Covid-19 has forced many businesses to pivot for survival. However, various scenarios can prompt an urgent rethink of products, services, processes and operations. From a practical point of view, the key to successful pivoting is good governance. Preparation and forecasting with known assumptions means business owners can better manage cashflow and stay solvent.
While each day presents challenges, understanding business levers and core strategy is essential to accelerate change, as SMEs may need to pivot faster to find new revenue streams and growth. And startups and small businesses have the mindset to do this better than anyone else.
According to a survey from Allianz Australia, two thirds of Australian SMEs have pivoted or adapted their business model in order to keep operating through the Covid-19 crisis. Successful ‘pivots’ can be attributed to the creativity, resilience and entrepreneurial nature of SMEs and represent anything from the acceleration of an existing plan to a complete diversification into something new.
PIVOTING BUSINESS FOR SURVUVAL
Where SMEs have triumphed though, is in their ability to respond quickly, adapt and transform in order to survive. We have seen extraordinary innovation within the sector (as the old adage says ‘necessity is the Mother of invention’) with small businesses altering their services and operations. Many have added online and delivery services or switched their manufacturing to provide different products, to cope with the surge in demand for speciality goods (earlier this year there were extensive toilet paper, hand sanitiser and personal protective equipment (PPE) shortages).
There has been a lift in transport and distribution across many industries too. The change in overseas travel and trade has meant supporting local manufacturing and supply chains, and the huge increase in consumer deliveries has seen an equally huge increase in the freight and logistics sector as they keep up with demand. The energy and resources sectors have also needed to rise to the occasion to ensure reliable and secure energy supply for all Australians through and beyond the pandemic.
There are also many smaller scale success stories from distilleries and craft breweries making hand sanitiser to fashion manufacturers making PPE equipment – right down to our local restaurants offering home delivery or diversifying to offer groceries and delivering other products.
Holistic businesses, those that treat the whole operation as one connected entity as opposed to composed of separate departments, are the businesses that have triumphed. The businesses that are showing growth are the ones that have been able to capitalise on the changes in our buying habits. We can expect that many of these business reinventions and changes in how we work, shop and interact to be around long-term. As a result, newly discovered brand loyalty and a significant ‘buy local’ mentality has developed.
SME CASHFLOW UNCERTAINTY
One thing seems certain as we navigate the early stages of recovery and that is that the SME sector will continue to experience revenue and cashflow volatility. Compounding this is the major impact that the pandemic has had on the availability of credit for businesses with lenders taking a cautious approach.
There are a myriad of options available to Australian SMEs to assist them financially. The SME Guarantee Scheme was a key initiative in supporting lending to SMEs. Additionally, the Australian Small Business and Family Enterprise Ombudsman Kate Carnell has released a Covid-19 Recovery Plan, recommending a suite of reforms to support small businesses in the post-Covid recovery phase.
While government initiatives have helped, the uncertainty persists. SMEs are wary of risk and taking on further debt. Business owners need to educate themselves on their financial options, and how alternative finance options can unlock growth opportunities.
Alternatives to traditional bank driven products are invoice financing, cashflow finance, debtor finance, invoice discounting. These facilities allow businesses to selectively sell one or more unpaid invoices to a third party as and when they need earlier access to accounts receivable. This provides fast access to much-needed working capital, unlocking funds that might not otherwise be available to businesses for up to 90 days.
For many businesses, the pivot to change products or services may be a short-lived and simple tactic for survival of Covid-19 restrictions. For others, the use of strategies like digital transformation, downsizing/simplifying offerings, ramping up online sales and marketing and repurposing resources may have had such a positive effect on their business that they may retain their new model indefinitely.
The road to financial recovery after the pandemic will be challenging for SMEs and in order to recover fully, businesses will need to continue to adapt and grow with an air of cautiousness – being alert to changes in customer demand and seizing opportunities as they arise.
This year has brought about seismic changes in the way we live and work, and we have all adapted or ‘pivoted’ in some way. However, the creativity of SMEs in keeping their businesses afloat in the face of adversity is a sign of the resilience and agility of the sector.
For more information about Apricity Finance or to find out how an invoice finance facility could help your business adapt to changing conditions by giving you access to the funds you are owed, visit here.