The challenge is to remould the old way of doing business, using existing contacts

As business prepares to restart after the Covid-19 lockdown, recovering small, medium and micro enterprises (SMMEs) are cash strapped.

Overheads such as rent, insurance, security, debit orders for services, and much else besides, have depleted savings and driven many enterprises into debt. Wages and salaries have had to be paid, at least for some employees, while the management and owners have had to live too.

Even if you received government bailouts, they were most likely insufficient. Many businesses did not, partly because in SA the policy of BEE has sent state money to enterprises with black ownership or shares in the company. Whites were at the end of the queue. Employees may or may not have benefited from the inefficient Unemployment Insurance Fund.

But there are opportunities. A maker of ties and caps and leggings can sew face masks and trade these through local business networks. Convert and repurpose your production: you face an innovation challenge to remould the way you have always done things, using existing contacts at every step.

That sounds fine and dandy, but meanwhile things are quite grim. To innovate is to spend time and money on things that may not pan out profitably. Instead of a profit centre you may just be creating a new cost you cannot afford.

Social distancing and sheltering at home imply that customers may be few and far between. Nor are you able to rely on previous operational and marketing methods. The marketplace has shifted online, where competition is intense and also hard to detect. Moving your business into cyberspace is one of those innovation costs you are forced to undertake, with uncertain results.

The problems are all-encompassing. Like a croc-infested river, the new business environment is filled with obscure dangers. At the same time, if you have a strategy to get where you are going you will at least feel a sense of mission, even optimism, as a new chapter in your working life opens.

The concept of the business S-curve illustrates how to get off the ground. Business recovery in the coronavirus era resembles entrepreneurial start-up in many ways, though there are significant differences.

Most small enterprises fail within a year or two. In the first few months of existence a start-up has many good ideas with some money in the pot. Business rises to a peak but at this point — the top of the curve — things start to fall apart.

Administration may be very tacky with no real control of costs and only informal bookkeeping. Unreliable service and quality are driving some buyers away. The supply chain has not been sorted out by means of reliable contractual agreements. The enterprise falls into a chasm — the bottom of the curve — from which many will never rise again.

Those that institute systems of control, contractual relationships, banking, operations and marketing, will be on the road to survival and growth. A business climbing out of the chasm of lockdown nowadays has systems and experience to apply in the new situation. Relationships exist with customers and suppliers, employees, investors, regulators and competitors.

The recovering business should already have gone through chasms and recoveries, perhaps not once but often. There is not just one S-curve but several in succession as the entrepreneur becomes a toughened manager, bridging the gap between start-up and stable enterprise.

Stages of grief

Take a tourism enterprise that transfers airport customers to accommodation. This will be a thing of the past for some time as airlines are grounded. The transporter can find other travellers such as suburban families on getaways into nature, or emergency workers going from A to B.

There’s an S-curve called the Kubler-Ross change curve, or the five stages of grief in dealing with death. From denial we move through anger and bargaining, depression and finally acceptance. The same with businesses in the shadow of the virus; we don’t want to face it, we seek to blame someone, we are wearied by what has to be done, we look for alternatives, but eventually we must make up our minds to do it.

Two factors come into play. Profit maximisation is impossible as the economy is barely ticking and one must seek to come out on what buyers can afford. It is also not wise to avoid innovation costs — they are the lifeline to sustainable growth.

Set out to provide low-cost solutions. As few customers have much money, low cost with extremely fine margins will be the main order of business. Rather than maximising profits, go for optimum pricing that is just enough to stay in the game.

South Africans are fortunate not to have lost touch with informal trading at the margins of larger institutions. Business, for us, is often the pavement outside the chain store where small traders set out their fruit stalls. It is also spaza shops, stokvel savings clubs that finance start-ups, suburban garages that give birth to new technologies, and university departments that spin off student whizz-kids.

To innovate under Covid-19 is to re-energise these networks. The spirit of entrepreneurship may have lay dormant when the business was thriving in its niche. SMMEs have fallen into a chasm not of their own making. This is a chance to embrace disruption and fit old tools to new uses in this viral world.  

• Addison is a former professor of communication. This is an extract from his “Plague Diary,” published on Facebook.