What’s it like running a small business now?

Manik Singh (name changed) runs a small firm manufacturing steel wire and ropes somewhere in Haryana. Started in October of 2016, the company quickly grew to a 60+ employee strength, earning good business on a regular basis. Until mid-March this year, that is. As the coronavirus pandemic began raising fears in India, the government announced a complete lockdown. “We completely stopped all operations and then we heard rumours that the lockdown would be extended,” Singh tells me over the phone.

Over the next two months, almost half of his workers headed back to their hometowns and villages. The other half, who could not travel, stayed on at the facility. “I continued to pay them their salaries even though there was no work,” Singh says. Operations did resume from the first week of May, but it was nowhere as smooth as pre-Covid - fraught with problems relating to rigorous sanitisation guidelines, increased costs, low availability of labour and clogged payments.

Small businesses have been among the worst impacted during this crisis. India is currently under Unlock 3.0 - which means fewer restrictions for individuals and businesses. Is this reflecting on on-ground realities?

LinkedIn’s Workforce Confidence Index - based on a biweekly survey of 1,000+ professionals in India during July 13-26 - looked at how sentiments of small business workers have moved since unlock initiatives were undertaken. The index gauges individual perceptions on three indicators - job security, financial stability and career outlook in the near future.

The overall optimism levels of those working with small businesses (1-200 employees) has picked up in a month starting mid-June - from a score of +49 to +58 (on a scale from -100 to +100). But while confidence on finances and career outlook has seen a consistent uptick, the same has not been true on the job front. From a high score of +58 a fortnight ago, optimism levels declined to +53 in the latest round. This is also lower than the job security confidence of those working in enterprise (10,000 or more employees) and mid-market (201-9,999 employees) companies.

According to Rituparna Chakraborty, co-founder, TeamLease, small firms are perennially stuck in a vicious cycle of informality and low productivity. Over 95% of micro small and medium enterprises in India employ less than five people, and estimates suggest 30-40% of them could cease to exist as the pandemic drags on.

What can assist these firms now? I interviewed Raghuram Rajan, former governor of the Reserve Bank of India, last week, who said there is a need for providing immediate financial support to SMEs that are hurting, else they may run out of resources to sustain themselves. Aside from financial and regulatory support, Chakraborty says the answer lies in three things- 

• Formalisation
• Urbanisation
• Industrialisation and human capital

Many small businesses, meanwhile, are innovating themselves to adapt to changing times. Some have moved online, shifted to digital payments and even reworked their entire operating model, like shifting from a catering business to home-delivering cooked meals.

The index also looked at how sentiments have moved across different sectors. Employees in corporate services and education fields continued to remain the most optimistic, while those in finance and media and communications fared the worst. 

HR expert Abhijit Bhaduri says this is because the confidence of employees is directly impacted by the view of the future. In that, in sectors that are seeing a lot of job losses, even those who stay back tend to carry stress of an impact some time in the future. The media and communications space, for one, has seen a bloodbath in recent time, with journalists working in regional language newspapers being the worst impacted, Bhaduri says. 

Will there be opportunities arising out of this crisis too? With rapid shifts towards increased digitisation, new openings for these skills are likely to increase.

How can small businesses weather the ongoing crisis? Share your views in the comments below.

Workforce Confidence Index Methodology

LinkedIn’s Workforce Confidence Index is based on a quantitative online survey that is distributed to members via email every two weeks. Roughly 1,000+ India-based members respond each wave. Members are randomly sampled and must be opted into research to participate. Students, stay-at-home partners & retirees are excluded from analysis so we’re able to get an accurate representation of those currently active in the workforce. We analyse data in aggregate and will always respect member privacy. 

Data is weighted by engagement level, to ensure fair representation of various activity levels on the platform. The results represent the world as seen through the lens of LinkedIn’s membership; variances between LinkedIn’s membership & overall market population are not accounted for. Confidence index scores are calculated by assigning each respondent a score (-100, -50, 0, 50, 100) based on how much they agree or disagree with each of three statements, and then finding the composite average score across all statements. Scores are averaged across two waves of data collection to ensure an accurate trend reading. The three statements are: [Job Security] I feel confident about my ability to get or hold onto a job right now; [Finances] I feel confident about my ability to improve my financial situation in the next 6 months; [Career] I feel confident about my ability to progress in my career in the next year.

Neil Basu and Cynthia Yee from LinkedIn Market Research contributed to this article.