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Flattening The Curve

Flattening The Curve

Hello fellow entrepreneurs,

It is a pleasure as well as a privilege to communicate with all of you and an honour to be associated with deAsra.

1 Entrepreneurship in challenging times

We all are aware of the Coronavirus (COVID19). However, though we have understood the logic of transmission and the science behind the spread of the virus, hardly anybody has understood the full social impact of this dreaded disease. Needless to say, we are not at all in a position to analyse the business impact of the same.

Not on our family, our society, city, country and the world.  Period. No wonder, it is labelled as the event of the century.

Every week new developments will happen and surprise (if not shock) the society and just like the stock market, one will feel like he/she is falling in a bottomless pit. Every day will feel like the worst has been reached but a new tomorrow will bring in new challenges.

 In late February, when the idea of helping small and micro-entrepreneurs first came to my mind, maybe the idea revolved around how Indian SMEs can benefit because of the disruption of the supply chain from China. Can it help India leapfrog its exports in Electronics?  Perhaps Indian auto ancillaries can step in and supply more to Indian and global auto majors. In a couple of weeks that no longer was a bright possibility.

As we moved from February to March, a decline in crude prices resulted in exciting times for the global airline industry. Nobody imagined a subsequent Saudi – Russian spat resulting in further cascading in oil prices and final culmination in global cancellations of all flights. As I write the article, airlines may have to face the worst challenge.  

While we can’t peek in the future, as entrepreneurs we need to forecast a base scenario and start planning for the same.

2. No revenue for a quarter

The way things are changing, I would not be surprised that lockdown may be extended or maybe take place again later in April /May.  We can look at a scene of no business for a quarter and make a contingency ( back up) plan to address the same. This plan will help you manage the business  (bring down the costs) for the next 3 months. As you must be aware, there are two types of costs/ expenses –

a. Fixed costs

These are the costs one has to bear irrespective of the revenue stream namely rent, electricity, EMIs, salaries, etc.

b. Variable costs

These costs may vary according to the revenue. Raw material, royalty, electricity for producing goods, etc. Many times it happens that without segregating the fixed and variable costs, one may get unnerved by the total costs.

c. An Excel Template to note the fixed costs. This is a rough estimate for a Micro-Enterprise.

Use a spreadsheet to note all the costs. This may seem elementary but costs change over time and you may not be aware of the exact costs.

Multiply the cost by 3 months. It will mostly give an idea that this is not the end of the world. Many costs can be reduced.

d. Think Laterally to bring down costs ( lateral thinking – trying to get new/unique solutions)

You will be surprised to note that the Pareto Principle will definitely work for the Fixed cost. What it means is that 80% of the costs will come under 20% of the heads.  So in this case also, salaries and loans cover ( 2 heads out of 10) 80% of the costs. This actually helps, as reducing just 1 or 2 heads will substantially reduce the costs.

i) Rent

Your landlord may not get a new tenant if you leave the place. Definitely not as good a person as you are or perhaps not a person who has paid all the rents on time. Talk to the landlord, it would not be a surprise if he/she will allow you to spread the 3-month rent (April – June) over the 9 months from July to December.

ii) EMI

While I wrote the article, I had written to talk to the bank to get a moratorium for 3 months. But as of 27th March, the RBI has already provided the moratorium for all the term loans.

iii) So think laterally on the same.  You would be surprised how other stakeholders would also be ready to help you. It’s a win-win

iv) Please be transparent in your discussions and document (write the changes)

3.  How the business will ramp up

If we have considered ground zero (start Date) as of April 2020, we also have to plan for the next quarter of July 2020 to Sept 2020.  This is the quarter when the business will start limping back to normalcy. We will explain this with examples –

  • Beauty Parlour ( Bridal Makeup / Normal Parlours)
  • Coaching Classes
  • Food Providers (Party orders/ Home Delivery /Mess)

The above graph also tells that a home delivery business has to be ready to scale up his/her business.

At the same time, some businesses will have a slow ramp-up to normalcy. 

Luxury vs Needs will also be a driving factor in businesses coming back to normalcy. Similarly, some businesses will also have to fight the scare /inertia of COVID19. Eg. Ladies may refuse to visit beauty parlours because of social distancing and hygiene issues.

a) Forecasting and Preparation for ramp-up

Try to proactively understand scenarios (possibilities) and try not to be in a position where you will be complaining of future events. Listing down future scenarios will help you to be in a better position to face them.

b) Coaching Class

Let us revisit coaching classes. It is evident that this sector will have the smoothest return to normalcy. But what if your competitor has shifted to an online medium? Your students may have shifted there.  Yes, listing future scenarios will help you face them.

4. Customer Connect

Now not all entrepreneurs are so lucky that parents will line up near their centres and follow up asking how their kids will recover their missed classes (while coming upfront with the fees for the next season) most entrepreneurs will have to generate rather regenerate the demand.

One of the best ways to generate demand in Q2 is by having more customer connect in the coming quarter.

In the last graph, we looked at 3-4 businesses and apparently amongst them we noted that beauty parlours will have the toughest time to regain normalcy.  So let’s look at how a beauty parlour can connect with the customer to ramp up the demand.

a) Customer Database

In case you have the telephone numbers, email addresses make sure you collate all the information and prepare the database. If you have not collected the information, better late than never.

b) Creating a social media presence

i) YouTube video – Make a simple video with some home beauty tips and upload on YouYube.  Send the links on WhatsApp/emails, etc.

ii) Create a Facebook Page/Web site

iii) Mailing list/WhatsApp groups

iv) Selecting a policy

There are many ways to attract attention on Social media platforms. Many ideas will be free while some may have cost/effort associated with it ( effort – you may require some time and planning ). Some may be technically challenging either for the entrepreneur or the customers.  Eg; A Twitter handle may not be the best policy for a beauty parlour but a FB page or WhatsApp group may be more beneficial. Select a policy based on the net savvy and reach of your customer and the cost/effort benefit as an entrepreneur.

v) Finally don’t forget that social media can be a nasty tool, a mistake or unpleasant negative feedback can become viral (spread) or spread by your customer

c) Audio Call – Still Works

Nothing like an audio call when people are free. Having worked in the corporate world, I know how difficult it is to grab my customer’s attention on a call. It is at times worse than the elevator pitch. (Elevator Pitch – Selling an idea while you are in the lift)  In the Corporate world, you get 30 seconds and have to make your point in that small time frame.

In the current scenario, take the benefit of people having time on their hands to engage with them on a personal level.  The customers will regard these calls with high esteem (respect) as they will register somewhere that these calls have no direct business motives.

d) Have Information at hand & most importantly get information

i) Information at hand

While we are on the call, use it to share information about new hygiene levels that your beauty parlour has encouraged.   You can perhaps tell that we are now having only customers by appointments so that there is no crowding at the reception area, etc.

As discussed, foresee the challenges, plan solutions and most importantly use customer connects to inform the customer about the initiatives.

ii) Get Information

Too many beauty parlour examples, let’s change to the home caterer.   A common food item ordered from home caterers is “Biryani”. Unlike Pizzas/Burgers, this food item is I think fairly reserved for the unorganised sector.  Such entrepreneurs can use this customer connect opportunity to understand items what customers want to order but are unavailable with them. Just as an example, customers may feel they want some Potatoes added to the “Biryani” like the “Bohri Biryani”  or some customers may want to have different flavours of Biryani maybe Fish/Prawns.  

iii) Depending on needs, Google Forms can also be created to collect information.

Usually, it is noted that feedback is easier to collect and analyse when collected verbally, but if the number is high Google forms can be designed.  Also, forms can be used to collect negative feedback, which at times customers may be reluctant to give face to face.

5. Flatten your curve

You may be flooded with Whatsapp messages on how to flatten the curve for COVID -19.

 

Social distancing has been the mantra for flattening the curve. It is nothing but the number of patients getting to hospitals at one time.  Say 1000 patients may turn positive, but the government tries to flatten and see that not all 1000 will need medication at one time. Assuming the government has only 300 beds to offer. This way the entire health sector will not crumble(collapse). Let us call this a critical position where the infrastructure crumbles and people may have to be left to die.

Another point to be noted is that the flattening of the curve results in delaying the collapse. This delay helps the administration to come up with solutions like vaccines, buying ventilators, creating isolation wards, etc.

So as entrepreneurs we also need to understand that critical point where the business may not be able to sustain.  We too should try to flatten the curve. Remember, the more the point is delayed it gives you time on war footing to prepare contingency plans which we discussed.

Contribution is nothing but the difference between selling price and variable cost.  So sticking to the same business of caterer, contribution is the difference between the cost of making the Biryani and selling the Biryani.  It will not include fixed costs. So Revenue (amount collected from Selling Biryanis) Less Variable cost (Cost of all raw materials, packing and transport) .

 It is clear from Fig 3, the entrepreneur can flatten the curve and the loss and the Point of collapse By Bringing down the fixed cost in the first quarter.

Conclusion

You have got some free time, use the same to restart your system with a new work-life balance.

 

Article Contributor:

Sandeep Tapaswi, is CEO, Fands Infonet Pvt Ltd a leading IT corporate training organisation. He has completed his Engineering and MBA from Pune University and runs his IT training organisation for 20 years.

His passion includes Badminton, Trekking, Triathlons/ Marathons and Urdu Ghazals.  Culture Change is a study close to his heart, and he is a Culture Change Catalyst by choice.

In his free time, Sandeep mentors small enterprises /Ngos for “Culture Change”. 

 

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