How to Support Entrepreneurs in the Time of Coronavirus
Imagine that you own a clothing shop in El Salvador. As people in your community adopt social distancing in response to the coronavirus outbreak, they stop shopping for clothes, only leaving their home to buy groceries and other essentials. Over the first couple of days, your sales fall by 50%, and then they keep dropping, until you’re only selling a few items per day. Your inventory is sitting there, unsold. Your landlord is calling and you don’t know how you’ll pay the rent. You don’t know how to reassure your employees that you’ll be able to keep the store open.
Millions of small business owners around the world are facing a situation like this. As the novel coronavirus COVID-19 spreads around the world, it is having a devastating economic impact. Social distancing, quarantines and other measures are leading to falling demand, mandatory store closings, labor shortages, disruptions to the supply chain and other challenges. Micro and small businesses, with limited savings and access to financing, are often the most vulnerable firms in these situations. In China, for example, a survey found that 20 percent of small and medium-sized enterprises (SMEs) could not survive a one-month quarantine and nearly two-thirds of businesses would go under if such a measure lasted for three months.
While developed economies may be in a position to provide some financial relief to their SMEs, small businesses in developing countries cannot necessarily count on these kinds of measures. So how can development organizations help these critical drivers of the local economy withstand an enormous shock like the COVID-19 pandemic?
To help answer that question, we are drawing on past experience. While the global scope of this crisis is nearly without precedent, some of TechnoServe’s work developing capacity and building ecosystems to support entrepreneurs in countries across Latin America, Africa and South Asia, yields important lessons for today’s businesses struggling to withstand the crisis.
Over the past two years, TechnoServe’s teams in Nicaragua and Chile faced prolonged crises related to socio-political upheaval in their countries. The massive protests, violence and curfews created many of the same business conditions presented by COVID-19: uncertainty and stress; difficulties for employees, and staff to make it to stores and places of business; disrupted supply chains; and reduced demand.
But the right support can make a crucial difference. For example, while Nicaragua’s business chamber estimates that 40-50% of small businesses failed during the 2018-2019 social conflict that engulfed the country, 87% of the participants in the Impulsa tu Empresa program – a partnership between TechnoServe and the Argidius Foundation – were able to stay in business.
How was this possible? At this current time of economic stress and uncertainty, we went back and collected some of the best practices and tips from the Nicaragua and Chile teams that helped entrepreneurs weather the crises there.
Find innovative ways to connect with entrepreneurs and make them feel supported
In a crisis like this one, in-person training often becomes impossible: already, a number of countries have implemented quarantines and travel restrictions. This is creating real challenges for projects trying to provide training and other support to entrepreneurs, but this is precisely the moment when it’s most important to reach out to program participants. According to our program manager in Nicaragua, one of the things entrepreneurs valued the most during the crisis was the knowledge that they were not alone, and that the project would continue to support them.
For that reason, it’s very important to quickly identify technologically appropriate methods to connect with the entrepreneurs. Look for tools that are already accessible and in use, because there’s not time to build out a solution from scratch or implement sophisticated approaches that will require testing and modification. In Chile and Nicaragua, roadblocks and other obstacles prevented advisors from visiting entrepreneurs for long stretches, so they moved sessions to Skype and other video conferencing platforms and kept in touch via WhatsApp and phone calls.
These solutions worked well for entrepreneurs in Chile and urban areas of Nicaragua, but we know they might not be appropriate in more remote settings where participants don’t have access to smartphones or stable internet connections. Nevertheless, there are still ways to communicate. When TechnoServe’s coffee teams in South Sudan had to suspend in-person training due to civil conflict there, they launched a radio program to continue communications with farmers on best agronomic practices.
Provide emotional support to entrepreneurs–and staff
One critical but often overlooked issue in times of crisis is the emotional health of the entrepreneur. While program participants still seek out training on business skills that will help them cope with the crisis, we noticed that in these times, they often demonstrated psychological distress that traditional stakeholders in the entrepreneurial ecosystem typically do not address.
Addressing the emotional challenges created by the crisis of course benefits the entrepreneurs as individuals, but it also improves the performance of their business. Faced with rapidly falling sales, spiraling problems and uncertainty about how long a crisis will last, entrepreneurs often feel overwhelmed and undergo a kind of paralysis, making it difficult for them to guide their business. Directly addressing the psychological duress that entrepreneurs find themselves in helps entrepreneurs to accept the new reality and be clear-headed in their decision-making.
In Chile, our team brought in a psychologist to prepare the program team to help entrepreneurs process what was happening and focus on the task at hand. We made sure to create spaces where the entrepreneurs could just talk, express themselves and feel heard, and our sessions emphasized self-care. It’s important to note that program staff also need this kind of support, because the uncertainty also affects them.
Help businesses shift to survival mode
The business advice provided to entrepreneurs also has to change. We typically work with entrepreneurs to develop sustainable, long-term growth strategies. In times of crisis, however, the focus must shift to surviving the lean times or finding new market opportunities. Because entrepreneurs know their communities better than anyone, our programs did not provide specific business ideas, but instead provided the framework for decision-making and strengthened the ability of business owners to analyze costs and benefits.
We observed that in order to reach a break-even point, businesses tended to cut product lines and services that became less profitable. Entrepreneurs also found new avenues for sales, and in other cases, entrepreneurs were able to identify funding opportunities from the public and nonprofit sectors to help defray losses. And while sometimes staff reductions are impossible to avoid, it’s important to encourage entrepreneurs to find other solutions first and leave that as a last resort.
When the political disturbances in Nicaragua caused blockades on many roads, cheese manufacturer Las Delicias struggled both to source milk from the countryside and reach buyers with its cheese. Owner Idalia Medina solved the first problem by deepening her relationship with the farmers in her supply chain, offering them agricultural inputs and other products to ensure that they would continue to sell to Las Delicias despite the transportation issues.
With the help of Impulsa tu Empresa, she has also worked to control her costs by overhauling the firm’s production process to more efficiently use resources, establishing better accounting processes, beginning to process and sell dairy by-products, and reducing her expenditure on electricity. She also identified new sales channels. Since joining the program, her sales have increased 22 percent and Las Delicias is more profitable.
Of course, the solutions will vary from situation to situation and crisis to crisis, but entrepreneurs with the right mindset are remarkably skilled at finding the right solutions.
COVID-19 presents a disorienting landscape and the entire entrepreneurship ecosystem will be tested. However, drawing upon what’s worked in the past, we can help entrepreneurs face the current challenges with resiliency and emerge ready for future growth.
Editor’s Note: This article was voted by readers as one of NextBillion’s Most Influential Articles of 2020.
Photo courtesy of organization.