26 Jul
The current scenario is a testing time for all business owners; the world has not seen such a devastating challenge for the last 100 years.
The buzzword “Challenges” is not new for entrepreneurs; we have faced many challenges to reach where we are today in business and bounce back or bounce forward despite all odds.
For the last few weeks, I went through various data on the past recessions and how companies pivoted from the recession, few of the significant crisis dates back to 1637 the tulip mania or tulip euphoria during the Dutch Golden Age where the tulip (bulbs) flowers (world-famous tulip gardens in Netherland) were traded on contract prices reached extraordinarily high levels and eventually collapsed in 1637 recording the first significant bubble in the economy. The great depression from 1929 to 1933, where the global GDP fell by 15%. In the great recession in 2008 /2009 where the GDP fell by 1% resulting in financial crisis, job losses, negative international trade, etc. started in the USA as subprime lending -economic burst and later spread around the word was considered as one of the worst crises of all time.
How companies bounced back from these crises according to the HBR article ( “Roaring Out of Recession,” Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen), In a study of
Four thousand seven hundred companies, 17% went broke, 9% performed better than their pre-recession period, and outperformed competitors. The strategies followed by the successful companies were evident in cost controls, less leveraged, spending wisely on expansion strategies, and aggressive marketing.
Based on my studies and listening to economic experts like RaghuramanRajan (former RBI Governor of India), Aravind Subramaniam (former financial advisor of India) Great minds of the Ivy league B-Schools, and some renowned therapists and psychologists, I would like to put forward my simple three steps coping mechanism for this current situation.
• Build resilience: Entrepreneurs are a breed apart. We have reached various stages in business by facing many challenges starting from scratch. We need to rebuild our company with the same willpower absorbing the shock and bouncing back with limited resources once again. Stay calm, look at your business with current reality, and reset new goals & strategies for your business.
• Build Reserves (cash): The liquidity crises are the significant challenges for small-medium enterprises at all times, significantly during slow down or tough times; it’s even more challenging to pull on. The first thing to act immediately is to prepare a cash flow projection for the next six months and assess your real business situation. The famous saying “CASH is the KING” is more relevant now more than ever. So ensure to collect all receivables despite resistance from the market. Build Reserves and stay away from significant expenses like capital or infrastructure unless it is warranted.
• Build Momentum: Any team that PLAY’s to WIN has a better chance of winning than a team that plays not to lose. The same principle applies to the business as well. Playing to win means preparing your team to be present in the market more powerfully, getting more closure to the customers, reaching them more in-person & virtually than in the past with more positive energy.
