What Small Businesses Can Do to Cope with the Covid-19 Crisis

With the COVID-19 pandemic severely hurting many companies worldwide, small-to-medium enterprises (SMEs), are among the worst hit. While governments tackle the complicated job of re-opening the markets while cases still continue unabated, the question remains: how can small businesses with limited resources recover? The answer is critical as small businesses account for two-thirds of the globe’s jobs and half of its GDP. In the UAE, this translates to more than 98 percent of the total number of companies operating in the country, with SMEs contributing 52 percent of the non-oil GDP.

So, during this time of uncertainty, how are SMEs coping in the UAE, and what can entrepreneurs do to rise above the challenges? Illustrado hosted a livestream discussion amongst entrepreneurs and business leaders from a variety of sectors to get valuable insights that SMEs can learn from, and here are the main points.

1)  PROTECT YOUR PEOPLE AND KEEP IN TOUCH WITH PARTNERS.

a)  Take care of the health and welfare of your workforce.  

“We want to make sure that they are safe and well taken care of,” says Ishwar Chugani, CEO and Managing Director of Giordano Middle East, which operates over 200 stores in 23 countries from their headquarters in Dubai. “At this point in time, I communicate with them, and I have to make sure that everyone is okay. Although expenses continue, we are looking at paid salaries this April - the important thing is we have to make sure that they have enough to live and survive.”

“I am where I am today because of my people,” says Chugani. He also cautions entrepreneurs from making drastic decisions in laying off staff, mindful that the markets and businesses are set to eventually re-open. “To get new people and to restart would be more expensive. We just need to focus on getting things done and then restart.”

Mary Jane Alvero, Group CEO of Prime Group, leading quality and compliance solutions provider in Asia, Middle East, and North Africa, meanwhile, admits that they weren’t affected much in this pandemic because they are into the construction business and laboratory services. However, Alvero says that they have created a centralized emergency response team related to the outbreak. “We believe that in this way, we could protect our customers and at the same time, we could protect our people,” She adds that part of their business continuity plan is to minimize the visitors, test consultants, suppliers, and customers.

b)  Reskill your employees or reassign and redistribute tasks in response to the current market situation.

Adopting to the current situation in some cases requires teaching your staff new skills, or reassigning them to handle other functions. According to Iman Suguitan, Founder and Managing Director of Ahsant Premium Hotel Supplies and Co-Chocolat, “Those people who used to deal with sourcing leather, for example, are now re-deployed to deliver chocolates,” says social entrepreneur Iman Suguitan. “We focus now on enhancing the customer journey, the customer experience like re-skilling. This is important even when the pandemic first blew up in China, So what we did was to keep everyone busy, and I think we are adapting.

c)   Allow your employees to work from home.

Atty. Barney Almazar, a partner at Gulf Law, says that for both parties to make this quarantine work, employers can just make their employees work from home. This is a win-win situation since the businesses would still be earning money while at the same time, providing salaries to their employees. At the time of writing, in Dubai, private sector companies are allowed to have only 30% of their workforce in offices, the rest have to work from home.

d)   If salary cuts or unpaid leave is unavoidable, do it lawfully.

Atty. Almazar says that if paying full salaries for employers is not possible, employees may be asked to go on unpaid leave, or given salary cuts. He explains, however, that this should be mutually agreed upon. “The Ministry of Human Resources and Emiratisation (MOHRE) has given a form which they could easily download and have to sign - together with their employer - if they agree on unpaid leave or a temporary reduction of salary,” he says. “In this way, parties are both protected. We also try to advise our clients to have an amicable settlement, but if they can’t agree, then the company has two options: to keep them under the payroll and pay them under the contract without reduction, or they can just let them go. For the employee who has been let go, think of options. If they are let go, they could look for another job when the lockdown is lifted.”

e)  Communicate openly with your staff and partners and share challenges.

“I do believe they are their heart and soul of the company,” says Albert Tranquilino, the Managing Director of Darcey’s Flowers. “I secure their future. Although we stopped operations, we use this time to be calm and to add some best value to our company. We try to be more creative and innovative, and productive too. I was also able to use this time to speak with my business networks and suppliers just to send my greetings, especially during these trying times.”

2. MITIGATE LOSSES AND TAKE ADVANTAGE OF AVAILABLE RELIEF

a)   Take advantage of whatever relief packages are available to help liquidity. Talk to your bank.

The UAE Central Bank has recently announced a Dh256 billion Targeted Economic Support Scheme (TESS) to equip banks to extend support to private sector companies and individuals affected by the crisis. Entrepreneurs are advised to talk to their banks to see how they can benefit from the initiative, whether in the form of loans, deferment of payments, or other support.

“When it comes to renegotiating with the banks, we are classifying the situation of the client,” says Atty. Almazar. “There are those without any default, and that means they have higher chances of having favorable restructuring terms and conditions. However, those who have issues with the banks can also renegotiate. There will just be additional things that we will have to do to prove to the bank that they can cope, considering the situation.”

b)  Check out government stimulus measures that can help reduce the cost of doing business and also simplify processes.

Among many other measures to ease business in the emirates, the government has also suspended the collection of administrative fines, and for companies with up to 6 employees, there is a reduction of work permit fees. Foreign companies, moreover, can apply a refund up to 50% of the bank guarantees they have paid for each of their employees, so that will be a big help on their cash flows. Those who are in trading have a 20% refund on customs duty paid for goods being sold in the UAE, according to Atty. Almazar.

The government is also giving extensions in renewing licenses, fines, and penalties, depending on which free zone the company is registered. Sharjah is offering an extension of up to 3 months for fees, and also condone fines at the start of the year. Dubai has several free zones that give a form of discount when license fees are paid in advance, so somehow this will also be beneficial to the cash flow. Other emirates are providing an extension, and the accumulation of fines has also been suspended.

“SMEs can also pay their license fees on installment,” says Atty. Almazar. “The surcharge per installment payment has been waived so this would be very helpful for businesses. They can make a staggered payment.”

Edwin Duria, Managing Director of Play Middle East Business Consultancy and Ambassador of Business Network International (BNI), adds that despite the lockdown, authorities are working online. “Businesses can renew their license online and work on different structures and promotions,” he says. “All they need to know is to check it. The discount depends on the structure and the activity and that the options depend upon the structure.”

c)   Raise money by selling off non-core assets.

For companies under tremendous financial pressure, especially those faced with having to lay off employees, Atty. Almazar suggests looking at non-core assets that they have, which they can use to augment their cash flow. He said, “Just last week, we did some asset swap where we sold some of the assets of the companies so that they would be free of debt, and that they would be in a better position.”

d)  Negotiate with landlords and suppliers to get more convenient payment terms/relief provisions.

At a time when most businesses are under tremendous pressure, it pays to talk candidly with your landlord and suppliers to strike a deal that will allow for business continuity and would help out both parties. “If you have a difficult time paying, the court can mitigate the situation, lessen the rent or impose that the tenant pays the rent,” says Atty. Almazar. “But that has to be in court.” He emphasizes that it’s in the best interest of both parties to negotiate and have a mutual agreement that will help and benefit one another.

With the imminent opening of shops around the emirates, Ishwar Chugani says part of their priorities is to discuss with the shopping malls and various retailers on what they can do for the tenants and what options they can offer, considering that it will take time for consumers to feel comfortable again to go shopping – even if businesses open tomorrow.

3. PREPARE FOR THE FUTURE AND KEEP AN EYE FOR OPPORTUNITIES

a)  Use this time to learn and plan for recovery – how you will operate when the lockdown is done.

Mary Jane Alvero, shares, “We have established a business continuity plan that has given us the vision for the next six months. Every week, we regularly review this and see if it needs changes since there are new regulations every day. Even if we already have a short-term plan, we make it a point to update what we are going to do since our projects are related to the government.”

b)   Covid-19 will not go away overnight, and as a result, consumer attitudes and preferences, as well as new consumption models are on the rise,

Read the full article here.