Small enterprises represent a dynamic sector of the economy. Therefore, this article aims to promote and identify the six critical components to sustain small business operations during crises and after.
In economic theory, internal and external factors influence a business's survival rate, especially as a firm’s survival falls in periods of economic and political crisis. Companies are affected in several different ways; small firms, in particular, require much support to boost their performance in an economic crisis.
Although smaller firms have similar organizational activities, structures, and strategies in satisfying customers while overcoming competition as larger firms, small firms are very distinct in that they have specific characteristics that distinguish them from larger firms. As a result, smaller companies are affected more by lingering economic crises than larger ones, mainly because of their unique characteristics and vulnerability due to limited resources and management systems to deal with unforeseen circumstances. Thus, these businesses struggle for survival in an economy with decreased consumer demand and heightened costs of running a business.
What to expect – Crisis Outcomes
The complexity of an economic crisis has several adverse effects on small businesses as well as on consumers. Here are some outcomes and challenges for both businesses and consumers that can be expected from a crisis. A crisis can lead to, but is not limited to:
Reduction in consumer demand, consumer confidence, sales, the purchasing power of consumers, and consumer trust.
Increase consumer frustration with higher prices and less disposable income.
Consumers' expenditures are significantly affected, resulting in consumers becoming more price sensitive.
The inability to acquire banking loans.
Increase production costs and prices.
The decline in production quantity, consumption, investment, and national currency.
High inflation and uncertainty / unforeseen business cost increase.
Critical factors which play a significant role in business survival during and after economic crises.
Before we list the critical components, it is essential first to explain the measure of business success. During a period of crisis, a firm’s survival is not the right measure to be considered for success; many businesses have no other alternative but continue to operate even though it is unprofitable. However, the meaning of business success in this context refers to the ability of an enterprise to overcome systemic and non-systemic risks, thus attaining sustainability during an economic crisis. Another key point to note is that some sectors are more crisis sensitive than others. Hence, these six critical factors listed in this article are generic and not specific to any sector.
Six critical factors to ensure small business sustainability during and after crises
1. Entrepreneur Resilience
Resilience is a significant component in ensuring business sustainability. It refers to the ability to adjust to changes [adaptive capacity], to overcome critical conditions that arise from crises and not become discouraged by failures, and also the ability to revert to a balanced state or recuperate from any setback.
This factor is the most significant as it umbrellas all the other factors listed hereafter.
2. Resourcefulness
Basically, the attribute of resourcefulness is the ability to control resources well and to maintain product and service quality during a crisis, to seek alternative resources, and properly control human resources to ensure that the business will have the ability to face instability and recover from disruption.
This component also corresponds to budgeting, cash flow, investment, relational networks, material assets, and the like.
3. Positivity
Entrepreneurs need to practice positivity, which enables preparedness to make decisions and take action, to lessen vulnerability and the effect of facing failure.
The inclination to operate the business despite small profits and the desire to serve several customers at the same time.
4. New Marketing Strategies (More details on marketing orientation during and after a crisis will be discussed in a separate article).
For a small business to increase the probability of succeeding during and after crises, it is essential to integrate new marketing strategies in compliance with the situation faced.
For service companies: Develop attractions to offer 'Unique Selling Propositions' and a 'Wow' factor that differentiates you from its competitors and something that customers will remember and will keep coming back to.
5. Transparency [in changes with business activities, offerings, and pricing]
Businesses need to be transparent in changes with business activities, offerings, and pricing during turbulent economic times; this may help the consumer understand the logic of changes and whether the changes are consistent with their expectations.
6. Innovation
Innovation is particularly important in times of crisis to stand out from competitors and fulfill customers' needs and expectations. Also, it is a necessary component in maintaining success, achieving long-term objectives, improving productivity levels, and developing the ability to compete in today's global markets. Innovation requires the need to invest in R&D continually.
Innovation should be promoted and invested in during tough economic times as a crucial mechanism for business growth and even survival.
Survival is one of the main goals of a firm's strategy, irrespective of its status and phase in the life cycle. The core of any business's sustainability and survival is its ability to adapt to internal and external environmental changes; however, the sector and country in which the firm operates are influential factors in its survival rates. All things considered in this article, we recommend that small businesses must implement the attributes and strategies/processes needed, that is, resilience, resourcefulness, positivity, new marketing strategies, and innovation for business survival, particularly during and after crises, rather than quitting when profits decrease.
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