We were inspired to write this article after seeing an opinion post stating that small businesses would need at least 24 months runway to get through the recession thanks to the pandemic.
Dictionary time: Runway refers to the time it takes for your startup to give up, provided your current income and expenses remain constant. Usually calculated by dividing the current cash position by the current monthly burn rate.
Of course, the ideal situation would be to have as much runway as possible, but we didn't think that a 24-month runway would be realistically achievable for many small businesses.
Nevertheless, we wanted to find out what they think of it from several small companies and spoke to Farid Nor from SimpanKira, Samantha Ng from Wise Crafters, Ivan Chin from GoLog and Khairul Faizi Khalid from REMEDi.
1) Farid Nor, founder of SimpanKira
SimpanKira is online accounting software for other small businesses and offers cloud accounting, payroll and payroll in one system.
"Honestly, I think a 24-month runway is a luxury that not everyone has," said Farid, adding that it was "ridiculously ambitious."
"Noble, but crazy. Most startups that I know haven't raised any money depend on monthly earnings. "
He believes startups that are a bit more mature would probably only have 6-10 months of runway, and it would depend on how they developed last year.
In order to stay ahead, sales teams need to know how long it takes to raise money with the bills they track, as the company's sales cycle determines how much a small business runway can save.
If the startups have previous sales performance data, they can most likely take this into account when assessing their spending budget and how long they could survive if they couldn't achieve the sales.
Farid Nor, SimpanKira
Desperate times call for desperate measures, so small business owners must do everything they can to stay afloat now, be it by negotiating with suppliers, asking customers to pay, or reducing expenses that aren't related to money-generating activities.
Despite SaaS 'demand in Malaysia, Farid said that we are still largely in a traditional mindset as entrepreneurs from generations of baby boomers are unwilling to incorporate technology into their work environment.
"Even if we do sales, we would have to come to their office because of the potential customers and run the demo instead of reading everything on our website, watching the tutorial and doing research online," he complained.
For this reason, their own sales were affected by the pandemic.
2) Samantha Ng, co-founder of Wise Crafters
Wise Crafters is a startup that sells healthy groceries that started online but has now grown into a physical oatmeal and kefir bar in Petaling Jaya.
Photo credit: Wise Crafters
Like Farid, Samantha agreed that a 24-month runway would be ideal to survive the recession, but realistically, she thought 6-12 months was the answer.
“During this pandemic, many small businesses have little or no income. The companies that were estimated to have 18 months of runway survival based on normal day estimates may not meet their expectations as the loss is now much greater. Maybe it was reduced to 12 months or less, ”she said.
Since their own runway is affected, Wise Crafters have led their offline customers online and are instead concentrating on online acquisition.
"We will take the budget off the previous runway and invest again in website, packaging and customer service," said Samantha.
Some other ways she shared that small businesses (especially retailers) on the small runway they still had could save would shift and use social media.
Most retailers spend a large budget to get a "hot spot". Maybe now is the time to rethink this: can you survive without having your company in this prime location?
Samantha Ng, wise artisan
"If the answer is yes, moving will save us from the recession," said Samantha.
3) Ivan Chin, founder of GoLog
GoLog is an on-demand logistics app that helps you find the closest driver in Selangor and Negeri Sembilan who will deliver your packages anywhere in Malaysia.
Ivan sees a 24-month runway as a safe zone for SMEs to deal with the effects of the economic crisis, but believes that most SMEs realistically don't even have a 3-month runway.
“The monthly burn rate is high and some high profile customers may have payment terms. The company must have at least a 6-month runway with an emergency plan in order to generate more income, ”he said from his own experience.
GoLog itself has managed to switch from providing B2B services to businesses to providing B2C services by delivering frozen, chilled, and fresh essentials to customers.
This is in line with Ivan's advice to look for an alternative source of income as soon as possible to maintain or build your own runway.
They need to monitor and review what their current business model is, whether they are able to meet the needs of market demand during this MCO, and they can add value through partnerships with other industries to generate income.
Ivan Chin, GoLog
What GoLog has done has enabled it to double its revenue during the MCO compared to before, so the runway was not significantly affected.
4) Khairul Faizi Khalid, founder of REMEDi
REMEDi is a cloud-based platform for health databases, with which clinics, hospitals and patients can save medical data securely and paperlessly.
"In the current circumstances, in which many companies have struggled before the pandemic, it is very difficult to justify having a certain number of runways for survival," said Khairul.
"The most important thing at the moment is to survive! That means maintaining low costs and achieving a stable, if low, income / opportunity that you can get during this trial period. "
While he doesn't agree that a strict 24-month runway is required, he believes that 12 to 24 months would give companies enough stability and time to implement their plans during a recession.
"Learning from experience is a pragmatic timeframe that is necessary for a reasonable and holistic plan to get the company on the right track in the short term," he said.
In addition to keeping costs down, Khairul also said working on leads that won't hurt you in the long run is beneficial for building your runway.
There has to be a balance between striving for a big head start, now costing the revenue that will be generated much later (e.g. doing jobs for large companies), and striving for smaller revenue, but not much effort to get it up and running quickly (e.g. small jobs that pay off in advance).
Khairul Faizi Khalid, REMEDi
For REMEDi, COVID-19 has influenced its business in the right direction by accelerating and accelerating the adoption of digital healthcare.
In fact, REMEDi has developed a new offer for virtual clinics because they are addressed by potential customers and not vice versa.
In short, it uses REMEDi's Electronic Medical Record (EMR) platform and allows patients to experience the full clinical experience (from pre-consultation to delivery of their prescriptions).
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In the various industries, it seemed that small business owners definitely had different ideas about what the ideal runway would look like and how it should be achieved.
However, it is clear that everyone found a strict 24-month runway to be somewhat too idealistic and unrealistic.
This is particularly because the pandemic came out of the left field in a way and many companies were unprepared for its effects.
Even if companies had a "safe" runway before the pandemic, the loss of sales channels for many industries would mean that the runway would go out faster than planned.
All over Malaysia (and around the world) drastic measures have been taken to lay off and cut wages, to name just a few, but there have also been companies that have found a way to turn quickly and overcome the storm.
I believe that this may be one of the best ways to ensure the survival of the company right now, especially if you can offer a product or service that meets the current needs of the market.
- More COVID-19 topics we wrote about here can be found here.
Selected image source: REMEDi / GoLog / Wise Crafters / SimpanKira