The Coronavirus – Crisis or THE Chance for SME’s?

The Coronavirus – Crisis or THE Chance for SME’s?

How SME’s can win in times of the coronavirus

The coronavirus (COVID-19) is keeping us busy and worried. For weeks the negative headlines in the news have been surpassing. Small and mid-size enterprises (SME’s) have been sent to a new type of crisis through the decreed lockdown. Governments all over the world providing useful tips on hygiene. Attentive behavior and social distancing alternate with absurd panic. Questionable hamster purchases let a very few businesses flourish.

There is no doubt that the coronavirus is the dominant topic of the year 2020. The deadly effects that Covid-19 can have on humans are well known by now. But what are the economic consequences? How does lockdown affect SME’s? And more importantly, how can an SME emerge even stronger from this crisis? In this article, I’d like to show a few possibilities. How companies can prepare themselves for even better times. Yes! Even in supposedly bad times.

Covid-19 and the dark side of globalization

the dark side of globalization

Today, the dark side of globalization becomes apparent. Initially apparently only a problem for large, globally operating corporations like airlines. Now, the coronavirus has reached Europe’s SMEs as well. Self-employed persons and especially sole companies are suffering. While family-owned businesses and bigger enterprises are supported by state subsidies. But only if the company was closed by the state. So what happens to everyone else?

One of my clients, a family-owned manufacturer, and supplier to the automotive industry lost 2 million Swiss francs in revenues. All this within one week and due to the coronavirus. The reason for this was that sub-suppliers in China were standing still due to quarantine. At the family-owned company, several employees were released from their jobs. It came even worse as some employees went on vacation to Italy. Now my client is even double-affected by Covid-19.

Contaminated business results

contaminated business results

According to several economists, almost 80% of small and medium-sized industrial businesses expect that the coronavirus will have a negative impact on their business results in 2020. 38% of them are expecting a significant slump. What are the main reasons for this? It can be from restrictions on business trips, the loss of important employees or trade fairs. Also caused due to disrupted supply chains or drastic falls in demand. Covid-19 will leave a huge business-damage behind in many sectors and all over the place.

Coronavirus shrinking the economy

According to the Swiss SECO, an expert group expects Switzerland to plunge into recession in 2020. Their GDP forecast is currently planned at -1.3% (March 2020). At the same time, the Swiss unemployment rate will rise significantly. 2.8% is expected so far. Swiss experts are known for their cautious assessments. On behalf of these experts, Eric Scheidegger, head of the economic policy directorate says:

Forecast uncertainty is currently extraordinarily high. However, economic growth in 2021 will be +3.3% and even stronger than expected.

The president of the German SEM Association (BVMW), Mario Ohoven says:

The effects of the coronavirus will significantly dampen growth in Germany. 25% of our members already feeling the effects.

Therefore, also German experts painting a gloomy picture. Germany, as the industrial motor of the European economy, stops growing in 2020. Gabriel Felbermayr, President of the Institute for the World Economy, sees a threat to the economy above all in China’s role. Germany and China are important trading partners. Felbermayr assumes that a 1% growth reduction in China means up to 0.2% less growth in Germany.

Economy crises and viruses are nothing new

sars swine flu ebola virus crisis

Economic crises and the fatal consequences of viruses are not new. A look back in history shows that epidemics or pandemics not only endanger humans and animals but always the economy too. The last financial crisis and strong currency fluctuations have always strengthened competitive companies.

Our economy survived the SARS virus

Do you remember SARS? The epidemic lung virus began in November 2002. It spread from the Chinese province of Guandong. Major conferences in the region were canceled, same as sporting events. Retail sales declined because people avoided supermarkets for fear of contagion. The tourism and aviation industries also suffered severe losses. The International Air Transport Association (IATA) put the economic damage caused by SARS at USD 10 billion and called 2003 “the most difficult year in the history of aviation”. All remaining market participants have increased their profits.

Do you remember the “swine flu”?

In April 2009, the Influenza A virus H1N1 was found for the first time in 2 patients in North America. Almost at the same time, the World Health Organization (WHO) warned of the danger of a new pandemic. The worldwide spread of the “swine flu” virus. By the end of the pandemic phase in August 2010, infections had been detected in laboratories in 214 countries. The travel and aviation industry was hit hard. Logistics by air fell by more than 21% and the number of passengers fell by 11%. Only a few small airlines had to file for insolvency. All others came out of this crisis even stronger.

Even the Ebola outbreak could not stop our economy

In March 2014, the Ministry of Health of the country of Guinea alerted the WHO about the outbreak of the infectious disease Ebola. The economy came to a partial standstill in West Africa. Travel has been reduced, as have imports and exports, companies have had to close, and many people in the region have lost their jobs. This also led to a reduction in the purchasing power of households. At the time, the World Bank estimated that economic growth in the three countries was reduced by more than 2 billion US dollars. Growth came back, the same business as usual.

How can SME’s win and emerge even stronger from a crisis?

how sme can win in times of crisis

I’m sure we experts agree on two things. Any positive news is welcome. Also, some good advice on how an SME or a Startup can emerge even stronger from difficult times. Below you’ll find tips on how to better prepare your company and how to become a beneficiary.

1. Be generative – always be prepared

Entrepreneurs who have already heard about crisis management are well aware that preparation is everything. All too often a crisis is a time of reaction. Often under pressure, wrong decisions are made. Not preparing a company for a possible crisis can have fatal consequences. Start by identifying your corporate culture regarding crisis management.

crisis management culture
The 5 levels of crisis management culture © marcelisler.com

Successful entrepreneurs prepare themselves in good times for every possible crisis scenario. Become generative so you’re always prepared, vigilant and resilient to any crisis. To reach the generative level, simply follow these 5 steps:

  1. Preparation
  2. Prevention
  3. Identification
  4. Recovery
  5. Monitoring

2. Make anti-cyclical investments

Many entrepreneurs, even well-educated ones, somehow forget what we’ve learned in school. Being successful after difficult economic situations takes anticyclical behavior. The ones who are investing anti-cyclical, invest in bad times, are the ones who win the game.

Especially in difficult times, it is even more important to invest in your company as well as in yourself. Now that the operational business is low you have the time to prepare for future growth. If you wanted to learn more, maybe about new market developments like blockchain technology, or analyzing growth potentials together with a business consultant, then it’s now the right time to do it.

3. Get immediate help from an expert

consultant in switzerland for sme and startups

All too often entrepreneurs and managers in SMEs try to help themselves. Asking an expert for advice or help is considered a no-go. “Management consultants are only for big companies”, I often hear. “Interim managers are too expensive”, I also hear again and again. But the consequences can be fatal. As Albert Einstein said:

A person who makes no mistakes has never tried anything new.

New approaches are often the only way out, especially in times of crisis. In order to avoid mistakes, to get efficient solutions and to keep the error rate as small as possible, one should get help. Especially in small and medium-sized companies. Note the 2 different levels of SME support:

3.1 Ask for help as an individual

Especially in times of crisis, entrepreneurs do read various strange words. Home office, remote work, digital transformation, video conferencing, blockchain, and so on. Ok, but how can we use that now and benefit as others do?

Well, as you now have enough time, you have two options. Either you tinker and read up on it for months or you decide on the efficient solution and hire an expert. One who not only explains the best working methods but also implements these tools immediately.

3.2 Ask for help on an organizational level

Is your company prepared if the f.e. sales manager is unable to work for an indefinite period of time due to infection with the coronavirus? Do you have the right personnel to react quickly to dynamic market developments? What if sudden changes in demand happening to scale up processes quickly? An absence due to illness is a typical example of a sudden vacancy. In this situation, interim management can be the ideal solution.

An interim manager is available within days. He or she fills the gap as an external manager and, with profound experience, steers the processes seamlessly in the right direction without a training period. Taking over classic management tasks and operational activities at the same time. Also bringing in concrete, systematic suggestions for improvement. Even fresh ideas on how to increase sales and marketing efficiency.

Conclusion on how to use Covid-19 for business success

Whining won’t help. Action is needed. Before you lose the overview or drive your company to the wall, ask an expert for advice. Sure, the internet is full of good advice. A search on google can explain what home-office means or how digital transformation works. But to get all these things done efficiently on time, a personal advisor is for sure more effective.

I’m always happy if I can be of any help. No matter what question you have, no matter what difficulty your business is going through, I’m sure together we can solve it and turn challenges into opportunities. Let me help you to emerge your SME even stronger after the coronavirus.

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Marcel Isler

Marcel is a management consultant and interim manager. With 30 years of experience in executive positions, he is always focused on efficiency, sales, and effective business processes. Marcel worked for leading companies such as 3M or Vink. In the last 10 years, he has specialized in new technologies and digital transformation. He supports small and medium-sized companies on their way to more success through increased efficiency.

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