How to Avoid Crisis in Business? Lessons from the Pandemic

Editor’s Note – How to avoid crisis in business?

There have been a plethora of stories about lessons from the pandemic. Most of these, including our top ranked Year in Review, deal rather extensively with the lessons from the pandemic. However, our experience, particularly in business, begs the answer to a pointed question. How to avoid crisis in business in the future by doing the right things now? Amede Achingale recounts her lessons from the pandemic from her vantage point in Nigeria. Moreover, she goes one step further too. She outlines five steps as a ready reckoner on how to avoid crisis in business in future. So, read on and start taking action right away!

Business Lessons from the Pandemic

Do you want to make certain that your business can endure any future economic crisis? Then you have to remember how it endured the one of 2020.

The economic impact of the pandemic, the insecurity and lockdowns globally and in Nigeria particularly, will be felt for a very long time. Businesses have either closed completely or diversified, shutting down certain industries. This has left millions of people without jobs and cash flow.

In 2019, according to the World Poverty Clock, Nigeria was ranked as the poverty capital of the world. The country has an estimated 89.1 million people living in extreme poverty. Those numbers are now likely to increase due to the impact of the pandemic on businesses and the resulting job losses.

As we face these scary future prospects and the long, unknown financial journey ahead of us, many people especially women, will continue to reflect on the most recent major events of the past year. Although it looks like the pandemic is over, it will take several more years for employment, business activities and the economy to pick up and stabilize to previous levels.

How to Avoid Crisis in Business?

Irrespective of what the future holds, it is important for us to look at the business successes and failures from the global pandemic and events in the past year and learn from the challenging time. These lessons learnt during the pandemic will still be true in 2021 and beyond and can help us navigate tough times much better.

These five points can serve as a guide on how to avoid crisis in business in the future by doing the right things now:

1. Cash is king

It is not totally a bad idea to use debt instead of equity to get into a business. However, it is important to preserve cash and reduce debt as soon as possible. Too much leverage in a recession or economic downturn is a problem.

Most of the people who were successful during the period of the pandemic were those who were not highly leveraged and those that had investments running before the pandemic. When a business owner makes money, one of the things they may want to do is to reduce their debt exposure as quickly as possible.

2. Diversify your customer base

Just as we are advised to diversify our investment portfolio, we have learnt to do the same with our businesses. One of the most common advice from financial and investment advisors to investors or those starting out, is to have a diversified portfolio of investments. That is, to have a mix of investments in different sectors and returns. If we do this, it reduces the potential of loss of capital and financial mishaps that comes from a single failed investment or risk. This is also true for our businesses and customer bases.

If a company has only one or two segments of customers, regardless of how successful it may be at the time, that can be a risky venture. It is best to have diversified income streams and establish multiple industries and types of customers that can do business with you.

For example, a Food Processing plant can also engage in the production (farming) of some of its raw materials which can be sold with or without value addition. That way, the business will continue to exist if any of them go away.

3. New Market/Channel Strategies

One of the key factors for businesses such as ours, that survived the past year and now, is that they developed new market/channel strategies. We achieved this through strategic partnerships while focusing on core competencies. This is a less capital-intensive way of growing the business. It keeps the cash flowing without making huge capital investments in new production facilities or inventory.

4. Always be prepared

We don’t know what the future holds, but we can always predict that it will be different than the present. As business owners, we should be prepared for what is coming next, even if uncertainty prevails.

To a certain extent, we even need to be worried about it so we don’t become comfortable where we are. Like a good chess player, we should always anticipate change that can affect our businesses ahead of time. Hence, it is advised to have a contingency plan.

The lesson here is that change is inevitable. We must learn to accept it, adapt to it and embrace it.

5. Take advantage of the opportunity

During difficult times, whether it was a decade ago or in the present day, we have seen people panic and think the world is coming to an end. This is often not the right mindset to have during a recession or economic downturn. Such thinking could even lead to a failure of the business.

Contrast that with those who looked at the situation as one of an opportunity. Now, we can see that this becomes a time of less competition. Consequently, it offers a greater chance to consolidate one’s position in the marketplace. As a result of the pandemic, there were lockdowns and job losses. This provided advantages for us, such as more available employees and cheaper accommodation, that weren’t possible six months ago. It also triggers an urgent need to move away from your comfort zone.

Plant those trees right now to sit in the shade later!

As you can see from the above, these are a few things that we can start doing right away. One of the key lessons from the pandemic lies in the timing of the action. However, the question of how to avoid crisis in business in the future needs your thought and actions right now. So, in conclusion, let’s pay heed to the wise words of Warren Buffett:

Someone is sitting in the shade today because someone planted a tree a long time ago.

Warren Buffett

This is the time where we should start planting trees. There are some available opportunities (trees) and over time those trees will grow. We may not immediately enjoy the fruits of our labor, but at a certain point in the future, we will be “sitting in the shade”.

There are many valuable experiences and lessons that we have learnt in these past few months. It is important to remember them and the above examples as we move forward in the new normal.

Editor’s Note:

The business lessons from the pandemic learnt by Amede Achingale appear as a Featured Snippet on Google. These lessons are invaluable, in both good and not so good times.

About The Author

Amede Achingale is the Co-Founder at Bosaz Foods, providing health-conscious individuals and businesses with healthy gluten-free food products and consulting services. She believes that every entrepreneur is a solution and value provider and business success is determined by how the business speaks to the pain point of those it serves.

Amede has over 20 years of experience in Banking, Agribusiness and Business Management. She has launched profitable businesses and received several awards, with the most recent being the Brand Africa Women in Business 2021 awards. Amede holds a BSc from Boston College Massachusetts, and MBA from Manchester Business School, UK.