Entrepreneurship Survival Post Covid-19
Research question: How startups and entrepreneurs will make sure the survival of their business in the post-COVID-19 economy? Research Method The qualitative research method is being used in this article The objective of the article: The objective of this article is to identify the ways and steps that are required for entrepreneurs and startup businesses to survive in the post-pandemic economy. This article will direct them to step by step to minimize their risk and maximize their chances of survival in the post COVID world also it will provide them the Does and don't in this current economic system of the post-pandemic world.
Text of the paper/article:
As most of the economists are saying these days “This global pandemic will shape businesses for decades to come “. This statement appears to be true somehow as per history every major Black Swan event whether pandemic or a log war changes the way socially and economically. The effect depends on the extent of the spread of the event it may be localized or global. Coronavirus is globally spread and almost no country is safe from the spread of this virus so any effect because of this virus will make a global impact.
Dated back to the ages of the black death in the 1300’s we can see that how drastically the pandemic has altered the course of running a business, economy and the whole country there is no doubt that black death has altered Europe in a way that it never went back to its previous state, the much stronger feudal system was broken and independent employment trend ruled the market. After the second world war, the economic practices also changed around the world, the collapse of the British empire, race of weapons, a new super economy, and most importantly the rise of modern agriculture.
In modern times, we have two examples that changed the course of economy and entrepreneurship the Sars Pandemic of 2002-2004 and the financial crisis of 2008, both of them helped in generating new fields of entrepreneurship for example after SARS pandemic the country which was greatly affected by it China witnessed a boom in the E-commerce economy and companies such as Alibaba transitioned from few million dollar companies to a multi-billion dollar empire (Vernuccio, 2020). The financial crisis of 2008 has given rise to the culture of sharing resources such as Uber and Air BnB for people can share their free resources with others and help to reduce the financial burden on them not to forget the birth of bitcoin also happened after the financial crisis to support a currency that is global and decentralized.
Late exploration has additionally featured an exponential flood in open doors for business visionaries in the pandemic and past. Suffering drivers, for example, safe division, home centrality and physical seclusion have quickened hearty open doors, for example, adaptable assembling, online instruction, the crisis the board, human services examination, senior consideration, telemedicine, computerized microfinance, gracefully chain flexibility, far off correspondence stages, multiplayer amusement, wellness gear, distant technical support and considerably more intelligent urban communities (Alex Maritz, 2020)
Covid-19 is nothing like the SARS pandemic or the financial crisis of 2008, it is way massive then both of them combined and the global effect of COVID-19 will be on a global scale. The effects of the COVID-19 are so immediate and extensive that no economy was able to handle it without damage. The number of unemployed people in the US hits the maximum ever and by May it was almost 40 million people unemployed (Jani, 2020). It is so hard to unseen the damage that has been done by COVID-19 but on the other side it has also introduced a new line for entrepreneurs “Distant economy”. (Alex Maritz, 2020)This pandemic has created a lot of opportunities for the entrepreneurs to possibly turn any business into the distant mode, there is been a rise in the people working from home and with that rise, a boom of apps which facilitate the remote working is on the rise the market leader is Zoom in the apps but there is still a lot of gap in this market to be filled with more sophisticated and secure options (Derderian, 2020)
The economic impact of Covid19 is far worse than the financial crisis of 2008 as France lost their 6 GDP points in a matter of fewer than two weeks as per May 21st almost 40 million Americans have filed for the unemployment benefits which is worse than great depression the unemployment rate skyrocketed to 14% and most of the jobs are eradicated with sports, hospitality and entertainment industry being the major victims of the pandemic. The good news is every crisis has a limit and it ends someday however effects can be felt for a long time but eventually, they fed as well and as an entrepreneur, it is so important to bounce back after crisis this is not only a desirable trait of an entrepreneur but also helps the entrepreneur gaining self-confidence and experience of crisis management.
How to survive the post-pandemic Economy for entrepreneurs ?
Seventeen years prior, the episode of SARS was spreading quickly across China, and the Alibaba workforce had gone into isolation. At that point, Alibaba was just four years of age and it was hazy whether the youthful beginning up would endure. Suspending activities would have managed a staggering hit to the organization. Be that as it may, Alibaba representatives got together their personal computers and phones, conveyed heaps of reports home, and started to work. The crisis was a transformative moment for the company. During the outbreak, Alibaba launched Taobao, its first consumer-facing platform, and now the world’s largest retail online marketplace (Horiz, 2013)
To survive a crisis and bounce back three key factors for every organization are the following:
- Process and procedures
- A Reliable and professional team
If anyone of this factor is missing, then it will become really hard for an entrepreneur to bounce back from the crisis especially a global crisis like Covid-19.
A new business plans
The first step is to retire the old business plan and prepare a new one that reflects the true challenges of the time and market the longer the company stick to the older plan the more it stays out of the real scenario. Also, the new plan not only should contain the strategies to bounce back but also plan the failure and how to deal with the worst-case scenario. The easiest way to do this is to look at the company profile in January 2020 and May 2020 identify the changes and the factors that brought those changes then prepare your plan for the escalated stage of those factors for example if your company was out of stock for 3 weeks because of the lockdown prepare for a situation when you have to go out of stock for another 6 or 9 weeks and how will you bounce back from that (Fishback, 2020)
It is very important to place some cash on the side for the worst possible situation for example if your company has $1 million in cash saving in January and you have utilized all the available cash by march then plan to borrow at least $2 million for the next two quarters of the year.
Analyze your financials
Financial health is the heart of any organization and in the post-COVID-era, it is very important to keep the company alive financially healthy, most of the borrowers are out of fund now and it is very hard to get loans and funding these days even if you're approved it will take months to get the money transfer in your account, look out for the SKU’s that are not generating enough money or the SKU’s that can be more profitable with a little influx of the money. You need to take some hard decisions in this situation and preferably go with the decision in favor of financial health (O’Connor, Stam, Sussan, & Audretsch, 2018)
Another important thing to consider is FOMO which is fear of missing out every pandemic or global crisis give rise to few markets that shoot up quickly after the crisis and almost 90% of them disappear within few years for Covid-19 a lot of sanitary and hygiene products shoot up thousand times in sales and demand for them seems never-ending but before investing large amounts in such volatile projects do consider the time to get your investment back or in financial wording the period of ROI, do not invest in those projects which will take you years to get your initial investments and start making profits such an investing in heavy machinery or total automation of the plant to increase the production capacity.
Manage the risk
Risk management is a very important part of the overall business strategy but in the crisis time, risk management ultimately becomes the most important part of the business strategy the businesses needs to identify the key areas for reducing risks and communicate with the stakeholders such as the board of directors, shareholders, VP,s clients, etc. to minimize the risk. the main goal in this situation is to secure more and more funds and cut the spending’s but in a way that will not negatively harm the business because cutting 10% cost inefficiently will cost you 50% of extra cost in the coming months (Abdul-Alim, 2020)
In the time of crisis, it is unlikely to get new customers easily so to keep hold of the existing customers you need to dive deeply in their databases and figure out what keeps them with you since a long time and try to strengthen your relationship with them maybe offer them more than they are getting from your company. A smart analysis is very important in the time of crisis instead of working on each SKU identify your key earners and try to keep a hold on them it is not good to get greedy in the crisis time it might bring you more business but there is also a high risk associated with it as well (Hawke, 2020).
Prepare for a new normal
Prepare for the post-pandemic economy, in the post-COVID-19 world there will be a lot of new normal such as distant working, no overseas suppliers or vendors or restricted travel prepare a business plan that will make you and your company more compatible with the post COVID world, appreciate distant working and online meetings rather than interpersonal interactions. If you are a contract manufacturer or a mass producer you might need to focus on local sourcing and local manufacturing instead of relying on India, China, or Bangladesh to be your factories.
There are different organizations and institutions providing support to their related circle one such initiative is the BGP response program from Cranfield school of management they're providing the much-needed support, guidelines and workforce assistance through online webinars which are helping hundreds of entrepreneurs and anyone can register it through their website. SME’s, in general, need guidance and support in this pandemic because of their higher susceptibility to fail these programs do not only help them during the pandemic but also helps them in re-emergence after the end of the pandemic which might be more difficult for most of the smaller and medium-sized businesses (Hawke, 2020)
As per the Cranfield Institute of management, they have categorized the whole crisis in three phases
Reaction and confusion Phase
Most of the businesses dealt well within the first phase as they were not running out of their safety funds and did not have their operations closed out but the businesses that took a proactive approach in this phase did not only survived the later phase better but also they did faceless financial shocks later in the pandemic. Confusion is what cost the businesses more than anything many organizations were confused about how to plan and strategize their business actions and the ones which dealt better with their confusion came up with the best plan to deal for the later stages.
Adjustment and coping phase
Currently, we all are in the adjustment and coping phase as the economy is reopening and a lot of businesses are getting their customers back it is most important to make a strategy that will not only allow the maximum value to the customers but also will help the businesses to gain more than before to make up for the losses. This phase needs most of the attention from entrepreneurs as this will decide the future for their business it is important to keep the pandemic factor as a key factor in their future business strategy (Horiz, 2013)
The Next Phase will be the Re-emergence phase which might be the case if there will be no second wave of the COVID-19 there will be a lot of new normal and some business practices might be outdated completely and the sooner the businesses will adapt to the new normal the better it will be for them and their stakeholders (Fishback, 2020)
Covid-19 is a unique pandemic in modern history because of many reasons it just not only spread globally but its effects on the economy and social practices will stay longer than any other pandemic or crisis in history. The effect of COVID-19 on economy and business is mostly disastrous however some special business units and sectors thrived in this crisis such as health supplies manufacturers, pharmaceutical industry and nutraceutical industry but because of the intensity of the impact of this pandemic those industries are having a hard time maintaining their supply chain efficiency.
Entrepreneurs are the one party that is mostly affected by this pandemic majority of the entrepreneurs run small and medium-sized businesses and it is very hard for them to keep up their business while maintaining the financial health of company there are few easy steps they can take to minimize the impact of the COVID-19 on their business. The 5 steps can be the following number one is to retire the old business plan and plan a new one that fits best with the current situation step two is to plan a borrowing strategy and find the lenders that can provide the best terms and conditions step three is to analyze the risk to the business and take necessary steps to minimize those risks step four is to Keep your customers and focus more on retaining the old customers rather than reaching the new ones step five is to transform the supply chain as per new needs such as more local vendors and cutting the channels and costs.
The businesses and entrepreneurs who did the most of the planning in the early phase are the ones that are least affected by the horrors of this pandemic instead of being confused and taking chances businesses should plan for the worst possible situation and still we are not sure about the second wave in the coming fall or winter businesses should start planning for the second wave instead of reacting to the pandemic when it arrives at the door
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Author: Muhammad Fahad Ali a student at LIGS University, under the supervision of lecturer Dr. Michael Aubry