Manoeuvring Post-pandemic Period
COVID-19 pandemic has changed many things, especially how we do business. Gopi Ganesalingam, Vice President of Global Growth Acceleration at MDEC, writes on how startups can deal with the challenges. This article first appeared in issue 6 of In Focus magazine.
SMEs have always been important contributors for any nation’s economy. However, if there’s one thing we’ve learnt during this COVID-19 pandemic, and recent lockdown that happened globally, is that things can suddenly change and SMEs need to quickly adapt to change. This is especially so for the shift to digital platforms. Lockdowns and restricted movements imposed by governments around the world have given a huge tailwind for digital transformation, and to customer experiences, showing that SMEs must move on to digital platforms.
As digital platforms have no boundaries, the door to global trade will be opened to many of them and the world can be their potential market. This is especially so when the shift to digital platforms comes with a connected supply chain ecosystem to support global outreach. That being said, SMEs will also need to relook at which stage of growth and customer acquisition they are at, especially now during the crisis of the COVID-19 pandemic. Digitalisation opens opportunities and access to customers locally and regionally that might suffice for some, but for others it might still not be enough, which is when accessing global markets will be critical.
With the recent PENJANA Economic Recovery Plan announced by the Malaysian government, there has been quite a number of items that’ll benefit SMEs and startups. The highlights include tax incentives such as tax deductions on renovations, work from home implementation for employees, COVID-19 related expenses and even increased Accelerated Capital Allowance on machinery and ICT equipment. SMEs and startups can also benefit indirectly from tax breaks given to landlords as this will see them getting reduction in rentals.
Through PENJANA, there’s funding support that the Malaysian government has given including the Dana Penjana Nasional that provide RM1.2 billion funding and capital to Malaysian venture capital funds and startups focusing on digitalising businesses. The fund will be used to foster innovation and domestic venture capital, and invested into seed stage or co-creation funds, series A/B funds, growth stage tech funds, venture debt funds and opportunistic funds.
Access to low interest loans has also been a focus with the PENJANA SME financing and PENJANA microfinancing – both with low interest rates of 3.5 per cent. With the former, the banking sector will offer an additional RM2 billion to SMEs impacted by COVID-19 with a maximum loan size of RM500,000 per SME, while the latter is a dedicated RM400 million fund to help micro SMEs, capped at RM50,000 per enterprise. Furthermore, with employee cost as a major factor for many businesses, an extension on the wage subsidy programme to another three months will also be of help to them.
At MDEC, we’ve also done our part in helping businesses weather through the pandemic from digitalisation assistance, upskilling, supply and demand services matching and funding facilitation.
The Malaysian government has always had an eye on growing social enterprises and tapping into their potential in the country, particularly via Malaysian Global Innovation and Creativity Centre (MaGIC). In fact, just recently in January 2020, the Malaysian Ministry of Entrepreneurial Development, via MaGIC, announced the social enterprise accreditation for 22 social enterprises. This sort of recognition is important, as it gives social enterprises benchmarks, clarity and most importantly, credibility. Credibility is important as it shows that these enterprises have succeeded in adopting sustainable models and it’ll open doors for funding, attracting talent and customers. What’s more, due to the guidelines provided by the accreditation, social enterprises gain trust that procures funding to survive the post-pandemic period.
Three Steps to Manoeuvre Post-pandemic Economy
Pivot. The pandemic has brought about crisis to businesses, but it also brings opportunities. Startups and SMEs will now need to relook at their businesses and business models and to pivot if they need to. What worked before the pandemic may likely not work during post-pandemic. Startups and SMEs will need to think very hard on how they can adapt their businesses to not only survive, but to eventually grow. Trim the fat, optimise operations, look at new or potential revenue streams. That will help startups and SMEs weather these challenging times.
Digitalise and automate. It’s safe to say that MDEC is the key agency that has been driving businesses to digitalise. With initiatives like Digital Transformation Program (DTAP) and SME Business Digitalisation Grant, it has been actively encouraging Malaysian businesses to digitalise to ensure that they are futureproof. This is needed now even more than ever considering that human contact has been restricted. On the customer engagement front, digital platforms will allow startups and SMEs to reach out to their customers easily, without relying on face to face contact.
Digitalising and automating businesses can also help in cost management. Certain processes and tasks that once required manual labour can now be streamlined and optimised, allowing human resources to be deployed more efficiently elsewhere and reduce manpower that’ll eventually reduce cost to a certain extent.
Seek help. There’s no harm in seeking help when it’s needed especially when the sustainability of your business is at stake. There are many avenues that can be found such as those by the Malaysian government and grants that can be applied such as MDEC’s SME Business Digitalisation Grant. Outside help via funding options include direct venture capital funding, crowd funding and if you really don’t want to lose equity, P2P lending. Also, third party opinion can be a big help. Finding a good mentor during this period, especially experienced ones that have weathered previous crisis, can help in ways that sometimes an injection of funds can’t. Insightful advice of a mentor through their experience, from optimising business processes and how to pivot, is valuable.
Main photo by Marvin Meyer on Unsplash