new ones designed altogether to adapt to new market conditions.
If there were any businesses left that weren’t present online, they most likely are now, or in the process of building their online presence.
Organisations Changing their Business Model
Within a span of only a couple of weeks, the global economy suffered a powerful shock. As a result, businesses have had to focus their assets on staying afloat in the era of “business as unusual”. These are only some of the industries that have had to adapt.
The sudden downturn in customers has negatively impacted the hospitality industry. However, many businesses have quickly and efficiently adapted to new circumstances and continue to operate during the pandemic.
Cafes rely on a pleasant social atmosphere, which means that they have been hit hard by the lockdown. Most cafes adapted by taking orders online or by phone and delivering coffee to their customers or letting them pick up their order.
Long-time Aviator client Seven Seeds, is a micro roaster and café operator with locations in and around Melbourne CBD, that had to pivot quickly in the wake of the crisis.
The business shifted entirely to a delivery and take away model. Customers can order a range of products from an adapted menu that reflects a takeaway environment; only items that travel well are offered.
Also, their customer base has changed due to the closure of universities around their various café locations, and a downturn in tourism. Therefore, their offerings are now focused more on the needs and tastes of the local community.
Melbourne’s Attica is one of the best restaurants in the world, which means it’s fully booked months in advance. This all changed as restaurants were subject to heavy constraints due to the COVID-19 pandemic.
The chef-owner Ben Shewry understood that the restaurant had to change its business model immediately because, “we were facing certain bankruptcy if we didn’t.”
Attica switched from a fine-dining establishment to a bakery within days. Customers would line up to buy delicious Vegemite scrolls and hot cross buns. However, as crowds grew and wanting to avoid a possible health risk, Shewry decided to only offer delivery.
Lot 100 is an Australian winery that has successfully pivoted its business and now makes at home pizza and pasta kits. Since it sources much of its fresh produce from local farmers, the winery also offers an essential vegetable box to its customers.
The principal market for the liquor brand evaporated in an instant after the British government issued sweeping lockdown policies. The brand’s solution was simple: they started producing hand sanitiser named “Hand Ginitizer”.
Here in Australia, Archie Rose Distilling Co switched from producing gin and whiskey to making hand sanitiser with gin distillates. The pivot not only helped to deal with the country-wide deficit in disinfectants but also kept the staff employed.
Gin and hand sanitisers share some key ingredients, which help distilleries adapt to market conditions and avoid bankruptcy.
The novelty of ordering groceries online has quickly worn off during the COVID-19 pandemic.
The demand for grocery delivery has skyrocketed since the crisis began because of the potential health risk associated with shopping in physical stores. As a result, online grocery sales in Australia increased 45% since the crisis began.
The department store Myer laid off approximately 10,000 employees in late March when it temporarily closed its stores, but now needs around 20% of those staff members to return to help meet its online orders.
The $94 billion fitness industry has adapted to the pandemic with creativity and resilience. Fitness studios are adding live and bookable classes to ClassPass, a streaming service that also contains a library of 2000 free audio and video workouts.
Body Electric Dance Studios has partnered with a video production company to provide its clients with engaging and valuable lessons online. The studio is considering letting clients see each other during the sessions to help people feel connected.
Louis Vuitton owner switched from producing its world famous perfumes to rolling out hand sanitisers in plastic bottles meant for health care workers in Parisian hospitals.
Incredibly, the luxury brand was able to after the French state requested that industry leaders help in producing vital medical supplies.
One of the main reasons the company was able to react swiftly is that cosmetics manufacturing is closely related to pharmacy.
Steps Businesses Can Take to Weather the Storm
In times of crisis, it is imperative to take a step back and breathe. Of course, this is easier said than done, especially in our current chaotic situation. However, be sure to eat well, to exercise a little, and relax. Feeling well and having a positive attitude will keep people around you calm and will help you make the right decision in managing your business.
With that in mind, let’s take a look at some steps small business owners can take to successfully run their companies during the crisis.
Honesty is the Best Policy
It’s crucial to keep all of your stakeholders informed about the impact of COVID-19 on your business. Calmly and respectfully explain to your staff how you plan on running the business during the crisis, and how this will affect them.
Reach Out to Government and Financial Institutions
Look into what sort of support measures the government is implementing to help businesses with their operational costs.
Business owners in Australia will from the government to help them manage the crisis.
Also, small businesses in Australia are eligible for a from banks and lenders.
Come Up With a Financial Plan
In order to stay afloat, your business will need to have cash coming in, which will be especially difficult with revenue being reduced due to the current global economic meltdown.
Set up a cash flow forecast (with the help of your accountant if necessary) for the next 12 months detailing all of your business’s fixed and variable costs. Decide which costs are necessary to keep the business running, and which are ‘non-essential’ and can be deferred and/or reinvested in your pivoting efforts.
Next, carry out an analysis of your product and service. See which ones generate the most profit, and phase out the less profitable ones.
Also, get in touch with people or companies you need to pay in the coming months and see if there are any chances of extending the payment deadlines. Given that the whole world has been swept up by the pandemic, it is likely that they will come up with options to ease your financial burden.
That also means reaching out to your debtors and obtaining any outstanding payments. Make sure, however, that you agree on a payment plan that works for both parties.
Finally, and hopefully it doesn’t come to this, find ways to cut costs. The biggest costs for most small businesses are office rent and employees. If possible, you may want to switch to a less expensive co-working space instead of remaining in your current office.
Identify New Opportunities
Now is the time to be honest with yourself and take stock of your business model. Can your business function in a new market environment caused by the COVID-19 pandemic? How are your customers reacting to these changes? Will your customer base stay the same or will you have to target a new audience?
Also, think about whether technology can help you adapt – is it possible to move your business online?
The point is to make sure that your product or service is relevant not only in the current business climate, but in a post-crisis era as well. That means addressing the current needs of your prospects and customers, but also planning for a future once the lockdown measures are eased.
However, keep in mind that people won’t revert back to their pre-crisis ways of living immediately after the pandemic subsides. Therefore, be cognizant of this fact as you’re adapting your business.
Hopefully, these questions will help you think of new ways of running your business successfully in the long-term.
Skills Training for Employees
Don’t forget that everyone is hurting right now. This includes your employees, who find themselves in a precarious position and need support.
One of the ways to help them is to provide them with relevant skills through training. There are countless affordable online courses and certifications that can give them the training they need to run other aspects of the business when their department doesn’t have work streaming in.
For example, your quality assurance team could learn how to help out the marketing team.
Finally, it pays to adopt a digital approach to work. Since it’s likely that most of your staff is working remotely, use online platforms like Google Docs and Asana to communicate effectively and make plans with your team.
Aviator Advisory can you help you navigate this crisis from a finance standpoint so that you thrive in a future that certainly won’t be anything like our present.
If you know how to pivot your business but you need financial assistance, reach out to us now to learn about your finance options.
Disclaimer: The information provided herein is for general information purposes only and does not constitute specific advice. It should not be relied upon for the purposes of entering into any legal or financial commitments. Specific advice should be obtained from a suitably qualified professional before adopting any investment/financial strategy.