‘Surviving the Crisis’ (for small businesses)

For most organisations (including Not-for-Profit Organisations) and individuals alike, the first priority during a crisis is to SURVIVE.

From an individual perspective, it is important that an Entrepreneur should neither play god (not everything is under your control) nor play the victim of circumstances (self-sympathy).

Awareness of the situation and clear communication to both internal and external stakeholders are very crucial in this situation to control the panic.

Now let’s imagine a family in a car during a total lock down scenario. The distance that the car can travel is determined by the quantity of fuel in the tank, mileage (efficiency of the car) and the next available petrol bunk.

In this example the car represents your organisation, the family represents employees, fuel represents cash, mileage efficiency represents your expenses and the distance to the next petrol bunk is the time taken for the cash flow situation to normalize. The chance of survival is heavily dependent on understanding these factors before making decisions. For the safety of the car and its passengers the driver of the car (Business Owner) cannot afford to panic.

While what we have to say in this blog may not be entirely new to most readers, we hope that it provides you with a framework to think clearly and make appropriate decisions amongst all the noise and panic.


Financial and people dimension of decisions operate in tandem to each other and are equally important. Therefore, it is important to balance both.

Though the leader strives to safeguard the interest of all stakeholders, the bitter truth about the survival stage is that some inevitable sacrifices and hard decisions have to be made.

Survival of an organisation during crisis like these depend largely on cash flows. Therefore, finance generally tends to act as a runway to make people related decisions.

In the current scenario we strongly recommend that you plan your cash flow for the next two months at least. The steps to make a plan can be broadly classified as review of expenses and cash positions.

Review of Expenses-

After listing all expenses for the month, examine each expense and categorize them as critical and non-critical (or essential and non-essential) for the present situation. Identify parties with whom negotiation is possible. Depending on the financial position the organisation may choose to pay all expenses, defer payments to some (in part or full), ask people to take voluntary cuts or in extreme cases lay off.

Let us now look at some expense items in detail:

·      Salaries and Wages

It is most likely to be the biggest expense and the most sensitive of all. Smaller organisations may take advantage of the Governments contribution to EPFO for certain class of employers[1]. In dealing with salaries, lessons may be drawn from the bigger firms and MNCs and start-ups in handling this.

For example-

a.      top executives either forgo or take deep pay cuts,

b.      some of them have put in a hiring freeze,

c.      year-end bonuses and appraisal have been cancelled,

d.      deferred part payment of salary beyond a basic amount till cash flow revives,

e.      some start-ups have even asked employees to voluntarily offer to take pay cuts based on their affordability[2].

This shows that the decisions are not binary (i.e. not that you either pay fully or don’t pay at all), it could be fine balance somewhere in between too (i.e. Partial cut or partial deferral).

Employers have to keep in mind that livelihoods depend on their decision in these difficult times and their treatment of employees during the time of crisis says a lot about them. Laying out the facts, options available to the organisation and involving the employees in the decision-making process in one way of handling it.

·      Rent-

This might again be a bigger bill depending on the type of business. The above listed options of full payment, deferred payment/ part payment may be used here too. You may also consider negotiating with landlords to work out a concessional rent for warehouses, shops etc. not used during the period. [3] [4]

·      Repayment of Loans-

The organisations in need may make the best use of the Moratorium on loans brought in by the Reserve Bank. However, one should keep in mind that the moratorium is merely a deferment, and not waiver on EMI payments. Interest will still accrue on the outstanding loans. It is important to note that credit cards carry a much higher interest rate and might result in a heavier burden[5]. Therefore, it is better for organisations with no cash flow problem to pay as per schedule. 

·      Supplier payments-

This is most likely the easiest to postpone depending on the business. However, it might still be prudent to make part payments so as to not strain relations with good suppliers and over burden them.

·      Electricity-

This could be a considerably big expense especially for manufacturers. No relief has been announced so far and consumers have been asked to pay based on previous months bill. Therefore, this needs to be planned accordingly.

·      Insurance-

You may consider renewal or postponement of insurance payments based on value of stock and risk attached to it. Essential businesses that remain open during this time may consider taking up new insurance policies to protect their employees and/or themselves (Read: BharatPe-ICICI Lombard[6]Reliance[7]). The Government has also relaxed dates to pay premiums on certain insurance policies[8].

It is needless to say that “Cash is King”, so ruthless cutting down of expenditure might be required. It requires revisiting of new capital expenditure (including replacement), marketing expenses and even small expenses like Magazine or other subscriptions etc. Some large companies have even cut down on refreshment expenses (tea, coffee and snacks etc…).

Cash Position-

The next step is to determine the cash position of the organisation by considering:

·      Bank balance,

·      Other easily liquid able assets (if any)

Example- Short-term deposits, Fixed deposits, Debt based funds, Gold, Bonds etc… (Shares and Mutual funds may not exactly be liquidable in the current market scenario, however, they too may be considered for extreme scenarios)

·      Availability of Cash Credit or Overdraft Facility with bank

·      Receivable management-

While most customer might have already suspended payments, it might be crucial and worthwhile to follow up with customers to receive as many payments as possible. Maintaining a cordial relationship with customers will be important for this. You could also offer cash discounts or negotiate a part payment to get payments at the earliest.

·      Inventory –

Explore the possibility of bulk liquidation of excess inventory for immediate cash, though the possibility in the current scenario may be remote.

As a small-scale manufacturer rightly mentioned, for some businesses the problem is not in bearing the expenses in the short term (which is also drawn from short term credit) but it is about collectability of receivables that were outstanding right before the pandemic broke.

During this phase when the organisation battles for survival, the leaders focus has to be on the “now and here” (short term) keeping the larger long-term picture in mind. We do understand that this is easier said than done.


To be able to communicate clearly the leader should first be clear in his/her mind. Proactive and open communication is extremely important to maintain trust amongst all stakeholders, most importantly your employees.

Once the decisions are made for each of the expenses, it is important to communicate the decision to the concerned party with reason and clarity. Employees and stakeholders should not be left second guessing till the payday arrives. Communicating difficulties in payments in advance gives them the most valuable time to plan and make alternate arrangement to take care of their own affairs.

Once the organisation overcomes the Survival stage, it will then be time to Stabilize and then to Sustain.

Survive => Stabilize => Sustain

# This too shall pass for if winter comes, can spring be far behind?

[1] https://www.businesstoday.in/current/economy-politics/relief-for-employers-govt-to-bear-epfo-contribution/story/399304.html


[3] https://www.businesstoday.in/latest/trends/coronavirus-tata-starbucks-asks-outlet-landlords-for-3-month-rent-waiver/story/400351.html

[4] https://economictimes.indiatimes.com/industry/services/retail/lockdown-effect-restaurants-cinemas-retailers-at-malls-seek-zero-rentals-till-may/articleshow/74956239.cms?from=mdr

[5] https://www.moneycontrol.com/news/business/personal-finance/rbi-moratorium-avoid-postponing-credit-card-dues-and-escape-exorbitant-interest-costs-5103691.html

[6] https://www.livemint.com/money/personal-finance/shopkeepers-can-buy-covid-19-cover-from-bharatpe-11585561333611.html

[7] https://www.livemint.com/money/personal-finance/reliance-general-insurance-launches-covid-19-protection-insurance-cover-11586333920929.html

[8] https://www.livemint.com/news/india/covid-19-premium-pay-for-health-third-party-auto-insurance-policyholders-eased-11585808454229.html

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