The COVID-19 outbreak has affected small businesses not just in local states but globally. This is especially true in developing countries, where they are experiencing socioeconomic pressures because of weak economic activity, lack of government support, and limited resources. Even big companies are forced to permanently closed down, pushing economies to decline.
The loss of jobs and business opportunities led to the rapid growth of unemployment. In a report by the Congressional Research Service, the unemployment rate reached a groundbreaking level of 14.8% in April 2020. It was the highest unemployment rate recorded since the Great Recession. As a result, lack of livelihood in poor communities pushed them into poverty, while resorting to financial aids, such as loan servicing and government support.
For those running a small business enterprise, laying off employees might be their best solution. But doing so will only transform the current economic disaster into a social crisis. To protect income and safeguard jobs, this article will discuss how you can revive the growth of small businesses while minimizing the disruptions brought by the global pandemic.
Take note of these lessons to preserve the financial stability of any business.
Allowing small businesses to grow
Transforming the role of state-owned businesses by providing more space for small firms will help new entrepreneurs find their footing in the ever-competitive business world. For example, there are countries where state-owned enterprises offer utility services, such as telecommunication, sewage, water source, and electricity generation.
But this technique may lead to the inefficient use of government resources, resulting in exhaustion of sources and generating lower income returns. What’s more, many utility companies are monopolies.
A feasible solution is for state-owned enterprises and governments to provide access to some essential services to allow small enterprises to survive. The government can also improve consumer protection and market competition in areas requiring strict regulations.
As the government strengthens its involvement in the business sector, it can prevent bigger firms from dominating the key sectors. It will also benefit the consumer population by reducing the scope for gouging and price controls, which heavily distorts the market competition that affects many consumers.
Another way is to give priority to female entrepreneurs to realize their capabilities in running a small business. Highlighting the role of women in the market sector can widen avenues, contributing to economic stability and community welfare. The government can promote female-led businesses by offering training in handling finances and business processes.
A great example is the country of Armenia, where they encourage women to enter entrepreneurship. This program led to the enrichment of community welfare, such as skill development, increased number of business registrations filed by women, and smooth access to financial resources.
Improving business regulations tailored to the needs of modern commerce
As more households plunge into poverty, banks have become more cautious about allowing mortgages due to low-quality loan applications and market risks. When small businesses and entrepreneurs lose their financial resources, they are likely to lose business opportunities and growth potential.
The pandemic might encourage the government to improve business regulations and laws catering to the changing needs of small enterprises and modern commerce. In some countries, entrepreneurs struggle to open a new business as it often involves long delays and higher costs, affecting business growth and investment. This is one of the main reasons behind the increasing number of informal labor businesses in some countries.
To pave the way for formal labor markets, governments must exert their efforts to eliminate bureaucratic paperwork and allow more businesses to resume their operations as they slowly ease COVID-19 restrictions.
Transforming business models
Another way to secure the success of small businesses is to modify business models using the latest innovations. One of the high potential fields is healthcare, a worldwide priority because of the COVID-19 health crisis. Instead of traveling to major cities to consult a doctor, telehealth platforms make a great business opportunity as they can provide treatment, preventive services, virtual diagnosis, and training for healthcare workers.
Another example is the agriculture sector, where they can use innovations to grow their agricultural businesses. Through technology, small-scale farmers can raise better harvests, achieve better inputs, incorporate new crop production mechanisms, and improve product value. Using these approaches can make a big difference in helping businesses to thrive amid a financial crisis.
Small businesses play a big role in the economy as they provide business growth and job opportunities in local communities. Using the above-mentioned approaches can save millions of jobs and livelihoods in poor local economies and prepare them against the growing business threat of the pandemic.