Every business has its ups and downs. For an entrepreneur, learning how to weather these storms is an essential skill. But, we do understand, that those who are new at this may not have the necessary guidance to navigate the crisis with the least amount of damage.
Here is our simple guide to help you overcome your first entrepreneurial crisis!
Types of entrepreneurial crises that you may face
A crisis often brings out the best in you, and you discover qualities that you never knew existed within.
– Rajeev Siddhartha
Isn’t this quote all about having a positive attitude? It sure is! So, whenever you face an entrepreneurial crisis, imagine these words and keep that positive mindset going.
Running a business is like an adventure with lots of surprises. The key is to be ready for the unexpected and have a plan for when things get tricky. That way, you can keep your business up and running smoothly. Isn’t it?
To make you ready, let’s have a quick look over the types that an entrepreneur could face.
Economic downturns
Economic downturns mean fewer sales. To get through this, you must find ways to save money, find new customers, or try selling other things.
Who is an excellent example?
One Indian D2C brand that excelled at managing money troubles or economic downturns during the COVID-19 pandemic is “Cureveda.” They expanded their product range, shifted focus to online sales, optimised costs, ensured supply chain resilience, and stayed consumer-centric.
This approach helped them not only weather the economic storm but also set the stage for continued growth.
Supply chain disruptions
Supply chain disruptions, like storms, can disrupt an entrepreneur’s journey due to natural disasters, logistics issues, supplier problems, global events, or market changes.
These can lead to financial losses, customer unhappiness, delays, and competitive setbacks.
Related read: How Managers and Team Leaders Can Practice Empathy During A Crisis
Who is an excellent example?
Wow Skin Science, an Indian brand, handled delivery issues during COVID-19 by sourcing locally, managing stock better, using various delivery options, being honest with customers about delays, and focusing on keeping customers happy.
Market competition
It’s like a giant game where everyone wants to win. In business, lots of competition means it takes more work to make money. To stay in the game, you need to develop new ideas, make your brand strong, and tell people about your business.
Related read: How small businesses can beat competition: 7 proven ways
Who is an excellent example?
“Boat Lifestyle,” an Indian D2C brand in the audio and electronics accessories market, has tackled intense competition (Noise, Boult, Leaf) by innovating products, building a solid brand, using digital marketing, offering competitive prices, and prioritising customer satisfaction.
Regulatory challenges
Picture your business as a puzzle. Sometimes, new rules or laws pop up, which feels like adding new puzzle pieces. You need to figure out how to fit them in.
Pro tip: To avoid trouble, learn about the rules, follow them, and ask for help if you need more clarification.
Financial struggles
Business is definitely like your piggy bank. You need more money in there to buy the things you need.
To fix this, you need to plan for your money, see where it goes, and ask for help if you’re short.
You could:
- Ask the bank for a loan: This could be a long and difficult process but it will be the most secure option at manageable interest rates
- Friends and family: They are always there to support you. ask them for short-term loans.
- Make sure your emergency fund is always ready
Related read: How To Support Small Businesses During an Economic Crisis
What to do when your first entrepreneurial crisis appears?
Crises are a natural part of entrepreneurship. By staying calm, seeking advice, and taking proactive steps, you can not only survive but also grow and learn from your first entrepreneurial crisis.
The challenges or crises you face today build a stronger and more resilient business for tomorrow. Here are some steps to follow to help you overcome your first entrepreneurial crisis.
a. Risk assessment
After identifying potential risks, it’s time to create a plan, just like assembling an emergency toolkit for a hike. This plan outlines how you’ll handle these risks—whether through prevention, risk-sharing, or confrontation.
Preparing for your first entrepreneurial crisis isn’t about eliminating risks, which is often impossible. It’s about being ready to face them, like a skilled sailor navigating uncertain waters.
So, assess your risks, gear up, and embark on your entrepreneurial journey with confidence.
- Know your business: Investigate your business thoroughly by identifying critical components, key customers, and potential vulnerabilities.
- “What If” questions: Play the “What If” game to uncover hidden risks. Explore scenarios like sales plummeting, supply disruptions, or industry upheavals.
- Seek advice: Connect with experienced entrepreneurs and experts for insights into industry-specific risks.
Related read: How to Survive a Crisis: 5 Strategies When Nothing Works for your Small Business
Risk assessment tools and techniques
- SWOT analysis: It is like a pros and cons list but for your business. It looks at Strengths, Weaknesses, Opportunities, and Threats.
- Risk matrix: A risk-o-meter showing which problems might happen and how bad they’d be.
- Scenario planning: Rehearsing for different crisis scenarios so you’re ready for anything.
- Benchmarking: Comparing with similar businesses to spot common risks.
- Financial modelling: Playing financial “what if” games to see if you’re ready for a crisis.
b. Developing a risk mitigation strategy
In the unpredictable world of business, risks are ever-present. So, developing a solid risk mitigation strategy is your shield against potential pitfalls.
This is how to do it right.
1. Financial resilience
- Emergency fund: Your business’s financial safety net for unexpected challenges.
- Credit and financing: Forge relationships with financial institutions for extra support during tough times.
- Debt management: Carefully balance your debt for long-term financial stability.
- Cost reduction: Trim unnecessary expenses to weather storms without compromising quality.
Related read: What is an emergency fund and how to build it for your eCommerce business?
2. Diversifying suppliers
- Assessing and strengthening your supply chain: Your supply chain is the backbone of your business. Assess its strengths and vulnerabilities regularly. Ensure your suppliers are reliable and have contingency plans in case of disruptions.
- Vendor relationships and contracts: Good relationships with your suppliers are like having trusted allies. Nurture these relationships and establish clear, mutually beneficial agreements. Open communication can be crucial during challenging times.
- Alternative sourcing strategies: Imagine your suppliers as a network of roads leading to your destination. If one road is blocked, having alternative routes can save the day. Explore backup suppliers or sourcing options to maintain access to essential materials or products.
3. Market diversification
Relying on a single market or customer segment is like putting all your eggs in one basket. Diversifying your customer base can reduce the risk associated with market-specific crises. It is like exploring new territories and opportunities.
4. Compliance and regulatory strategies
- Know Indian business laws: It’s like having a map in a maze. Learn the laws for your industry. Legal knowledge guides you through compliance.
- Compliance audits: Regular check-ups, like a health check for your business. Ensure you follow the law and standards to spot issues early.
- Legal readiness: Be ready for legal challenges during crises, just like carrying a first-aid kit. Consult experts to understand your rights and duties. Legal preparedness is your safety kit.
Related read: 5 legal mistakes to avoid when starting your business
5. Insurance considerations
Insurance is like a shield protecting your business. Assess your current insurance coverage and ensure you have the right policies. Business interruption insurance, for example, can be a lifesaver when your operations are disrupted.
6. Protecting your mental health
Going through a crisis, especially your first one can be nerve-wracking. As an entrepreneur, it is important to also stay aware of your mental health. Here are some tips:
- Anxiety relief: The entrepreneurial journey is undoubtedly like a rollercoaster. Find healthy ways to manage stress, like mindfulness or exercise.
- Work-life balance: Enjoy the ride, and remember to balance work and life. Preventing burnout is crucial during a crisis.
- Mental preparedness: Just like you prepare for weather changes, get mentally ready for future challenges. A resilient mindset helps you stay determined and adaptable.
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Remember, the first entrepreneurial crisis is always the hardest, but keep your chin up. You’re doing great and learning to navigate the rough waters of entrepreneurship!
Keep things simple with Instamojo
Instamojo simplifies your business operations, reducing potential risks even during entrepreneurial crises. The user-friendly platform makes setting up and managing your online store a breeze.
Moreover, we offer a supportive business community, allowing you to voice your concerns, seek advice, and create a safety net to help you navigate the challenges of entrepreneurship with confidence.
