Building Resilience In Uncertain Times: How Micro-Entrepreneurs Can Thrive Amidst Financial Setbacks

Micro-entrepreneurs, startups, and SMEs have faced significant challenges in recent years as a result of a number of financial setbacks. The pandemic forced several micro-businesses to close permanently, putting millions of people at risk. 

Despite technological advancements, supply chains have become difficult to manage. Market conditions are not improving, and input costs are rising for all players. It is not that there is a lack of consumer demand; it is the ability to address it effectively and quickly that is the concern right now. 

The key to survival for micro-entrepreneurs is to stay alert to market trends and regulatory changes that may affect the operational environment and to be financially prudent. Let’s take a look at some essential tips for microentrepreneurs to navigate the new fiscal landscape. 

Getting Ready For An Emergency

Downturns or emergencies are unavoidable phases for every economy. As a small business, the key is to build a moat that can protect the business during an emergency. Following conventional wisdom and saving for emergencies is essential, as is setting an attainable savings goal. 

The practices should be dynamic so that you save more when the business makes money, and less during the down season. One account must be designated for operational expenses and the other for savings, with an auto-debit instruction for a manageable amount of money to be deposited into the emergency fund each month.  Since this account is separate from a regular operational expenses account, it should only be used in the event of a true financial emergency.

Review Costs And Savings Patterns Periodically

Even if you set a long-term savings goal, it is critical to dynamically monitor and change the savings and expense patterns. Speed up when you see a clean and wide runway, and slow down when the terrain is difficult and serpentine. 

It is also important to dynamically monitor operating costs. Raw materials, transportation, and labour costs are constantly changing. You must be able to use dynamic cost-cutting when prices fall and readjust your own operating costs or sale rates when prices rise.  

Clear Demarcation Of Emergency Needs 

When you set up an emergency fund, the first thing to determine is how much money can help the business tide over an emergency. You must also clearly define what constitutes an emergency and what does not. When times are good, micro-entrepreneurs may be tempted to expand their business, enter new markets, expand their service portfolio, or even spend on asset acquisition by liquidating savings. 

However, an emergency should only be declared when the company is unable to manage operating expenses for any reason. In such a case, the buffer funds should be sufficient to keep the business running for at least 3-6 months, and ideally for 18-24 months. You can always use the extra savings for operational expansions once you have these funds for an emergency, but not otherwise. 

Identifying Sources Of Finances And Securing Funds

One of the most common mistakes that micro-entrepreneurs make is not caring about securing funds or borrowing when things are going well. To believe that the cash flow is good and you would take loans or support only when it is hurt, could be a terrible strategy because lenders are most likely to pull away if they have to lend to a struggling business. 

During a downturn, banks, organised sector lenders and venture capitalists would be less willing to fund businesses. All options must be explored and leveraged, whether it is securing debt funding from non-bank lenders, private investors, or VCs, taking micro-loans from cooperative businesses or governmental schemes such as the MUDRA, or applying for a line of credit. 

Maintaining a credit card or a current account with an NBFC that provides instant credit is also recommended. However, such high-interest credit lines should only be tapped into for emergency needs or short-term opportunities, and all borrowings should be duly paid off at the earliest. 

Invest In Technology 

Technology is becoming the most powerful enabler. 

Whether your budget is $100 or $10,000, invest in technology wherever it can improve operational efficiency, customer experience, or business outreach. 

Network And Learn

Operational processes and skills are evolving, and if you can upskill by participating in mentorship or cohorts, or network through industry organisations and events, it will be extremely beneficial in crisis situations. 

Micro-entrepreneurs can learn and network at startup incubators, mentoring programmes, and knowledge-sharing platforms across India.

Delight The Customers

Nothing beats customer retention when it comes to maintaining consistent revenue flows. In fact, in the event of an emergency, it is not uncommon for micro-businesses to crowdfund by tapping into their loyal customer base. 

Thus, focus on consistently providing the best product and service to all of your customers to reduce the likelihood of a downturn. 

In Conclusion

Navigating the new fiscal landscape is not easy, but with the right strategies, it can certainly be exciting and rewarding for micro-entrepreneurs. Go ahead and use your financial knowledge and network to build a strong and sustainable brand in a volatile market!