This is how entrepreneurs are dealing with Covid crisis

how entrepreneurs deals with covid crisis

Although the covid-19 crisis affects all economic activity, public aid programs tend to prioritize and protect consolidated organizations. 

The priority of public institutions seems to be to reduce the risk of bankruptcy and job destruction. In times of crisis, unfortunately, the promotion of innovation or entrepreneurial activity may be forgotten.

A key issue when analyzing entrepreneurial action in times of uncertainty is whether entrepreneurs could benefit from planning and whether having a plan is sufficient to weather the crisis.

The economic crisis resulting from covid-19 poses many existential challenges for start-ups.

Business planning

The coronavirus pandemic has shaken business planning processes and has had critical consequences on their performance. The economic crisis resulting from covid-19 poses many existential challenges for start-ups.

For entrepreneurs and investors, the coronavirus crisis means having the ability to adapt business planning to the changing reality.

Planning efforts can be geared towards boosting profit growth (e.g., by seeking revenue growth through atypical channels) and/or limiting downside risk and ensuring immediate profitability and positive cash flow by adopting an overall successful orientation.

In the current context, entrepreneurs may choose to set more prudent growth objectives, considering the increasing risks and uncertainty of the market and the greater constraints in obtaining financial resources. 

Frugal behavior

Frugality is an individual disposition associated with entrepreneurs, defined as “an individual’s general preference for preserving resources and applying economic rationality in their acquisition.”

Having a frugal disposition could help cushion the impact of covid-19 and improve the execution of new entrepreneurial ventures.

Having a frugal disposition could help cushion the impact of covid-19 and improve the execution of new business projects.

Today, some of the most successful entrepreneurs have attributed their success to their frugal disposition; this is the case, for example, of Warren Buffet and Jeff Bezos, founders of Berkshire Hathaway and Amazon, respectively.

To behave frugally, one must have a long-term goal in mind (e.g., survival of the business beyond the next two years), focus on using available resources within reach, and achieve the best possible price when acquiring new goods and services.

Social support

In addition to adjusting planning processes and delving into frugality as an advantageous behavior in today’s turbulent environment, having social supports could help establish personal and professional connections during the downturn.

Previous research in entrepreneurship has shown that entrepreneurs’ social networks play a relevant role in business performance because they facilitate access to valuable resources.

An important resource exchange in social networks is social support, which involves not only exchanging information, but also emotional support such as empathy, closeness or trust.

In fact, for entrepreneurs who suffered from the economic recession of 2008, strengthening contact with their social relationships helped to mitigate the impact of economic stress, and this in turn reduced the initial intention of some entrepreneurs to abandon their entrepreneurial project.