Entrepreneurship and risk seem inseparable. And for the last year, that relationship has been far riskier. COVID-19 has had a major impact on everyone from farmers, to restaurants, to consumers standing at empty supermarket shelves. The pandemic has highlighted massive problems in food systems and global trade.
Building your skills as an entrepreneur has a lot do to with analysis and learning from the situations that challenge you most. Looking at the highlighted problems as agrifood entrepreneurs, what lessons can we take that will help us become better at what we do?
Build a Strong Local Supply Line
Even if the pandemic is not placing quarantine restrictions on international shipping, there is always a chance that a gigantic container ship gets stuck in a tiny canal.
“No-one can deny that the pandemic brought to the fore certain supply chain weaknesses that we weren’t aware of before. We can’t afford to repeat this, which is why government and businesses are seriously relooking at their supply chains. We need to build greater resilience to unexpected shocks,” says Saliegh Salaam, portfolio manager at Old Mutual Investment Group’s Customised Solutions, speaking to How we made it in Africa.
Your main business may be reliant on international imports or exports, but if it is possible, build and maintain local connections that will get you the inputs you need and a market to sell your product.
Strong local supply-chains don’t just ensure your business has a back-up but will help to boost local economy and help your community weather global threats.
Diversify Your Business
“If your income streams are successfully adapted to change or sufficiently diversified to mitigate the risk of change, you will not only economically survive but potentially flourish in this pandemic,” says Samuel Leach.
Once your core business is strong and it is running steadily, it may be time to consider how you will add different revenue streams.
Can you use your existing customer base to build another product line or even new business? When you get to know your clients, you might see other needs they have. By helping them solve that need, you can expand your business and become more resilient.
The COVID-19 pandemic didn’t leave much room for wonder about business pivots. Doing something different immediately was the only survival strategy for many businesses.
Social entrepreneurs, Gelaine Santiago says, “During hardship, your what must pivot. But your why must remain constant and stronger than ever.” Beyond “making some money”, connecting with the reason you started your business will help you remain centred as you find different, relevant ways of achieving the same goal.
Cash Flow Matters
Millions of businesses failed during the initial COVID lockdown. After that, slow economic recovery and cash-poor customers meant a very, very long time passed before survivors started turning a profit. Globally, the restaurant industry was particularly hard-hit, which had a knock-on effect all the way back to the framers who grow for them.
The pandemic means that entrepreneurs may have to reconsider how they work with their cash. Entrepreneurs have to careful balance between emergency savings and reinvesting profits.
Traditional logic said that it is a great idea to have 1 months’ worth of savings as a back-up to run your business. Pandemic logic says that it may be an even better idea for stable businesses to invest a portion of their profits until there is a 3-to-6-month cash backup to cover running costs in a worst-case scenario.
Putting emergency cash in an interest-bearing investment vehicle that can pay out at short notice is a good strategy. When an excess builds up, the money can be used to fund a reinvestment strategy to grow or scale your business to the next level.
When it comes to spending cash in your business, austerity in key. Writing for Entrepreneur, Alejandero Saracho says, “When you buy something, make sure that it is directly related to the generation of sales. If you need a computer, ask yourself which computer meets your basic needs (not which one meets the needs of your ego). And ask yourself, if I buy a more expensive computer, will this increase my sales?”
What lessons have you learnt from the pandemic? Have they made you a better entrepreneur? Importantly, are you using those lessons to build a stronger more resilient agrifood business?
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