What Do Entrepreneurs Do During a Crisis?

September 16, 2024 / September 16, 2024 | Leave a comment

In the past few weeks, I’ve received numerous calls and had online mentoring sessions where entrepreneurs I work with asked me, “Florin, what do you recommend I do during this crisis period? What actions should I take and in what directions to continue my business and get through this period successfully?” Many of them have not experienced similar situations before because they have only been entrepreneurs for a few years and have not encountered such a challenging and difficult global context.

Before discussing the topic and possible actions for local entrepreneurs in the current context, here are a few personal considerations related to the moment we are going through:

COVID-19 triggered and facilitated a global macroeconomic downward trend that was expected to occur in the near future, following a significant period of global economic growth that began in 2009/2010. Signs of over-saturation and “heating up” were already felt in many sectors and national economies even before the coronavirus outbreak. From my perspective, entrepreneurship in our country has been relatively recent, and I am the first to appreciate the achievements of the Romanian entrepreneurial environment under the conditions of its relative youth. Comparisons with Silicon Valley and other Western entrepreneurial ecosystems are somewhat irrelevant due to significant gaps related to: entrepreneurial experience, access to expertise, access to diverse funding instruments, the existence of a predictable and stable economic and fiscal system, entrepreneurial culture, and general entrepreneurial mindset. I want to say that it was not necessarily necessary for COVID-19 for such a young entrepreneurial system as the local one to face challenges and difficulties; it could have been any other unfavorable macro event (financial, medical, social, etc.).

With or without COVID-19, it is healthy for a business to have reserves and liquidity, as well as a risk management system to activate in such difficult and special situations. We have been accustomed in the last 10 years to the phrase “markets are growing,” which was good for our businesses but also led to a certain “numbness of managerial senses” and attitudes such as “We’re going with the market!” It’s time to wake up! (and here I’m not referring only to business behavior…)

I don’t believe in a “miraculous” mechanism of standard, universally applicable measures that will work equally for every entrepreneur and organization. I believe in measures that can be analyzed as options by each entrepreneur and adapted specifically according to the peculiarities of their business and a series of relevant criteria: activity domain, entrepreneur experience and business maturity, organization size and resources, business model, products or services offered. So, in the end, I recommend that each entrepreneur act based on their own analysis and the measures appropriate to their situation.

Below, I provide some advice and options for entrepreneurs, SME managers, and startups to deal with the challenges generated by the negative impact of COVID-19:

I. Objectively analyze the current situation and the potential impact of the COVID-19 crisis on your business in the medium term.

In the first weeks of the crisis, there was a phase of panic and impulsive actions driven by the fear of losing money, businesses, and assets. Now we are in a stage of reassessment, analysis, and implementation of adaptation measures. Try to answer questions such as:

How is your business affected operationally and financially? Estimate how your company’s revenues and cash flow will be affected.
How does the crisis impact your team and organization? Are there the necessary resources to maintain the team?
How does the context affect the market in which you operate? How is your relationship with your customers affected?
What is the impact of the context on your business goals in the medium and long term?
What are the potential ideas for pivoting from the product perspective to ensure business continuity and team retention?
How do you ensure the health of your business in the context of the crisis?
Are there resources to continue the planned investment projects for this year?

If your company has a Board, propose a meeting with the agenda above as soon as possible. If you do not have a Board, then turn to relevant Advisors for your business’s specifics.

II. Set short-term objectives and implement a plan of measures to secure your business’s capital and assets.

You’ve worked hard to develop a product, a brand, a team. Years of work, investments, financial, material, and human efforts. You’ve overcome difficult periods in the past, and you will get through this crisis as well! Make sure you keep everything you’ve built so far. Your partners and team are among your most important “assets,” and I recommend doing everything you can to keep them.

Immediately redefine your short-term and medium-term strategy!

After the analysis from the first stage (section I above), I recommend setting 5 short-term priority objectives along with a plan of immediate measures and actions. The most important thing is the survival of your company, even with compromises.

Possible measures I recommend analyzing to ensure the survival of the business and securing capital include:

Act prudently and pay special attention to financial management during the crisis. I recommend adjusting the Revenue and Expense Budget (BVC) for the crisis period as a first measure.
A second important measure is to quickly assess your company’s liquidity and the possibilities of rapidly converting certain assets into liquidity, as well as the options for loans if needed. The logic is to maintain as comfortable a cash position as possible during the crisis, to be as less vulnerable as possible.
Implement a strict cost control during the crisis. Analyze how you can optimize operational costs and the possibility of reducing costs that do not generate significant direct value to your business. Consider the possibility of short-term salary adjustments, starting with yourself, with the perspective of returning after the crisis ends. Analyze the possibility of reducing fixed costs (overheads, utilities, rent), especially in the context of transitioning to remote work and using online tools.
Communicate intensively with clients during the crisis, gather feedback, and try to provide tools to retain them (discounts, promotions, installment payments, extended payment terms). Develop a mechanism to retain clients who stay with you in this difficult context.
Approach your suppliers and try to negotiate with each of them a rescheduling of existing debts or future payments. This is a period where every business prioritizes keeping clients, and your suppliers will approach this issue in the same way; it’s better to negotiate than to lose you. Of course, I recommend a professional conduct and in the spirit of long-term partnership, but I am convinced that there will be situations where some may try to take advantage of the context.
Be flexible and innovative regarding your product, identify pivoting solutions. Startups and smaller companies have the advantage of being more agile and can pivot their products and services more quickly. Adapting to the context as quickly and efficiently as possible can largely mean the survival of your business! Therefore, I recommend adjusting your product roadmap to the crisis context. If possible, consider using your team’s experience and expertise even for short-term projects that generate capital for survival (outsourcing, consulting, subcontracting, integrations, bartering, etc.)
With travel restrictions and quarantines in place, remote work and video conferences have become the norm. Due to their extremely flexible nature, these online tools already have rapid adoption. My recommendation is to integrate digital work and communication tools (Skype, Zoom, Slack, etc.) as quickly as possible.
Analyze and implement suitable support solutions for SMEs and entrepreneurs issued in the context of the crisis by national and European authorities. Companies with declining revenues need help to stay afloat during this period and to maintain jobs. See to what extent you can benefit from such measures to help you get through the crisis. I recommend approaching this help from authorities as supplementary and not as a replacement for your own managerial measures listed above.
Give up on secondary business activities and/or projects that involve high risks in the crisis context.
Put on hold investment projects that require high funding and for which you do not have secured funding sources. You will be able to resume investment projects after the crisis.

III. Protect Your Team!

As mentioned above, from my perspective, the primary objective during a crisis is the survival of the business and retaining the team. Therefore, you can consider the following measures:

Communicate transparently and honestly with your team about the measures you plan to implement as a result of the crisis: Short-term objectives and action plan.
Keep the team motivated and united, working together to continue activities and generate revenue.
Ensure that the team remains safe and healthy (both body and mind) and maintain contact and communication during the crisis.
Ensure the implementation of hygiene, distancing, reporting measures, and all other measures imposed by authorities during the crisis.
Provide the entire infrastructure and tools necessary for the team and remote work to function efficiently during the crisis.
Protect and motivate employees who have proven to be attached to the business even in difficult, crisis moments. “A person’s true character is often revealed in time of crisis or temptation. Make sure that you have what it takes to be your best in such times.” – Dr. Paul TP Wong. Ensure at least the minimum necessary remuneration for your team members during the crisis, and then gradually return to the initial benefits.
In difficult moments due to the crisis, it is important for an entrepreneur-founder to act as empathetically as possible with their team.

IV. Identify New Opportunities Generated by the New Context. Explore Partnerships with Businesses in Less Affected Sectors.

First, any crisis creates a challenging context for all entrepreneurs, but at the same time, it will also bring opportunities. Each entrepreneur will see different new opportunities in the new context created by the crisis and in the future evolution of the economy.

Secondly, a crisis affects different sectors and regions of the world differently (in terms of intensity and impact), even though all these are interconnected due to globalization. Consequently, there will be sectors less affected or with favorable circumstances; examples in the context of COVID-19 include:

Sectors that meet the primary needs of the population: food, bread, water, hygiene and protection products, etc.
Home delivery services, takeaway food
Healthtech: e.g., Telemedicine
Tele-education, e-learning
Biotech, fintech, AR, 3D printing for medical services
Entertainment tools, home workouts, gaming
Pharmaceutical industry
Online communication platforms and tools
Commodities (especially cereals)
Defensive industries (utilities, energy, telecom)

In this context, it is important for each entrepreneur to anticipate the areas that will grow in the short and medium term as a result of the changes brought about by the crisis. Ideally, you should find services or products with which you can pivot or connect to such industries, at least in the short and medium term. If the experience and expertise of your team do not make this possible, you might consider partnerships with companies in these fields to propose various solutions (outsourcing, subcontracting, add-ons, re-selling, etc.). Take these recommendations as examples; ultimately, each entrepreneur knows their own strengths, expertise, know-how, team, and the value mix they can bring to a strategic partnership during the crisis.

Additionally, I recommend analyzing the tools offered by the European Commission and several major companies (Facebook, Google) to support SMEs and certain fields of activity. Public subsidies and funding from national and supranational organizations could represent an opportunity to consider. It is very likely that government funding for innovative businesses will increase in the coming months (including R&D).

V. Strengthen Your Online Presence and PR for Your Business

Invest time and energy in communication during a crisis. Offset a potential reduction in business volume with more intense communication and improvement in PR and online presence. Digital marketing is less costly and more effective than traditional marketing channels, such as TV ads. With the help of a marketing and PR specialist, you can identify your business’s strengths, weaknesses, opportunities, and threats in the context of the crisis and adjust your offerings and messaging.

One of the challenges businesses face during a crisis is sales. According to scientific studies, approximately 70% of companies report that it is cheaper to retain customers than to find new ones. Here are some recommendations for effective marketing during a crisis:

Implement a customer loyalty-oriented marketing strategy. Companies that are most successful during an economic crisis are those capable of executing successful loyalty campaigns.
Identify cost-effective marketing channels that generate measurable opportunities.
Communicate constantly with your customers by presenting them with discounts, offers, promotions, and updates about your business.
Strive to be as visible as possible during the economic downturn, keeping your values and brand in the customers’ minds. Generally, during crises, customers will turn to brands they easily remember.
Provide the best possible experience to your customers during the crisis.

VI. Positivity and Confidence: We’ll Get Through This!

Crisis moments bring many challenges and difficulties to entrepreneurs. Such periods require strong yet empathetic leadership. It is a crucial test for entrepreneurs and business founders to validate their qualities and capabilities to survive with their businesses and retain their teams. Those who survive economically will come out stronger and wiser from this crisis. As mentioned at the beginning, many entrepreneurs lack experience with similar crises, and in such cases, they can seek advice from partners, mentors, and investors who can share their experiences from past crises (e.g., the Asian Crisis of 1997, the Financial Crisis of 2008).

Short-term strategy is necessary to adapt to new realities, but organizations need to think long-term, using the quick lessons learned during the pandemic to build lasting relationships with customers. You will experience events that will generate strategic solutions which we can develop in the coming months.

Organizations will make significant efforts in digital transformation. We will replace many old processes, develop new collaboration skills, and learn important lessons about keeping employees engaged in a remote setting. These will be key ideas for bringing us back to our physical offices once the crisis is over.

But beyond business lessons, it is crucial to reflect on ourselves, on why we ended up here, on the things that have evolved in the wrong direction over the past years regarding values, principles, partnerships, trust, and transparency among partners, and relationships between people in general. The way we have approached work, earnings, community involvement, and the environment, etc. It is time for a significant change for each of us. This will undoubtedly bring positive outcomes in the long term for each of us and for humanity as a whole.

Wishing everyone health and confidence!

If you are interested in this topic and have questions or suggestions, you can write to me here: contact@florinmpop.ro