How one SME is handling the lockdown in South Africa

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By: Alexander Knieps

Are you struggling with the impact of Covid -9? Are you scared of going out of business? Is the uncertainty killing you?

Don’t worry, you are not alone – we have the same thoughts, but we will try to help (see our amazing offer below that will help). In German, there is a saying, “Geteiltes Leid, ist halbes Leid.” Translated it means something like this – a trouble shared, is a trouble halved. I am personally living by the motto “What I can’t control, I am not stressing about.”So what can we control?  

We as Printulu are shutting down production, as requested by the President, from the 26th of March until the 16th of April.

It hurts all of us, but it is required in order to protect the weakest of society, ironically while affecting the poorest of society the most. Given this unprecedented situation, maybe comparable to the 1929 market crash, we urge all of our clients to make the most out of this lockdown.

We believe difficult times bear the biggest opportunities:

  • 1890: General Electric was founded during a recession.
  • 1975: Microsoft was founded during stagflation in the US.
  • 2009: Dropbox was founded during the last financial crisis.

What does this mean for us? The lockdown is the opportunity to work on what we can influence!

We are evaluating all angles to costs, ensure liquidity while investing in our team and our brand. You should do this, too. Not later, not in 3 weeks. Right now. We do not know how long the situation is actually going to last.

a trouble shared, is a trouble halved

Alexander Knieps

Therefore, we are taking the following measures in order to protect our staff and to avoid any layoffs during these times:

Cut fixed costs

Rent: Our lease contract ended in December. From then on we were automatically on a month-to-month contract. As we do not know how long the pandemic will last, we will cancel our lease. Everyone is working from home in any case. We have spoken to other tenants in the building – they are facing similar difficulties. As our landlord really wants to keep us, they are now trying to stop their bond payment to the bank and come to the party. We will see how this plays out, but we need to work on our fixed costs. Have a chat with your landlord – they know what you are going through.

IT costs: We have been working on our platform for 3 years, releasing updated features every week. Sometimes on the frontend, but mostly on the back-end to automate processes or better track orders in production. Right now we have stripped our projects down to the bare minimum. IT is expensive and mostly pays off in the long run. Right now, it is a time to balance the long-term and short-term.   

Other costs: I spent the last 24 hours going through our bank statements, line by line, to evaluate which costs can be cut. You will be surprised what you will find. I have cut down on subscriptions to help automate marketing projects because right now we have the hours to do work manually. In addition, we canceled a subscription for streamlining our hiring process – it is very clear, we cannot hire right now. Times are tough…

Salaries/team: We recommend to let everyone work from home (if possible). If someone is not able to work from home we encourage them to help everyone in this situation as much as possible. Consider short-time and only if the lockdown continues for too long and it is inevitable, start retrenching people. If you have to retrench, try to base it off of performance and not by the length of employment. This is important for the culture of your company.

Ensure short-term liquidity

Grants: Up until now, it is not clear to me what exactly the South African government is offering to help to mitigate the effect on small businesses. However, we really recommend that you apply via http://www.smmesa.gov.za/

Loans: If you have a loan, speak to your bank to get a repayment holiday. Most of them have already implemented it. In addition, speak to the bank for more liquidity. It is not going to be easy, but necessary. Maybe not for the next 3 weeks, but what if it takes longer?

Investors: Speak to potential investors or friends (also called “Friends, Family and Fools”) to provide you with a loan or an equity investment in order to bridge a short-term liquidity gap. Prefer raising debt rather than equity. If you cannot come to an agreement, use a so-called safe note agreement. We have made use of this in the past and are also speaking to our investors to provide a financing bridge in case this situation goes on for 3 or even 6 months.

Suppliers: Speak to your suppliers and revisit payment terms. Unfortunately, your suppliers will have many clients asking for an extension. In order to not harm the relationship and be able to act quickly after the lockdown, we really recommend working collaboratively with your suppliers.

Invest in your team

Training: If you have a team, now is the time to upskill them and make your team more robust to any external shocks. Is there anything you always wanted to delegate, but never found the time? If you do not have a team, make sure you upskill yourself. Read a book about cost cutting, marketing, leadership. Use the lockdown time and don’t waste it on Netflix. Rather invest in courses from websites such as Udemy or GO1 to provide courses for your team (or yourself)!  

Analysis / clean-ups: Do you need to follow up on some payments? Is your accounting not 100% up to date? Is there an analysis you always wanted to do, but did not get the time? Now is the time. Get it done and make every minute count.

Invest in your brand

Contact clients: Make sure you contact your key clients and help them survive this unprecedented situation. Help now and have a loyal client forever. With this email I am trying to make a small contribution in trying to help businesses.

Marketing initiatives: Prepare all your marketing initiatives for the year. Get the designs ready, get the ad-copy right and get the ball rolling so that you are moving strongly when the lockdown is over. Marketing is a variable cost – not a fixed cost adding to your underlying risk. Secure liquidity and invest the rest in your brand and product.

Printulu is an online printing firm in South Africa. Alexander Knieps is their CEO.

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