Most small businesses are built for the good months. Rent, salaries and supplier terms are set when sales are normal, and the plan for a bad quarter is usually “we will manage”. Resilience is the work of deciding in advance, and in writing, how the business survives a shock, then building the cash, relationships and documents that make the plan real. This article draws on what Malaysian SMEs learned in 2020 and sets out four weak points to test, with a 30-day plan to strengthen them.
What 2020 taught Malaysian SMEs
According to the Department of Statistics, SME value added fell 7.3% in 2020, the first time in 17 years that SMEs performed worse than the economy as a whole. Services SMEs fell 9.2% and construction SMEs 15.4%. SME employment dropped by about 65,000 people to 7.25 million.
The speed of the shock mattered as much as its size. When the SME Association of Malaysia polled its members in late March 2020, two weeks into the Movement Control Order, 33% said they had cash only to get through March, and another 37.8% only until April. The poll drew 15,627 responses in under 18 hours, and 82% of respondents expected a loss for the year. Many businesses were weeks from running out of cash before any support arrived.
Support did arrive. Bank Negara Malaysia announced a six-month deferment of loan repayments for individuals and SMEs from 1 April 2020, covering performing ringgit loans. But interest continued to accrue on the deferred amounts, and the money still had to be repaid. Help will come, but it takes weeks and usually arrives as a loan rather than a gift. Only the businesses still standing when it lands can use it.
Four weak points to test this month
1. Cash buffer: count it in weeks, not ringgit
Start with your monthly fixed costs: rent, salaries with statutory contributions, loan instalments, utilities, insurance and software. Divide your spare cash by that number. Most owners find the answer is two to four weeks.
Suppose a small manufacturer in Shah Alam has fixed costs of RM85,000 a month and RM60,000 of spare cash: about three weeks. A sensible first target is RM255,000, or three months. The figures are made up for the example; the method applies to any business. Transfer a fixed percentage of every receipt, say 5%, into a separate account on the day it arrives, and set two written rules for that account. The first says what counts as an emergency. The second says who can authorise a withdrawal and who must be told. At RM6,000 a month the manufacturer reaches the target in about 33 months; selling slow-moving stock and holding back one year of dividends can halve that.
The first RM50,000 is worth more than the last. It is the difference between negotiating with a landlord from a position of calm and asking for time.
2. Concentration: who can hurt you with one phone call?
Write down your top five customers and the share of revenue each brings, and your top five suppliers with what they supply. Then test them against these levels.
| Measure | Warning level | What to do |
|---|---|---|
| Largest customer’s share of revenue | Above 25% | Agree payment terms in writing; set a target to add two mid-sized customers this year |
| Top three customers combined | Above 50% | Spread sales effort deliberately; price new work to win smaller accounts |
| Any critical input from one supplier | No qualified alternative | Trial a second source for 10% of volume even if it costs more |
| Receivables overdue beyond 60 days | Above one month of fixed costs | Stop supply until paid; call, do not email |
A logistics subcontractor in Klang that earns 70% of revenue from one e-commerce client on 60-day terms has, in effect, become a department of that client. One late payment run becomes a salary crisis. The fix is slow and unglamorous: two years of adding smaller clients until the largest one is under a third.
3. Key-person risk: what stops if you are away for six weeks?
In most SMEs the key person is the owner. Ask what would stop if you were in hospital for six weeks: bank approvals, supplier negotiations, pricing decisions, access to accounts and passwords, the relationship with the two largest customers.
Four actions cover most of it. Add a second bank signatory with a sensible limit. Write one-page procedures for the five tasks only you know how to do. Cross-train so that every critical job has a second person who has actually done it, not merely watched. And where the loss of one person would cut profits, consider key-person insurance. The Inland Revenue Board’s Public Ruling 2/2003 sets out the tax treatment: premiums on a term life or accident policy with no investment element, where the proceeds stay with the company, are deductible against business income, and the proceeds are taxable; premiums on whole life or endowment policies are not deductible. Ask your tax agent before you buy.
4. A continuity plan that fits on two pages
A continuity plan is a short document, not a binder. For each of five scenarios it answers three questions: who decides, what happens in the first 48 hours, and who gets called.
| Scenario | First 48 hours | Who leads |
|---|---|---|
| Premises unusable (fire, flood, closure order) | Tell staff and top customers; switch to backup location or remote work; call insurer | Owner, then operations lead |
| Main system or data unavailable | Restore from the backup tested last quarter; run orders on paper | Office manager |
| Owner or key person absent | Second signatory takes over payments; procedures folder opened | Named deputy |
| Largest customer stops ordering | Cash forecast redone for 13 weeks; cost-cut list activated | Owner and accountant |
| Revenue stops for two months | Buffer account rules applied; landlord and bank contacted in week one | Owner |
Keep the plan with the insurance policies, the backup instructions and the contact list, in one place that two people can reach. Check it twice a year, and after every real incident, however small.
Insurance belongs in the plan rather than in a drawer. The General Insurance Association of Malaysia lists the main covers for businesses: business interruption, burglary and theft, money, public liability, product liability, fidelity guarantee, employer liability and workmen compensation. Read the perils listed on your property policy against the risks you actually face; a shoplot near a river needs flood cover, not only fire.
Where to start: resilience in 30 days
- Week 1: calculate your buffer in weeks; open the separate account; write the two rules.
- Week 2: list your top five customers and suppliers with percentages; choose one concentration fix.
- Week 3: write the five one-page procedures; add the second signatory.
- Week 4: draft the two-page continuity plan; test one backup restore; review your insurance perils.
Common mistakes
- Treating the overdraft facility as the cash buffer. A facility can be withdrawn; cash cannot.
- Keeping the continuity plan only in the owner’s head or on the owner’s laptop.
- Buying insurance once and never reading the policy again as the business changes.
- Chasing one large customer because the revenue is attractive, without pricing in the dependence.
How Gusto Style can help
Platinum Scale Advisory is our fixed-price programme for owners who are growing and want the business to hold its shape under stress. Resilience is built into the growth plan rather than added afterwards: we set your buffer target, map concentration and key-person exposure, draft the continuity plan with your team, and review it with you as the numbers change. See Platinum Scale Advisory
Sources
- Small and Medium Enterprises (SMEs) Performance 2020, Department of Statistics Malaysia, 2021
- MCO: 30pc of Malaysian SMEs have cashflow only for March, another 37pc for April, survey shows, Malay Mail, 2020
- Measures to Assist Individuals, SMEs and Corporates Affected by COVID-19, Bank Negara Malaysia, 2020
- Public Ruling No. 2/2003: “Key-Man” Insurance, Inland Revenue Board of Malaysia (copy hosted by CTIM), 2003
- Business Insurance: Financial Lines, Persatuan Insurans Am Malaysia (PIAM), 2026