EXCLUSIVE: SME’s Should Not Depend On The Government to Survive

2020 will be remembered as a year of surprises. Within months, global recession happens, consumer behavior and lifestyle changed big time, massive unemployment looms and inept governments exposed. Every country takes on more debt and to parody President Donald Trump – ‘We have taken more debts like you have never seen before, incredible amount of debts that only our great USA can create, and only I know how to borrow so much for the great American people so that our bigger mountain of debt ( bigger than China) will make this country great again”.

Then we have our very own politicians. This year will be remembered as the year of the frogs. The wrestle for power has been intense to say the least. Ideals and principles are thrown out of the window. Collaboration for mutual benefits is the name of the game. Pandemic recession? No problem. Raise government debt and give pittance to our voters. Lower income for the general population? No problem as long as my personal remuneration is intact. Third wave Covid? No problem as I can now ask them to stay at home. Easier to control and manage crowds without bringing out my rotan. All in the excuse of a healthy Malaysia.

The smart population is enraged by the carelessness and selfishness of our politicians. But just like another country (hint hint), these politicians are supported by the dumb population who values the pittance thrown at them. Not easy to change 60 years of cultural habits.

The recent unnecessary Sabah elections has brought about the 3rd wave of COVID infections to the extent that lockdowns are necessary. Immediately after the announcement of a CMCO, the malls and restaurants were empty and sales across the board plummets. Consumer spending plummets. No problem. The politicians are too busy forming new coalitions to wrest control and to stay in power. More pittance thrown.

The non political Minister of Finance is left on his own to prepare the new budget 2021 even though the previous budget has not been ratified by parliament. No problem. A new Finance Minister will be appointed soon once the new coalition is in place.

In defense of the politicians, keeping their jobs is their livelihoods. Staying in power improves their livelihoods and for some, their personal freedom. This is what they live for. It is their constitutional right. Fooling some of the people all the time is a compulsory skill set for a politician to maintain his livelihood.

As for the entrepreneurs, learn to survive without government aid. It is not that they don’t care, they are just too busy trying to stay afloat, just like you. You will need to grasp quickly the constant changes that is happening around you and you will need to adapt fast. Pronto. As you should have done it yesterday instead of tomorrow. So what are the trends to look out for?

Bank loans and credit cards are not cash reserves. They are liabilities that need to be paid. Cash Reserve is cash in the bank, cash at home , properties that you can sell and jewelry that can be pawned. Entrepreneurs realised that the moratorium holiday is over and they now have to start repaying debt (hopefully over a longer period). Most SME’s now have to dig into their cash reserves (if any) and now wish that they should have saved more when times were better. Learning from hindsight is only useful if you survive this crisis. Cashflow management 1.01.

Changes instituted by government authorities. USA declaring trade war on China resulting in Chinese companies being denied access to markets, supply chain and even threats of closure to Tik Tok. Closing borders killed international air travel business and tourism trade. These are ‘stop dead’ changes.

Government imposed lockdowns dampen consumer demand. Strict enforcement results in ‘stop dead’ consequences on pubs, cinemas etc. There were jokes flying around that our Health Ministry should quarantine our politicians indefinitely until a vaccine is found. Most business models now on a ‘stop go-stop go’ mode. Today good business, tomorrow no business kind of conundrum. The more variable cost you have, the better you will survive. So restructure your cost from fixed to variable as much as you can.

Elimination of excess capacity. Stop dreaming of growth if your market has shrunk tremendously. Your management is hopeful that the business will pick up soon. Well it won’t. If traditional advertising spent has gone to digital competitors, your market will stay shrunk. Deal with it. Right size your organisation and get rid of excess capacity.

For industries that have excess capacity (built up due to optimistic projections), consolidation is the way to go. Two factories merge into one. Poof! 50% capacity disappear. If you are a small player barely surviving and nobody wants to marry you, just close shop and go do something else more profitable. No point in delaying certain death unless you enjoy further sufferings.

For over supply situations, reduce your ego and stop thinking that you are smarter than your competitors. If the market is saturated with high end residential apartments, office space and malls with no new buyers or tenants in sight, stop being a smart ass. You can never beat the market, never mind your competitors.

Whether it is excess capacity or oversupply, this is the time to consolidate your business. Merge or close. Right size or disappear into the horizon.

The same goes for startups thinking that you can compete with the market leaders just because you think you are offering a better product. Just remember they are market leaders for many good reasons. They are better than you in all aspects of the business and they have the volume and tonnes of cash reserve to outlast you.

If your customers have bought less cosmetics, clothes and shoes because they are working more from home, pivot to selling them items that they can use at home via online and home deliveries. If your F&B business is now mainly take away but hefty margins goes to Grabfood, remodel your restaurant to central kitchen, raise your prices and focus on shorter delivery time and keeping the food hot when it reaches the consumers. Be different and stay focus on your strengths.

Do what the politicians are doing. Stay alive, protect your livelihoods as selfishly as you can, pivot, change, jump if you must but make sure it is to a new pond full of freshwater and not into a pot of boiling water.

Stay safe and stay afloat!