What keeps PH business owners up at night?
Day 8 Business Academy Foundation, a social enterprise dedicated to helping small and medium-sized enterprises (SMEs), conducted a survey between June and August this year to determine the current state of mind of SME business owners and see what kind of help or assistance they need given the daunting challenges posed by the COVID-19 pandemic.
Here are some of the key findings based on the responses of close to 300 entrepreneurs from different industries:
1. ROI (return on investment): Only 30 percent of the respondents have recovered their business investment while 20 percent have not been able to recover anything since they started their business. About half were on the way to recovering their investment when the pandemic suddenly struck.
2. Growth 2021: Only 38 percent saw an increase in revenues while 62 percent experienced lower revenues during the first half 2021 versus the same period in 2020. Of this, two-thirds of businesses said their sales had declined by over 30 percent year-on-year.
3. Growth 2020: Only 29 percent reported an increase in revenues in 2020 versus 2019. The rest posted lower revenues versus 2019. Of this, seven out of 10 respondents said sales declined year-on-year by over 30 percent.
4. Offering model: As to how their business model changed during the pandemic, 62 percent targeted new markets, 57 percent introduced new products, 43 percent entered new distribution channels, 47 percent adjusted their pricing strategy and 34 percent improved customer acquisition and bonding strategy.
5. Operating model: On changes in the operation of their business model during the pandemic, 20 percent improved their supply chain, 40 percent simplified their company’s processes, 34 percent repurposed staff for other functions, 32 percent used the company’s strengths to do something else, 23 percent innovated on what they were already doing, while 51 percent resorted to reducing their costs.
6. Survival actions: To survive the pandemic, actions taken included: 28 percent decided not to fill up the vacancies left by resigning employees, 20 percent retrenched some regular employees and 14 percent cut the pay of existing employees (principally resorted to by those who have not yet recovered their investment).
7. Office space: Real estate wise, 16 percent had to reduce the total space being used by their company to reduce their rental expense.
8. Cash flow: Assuming no further improvement in their business situation, SMEs estimate that they will go broke in: 12 percent said they would only last a month more, 7 percent said two months, 19 percent said three, 14 percent said 4 to 5 months, 28 percent will last 6 to 12 months, with only 21 percent saying they would last another year. Typically, those who have already recovered their investment had more cash to survive on.
9. Cash strategy: To preserve cash, 29 percent had to borrow more money, 24 percent had to delay paying their suppliers and 13 percent had to restructure their bank loan. Only 18 percent said they did not have to resort to any cost-cutting measures.
10. Future cash strategy: To improve cash flow further, 55 percent were considering welcoming new investment and business partners, 33 percent plan to negotiate payment terms with their suppliers, 28 percent plan to negotiate payment with their banks, 22 percent plan to negotiate payment terms with lessors, 22 percent wanted to reduce the number of people further, 15 percent plan to reduce advertising and promotions investment, 13 percent wanted to reduce product lines and 9 percent plan to reduce training investment. Only 15 percent did not have to negotiate anything for their survival.
11. Other actions: Some also mentioned liquidating nonperforming assets, asking shareholders for advances, outsourcing services and seeking advice from mentors.
12. Source of funding: 20 percent plan to get loans from banks, 18 percent intend to borrow from microlenders, 6 percent from online lenders and 3 percent appear to have no choice except to resort to loan sharks, with only 1 percent saying they availed themselves of government grants.
13. Wish list: 73 percent hope someone can help them increase revenues, 74 percent hope someone can help introduce them to more potential clients, 64 percent hope someone can help them become more operationally efficient, 61 percent hope someone can help improve their cash flow and only 2 percent did not need any help.
14. Ideation: To get new ideas, 76 percent of the SMEs attended many webinars, 67 percent relied on self-reflection on what to do, 66 percent read up on what others were doing, 49 percent met their people on strategy and 46 percent decided to consult mentors.
15. Government: Only 34 percent think the government did all it could during the pandemic. Two-thirds think otherwise.
16. Migration: 30 percent of business owners are considering migrating if the business situation will not improve in the Philippines. Of this, 40 percent said they would definitely migrate. The majority of those who have recovered their investment do not plan to migrate despite business challenges.
17. Business closure and employment: 30 percent of business owners are considering closing their business and seeking employment if the business situation will not improve in the Philippines. There is a close correlation between closing a business, seeking employment and migrating to another country.
18. Mental health: 57 percent of business owners have experienced mental health issues, with 23 percent answering “very often” compared to 34 percent who said “occasionally.” This not only lowers their productivity, but it can also affect sleep quality and lowers the immune system, as brain functions are interlinked with our immune system, the exact opposite of what is needed to fight COVID-19. Only 17 percent said they never had any mental health issue.
19. Traits: Among self-claimed personal traits of the SME entrepreneurs, 88 percent claimed that they are open-minded, 80 percent are courageous, 76 percent have moral consciousness, 76 percent are optimistic, 65 percent are spiritual, 61 percent have a personal purpose. Although only 45 percent have social support groups, 35 percent have strong role models and 31 percent make time for physical exercise, three major factors that can affect their resiliency.
The full report can be downloaded from www.day8.org.