The Future of Small Businesses is Hybrid

A small consultancy firm in Malta shares from its privileged observatory the opportunities and difficulties of being a small company during the COVID-19 pandemic

Initially born as a “traditional” software company, Across Limits, is a 19-year old company that has, over the years, specialized in helping other companies seize European opportunities for growth. It is in fact a small company, based in Malta and employs around 25 people. Its founder, Angele Giuliano, is a business angel and mentor as she dynamically works both as a small business owner and a business consultant for other companies. She provides some first-hand insights on what it means to be a small company at the time of Covid-19 (1).

“As the pandemic hit the economy, we at Across Limits have been working incessantly. Like us, some companies have been busier than before, especially those involved in health and research,” says Ms. Giuliano. Not every company shares the same luck, but there is one thing everybody can agree on. And that is the way companies are run which has changed dramatically since the start of the COVID-19 pandemic.

How have Small and Medium Enterprises (SMEs) been coping since February 2020?

Adjusting to new ways of reaching potential customers

With the impossibility of attending and organizing in-presence corporate events like trade exhibitions, workshops, and conferences, companies had to come up with new ways of meeting potential customers.

Indeed, the “Global State of Small Business Report April 2021” (2) a collaboration between Facebook, the OECD, and the World Bank, indicates how the most common change made by SMEs since the start of the pandemic has affected interaction with customers.

“Our company used to organize workshops as a way to introduce itself to new clients and, thus, to sell consultancy projects,” says Ms. Giuliano. “With all the travel and gathering restrictions, we now have to meet customers on a one-to-one basis, using virtual conferencing platforms”.

Several important trade shows which couldn’t take place in 2020 and 2021 have come up with virtual shows. This is the case for Hannover Messe, one of the largest exhibitions for the manufacturing sector. "The past few months have shown that digital formats cannot replace a real trade fair," said Dr. Jochen Köckler, CEO of Deutsche Messe AG. “In 2022, sanitary conditions allowing the trade show will return to a physical format, but complemented with innovative digital opportunities for involvement.” (3)

While physical presence cannot be a substitute for the whole marketing and sales process, especially in some sectors, online advertising can offer interesting opportunities to SMEs. Indeed, presence on search engines, if well structured, allows companies to reach a potential customer base of millions.

The Call: Government should help companies embrace the digital transformation

Governments should improve digital infrastructures, in order to reach all businesses even in remote areas. This allows users at every step of the value chain (suppliers and customers) to easily interconnect with each other. Incentives should be addressed by companies to enhance their IT infrastructures and to train employees for the new digital environment. Particular effort must be done to increase companies’ attention to cybersecurity.

Adjusting to a new workplace setting

Remote work has not only changed interaction with customers and suppliers but has also changed working with colleagues.

There are both pros and cons of working from home. First, less time is devoted to commuting. “Malta is a small island,” says Ms. Giuliano. “But, we have traffic too.” Saving on the number of hours spent commuting, which are often unproductive, can actually lead to an increase in productivity. This has been the case for some companies, like Across Limits.

Research on this point is, however, controversial. In a recent study conducted by McKinsey, (4) which analyzed the potential for remote work in a range of countries, it was concluded that although some tasks can be done remotely in a crisis, they are much more effectively done in person. These are activities that entail advice and feedback, or those that benefit from collaboration.

Hybrid models of remote and in-presence working are likely to emerge. Ms. Giuliano herself, is thinking of asking her employees to report for office work at least for two days a week, since “a couple of days of physical meeting is required to align on common projects”.

The Call: Government’s policies should aim at making work from home sustainable in the long run

It is clear that hybrid forms of working will remain indefinitely considering both in-office and work-at-home conditions. For smaller companies, this might mean a very demanding change in their logistics and their working arrangements. Government policies should be aimed at assisting companies in their reorganization process, especially for smaller companies who are transforming remote working into an opportunity for all.

Accessing to finance and diversification of SME financing instruments

One major issue during the pandemic was related to the liquidity shortages caused by the sudden drop in revenues.

While access to banking finance instruments remained relatively easy for SMEs, thanks to robust governments’ measures, OECD findings (5) indicate a tightening of alternative sources of finance, particularly on early stage equity financing.

Risk aversion increases in times of crisis, as Ms. Giuliano, a business angel herself notes. In anticipation of potential losses, investors might decide to wait for better times.

The Call: Public policies should aim at supporting the recent trend of SMEs diversification of financing sources

Governments should support the market for alternative sources of financing for companies (venture capital, online financing, and factoring, business angels, etc. through a mix of fiscal policy, government-backed guarantees, and regulatory initiatives).

Conclusion

Since the start of the pandemic, small companies had to face a changing business environment. Regardless of the actual impact on their balance sheet, companies have faced new working conditions in every aspect of their company life. While being smaller might entail greater flexibility and capacity of adapting, public policy should be aimed at helping SMEs to adapt to the new business paradigm.

Written by Giulia Silva who holds a graduate degree from Bocconi University. She is currently working as an Economic Affairs Officer at Confindustria Piacenza

Edited by Grace Ann Marciano

September 2021

In 2020 Think Tank AlterContacts launched the Lockdown Economy, an international non-profit grassroots social-economic and educational initiative to help small businesses and self-employed professionals overcome the challenges of the pandemic and reactivate the economy. It is registered by the United Nations as an Acceleration Action for SDG. From May 2020 until July 2021 we have been collecting insights from small business owners and self-employed professionals from different business sectors and countries to see how the COVID-19 pandemic affected their business, their life, and future. This article is based on the field research of the Lockdown Economy.

References

(1) Think Tank AlterContacts, Lockdown Economy initiative Lockdown in a European Opportunities Consultancy with Angele Giuliano. Small Businesses and COVID-19. Available at https://www.youtube.com/watch?v=YrdLXTtt5gg. Accessed 7 September 2021

(2) Facebook, OECD, and World Bank. 2021 Global State of Small Business Report. Available at https://about.fb.com/wp-content/uploads/2020/07/Global_State_of_Small_Business_Report.pdf. Accessed 7 September 2021

(3) Hannover Messe News website. HANNOVER MESSE 2022 - Focus on digitalization and decarbonization. Available at ttps://www.hannovermesse.de/en/news/news-articles/hannover-messe-2022-focus-on-digitalization-and-decarbonization. Accessed 7 September 2021

(4) McKinsey Global Institute. What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. Available at https://www.mckinsey.com/featured-insights/future-of-work/whats-next-for-remote-work-an-analysis-of-2000-tasks-800-jobs-and-nine-countries. Accessed 7 September 2021

(5) OECD. The impact of COVID-19 on SME financing: A special edition of the OECD Financing SMEs and Entrepreneurs Scoreboard. Available at https://doi.org/10.1787/ecd81a65-en

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