Innovation in the Face of Crisis: How to Support Entrepreneurs during the Continuing COVID-19 Pandemic
Numbers show that when entrepreneurs receive support, they can innovate, adapt, and overcome enormous obstacles. But there are millions of entrepreneurs in the world still facing the prospect of losing their business amid the lingering crisis. Civil society, government, and the private sector must work together to reach these women and men.
Editor’s Note: This article was originally published on Business Fights Poverty.
When the COVID-19 pandemic reached El Salvador, it delivered a blow to Fátima Meléndez, owner of Lafá Cake Boutique in San Salvador. Most of the company’s business came from providing cakes and dessert tables at weddings, which were canceled indefinitely when El Salvador entered a strict, months-long lockdown. Lafá saw its sales plummet and even had to suspend two of its employees
Half the world away in Nairobi, Kenya, the pandemic was also creating challenges for Candy Waithaka and her small retail outlet, the Hebron Cereal Shop, which sells grains and other basic foodstuffs. Customers shied away from the store due to fears of COVID-19, and disruptions in the supply chain led the prices for some of her merchandise to rise at just the same moment that consumer purchasing power in her vulnerable community declined. Soon, Candy found herself selling just $7 of grains per week
Lafá Cake Boutique and Hebron Cereal Shop are not alone. The COVID-19 pandemic unleashed a rapid and unprecedented crisis upon businesses across the developing world: by May, 87% of small business owners in Africa feared that their businesses would not survive the crisis, and in July UN-ECLAC reported that 2.7 million businesses in Latin America are at risk of shutting down, Some of these fears materialized: in a late-October study, about a quarter of small and medium-sized businesses in Sub-Saharan Africa and 15% of those in Latin America and the Caribbean were closed. More than 70% of entrepreneurs in Africa and 60% of those in Latin America and the Caribbean reported difficulties covering their living expenses.
But as difficult and disruptive as the past year has been for entrepreneurs, the situation has not been—and is not now—hopeless. When business-as-usual isn’t feasible, entrepreneurs need to innovate, think like a start-up, and adapt to changing circumstances. The Citi Foundation and international nonprofit TechnoServe have been working together in Africa and Central America to help entrepreneurs make these changes. Over the past year, we’ve identified key skills that entrepreneurs need to operate successfully amid the COVID-19 crisis and recovery.
Identifying Products and Services for a Pandemic
One of the greatest challenges facing entrepreneurs is that many businesses have found that their products were made temporarily obsolete by the crisis. As a result, entrepreneurs must identify what products and services are in demand and sketch out a plan for how to shift their operations to meet those needs
Lafá Cake Boutique could no longer sell cakes and dessert tables for weddings. But working with a business advisor from the Crece Tu Empresa (Grow Your Business) program—a partnership between Citi Foundation and TechnoServe to support youth-owned businesses in four Central American countries—Fátima analyzed the local and international market behavior to identify new products and services that customers wanted during the pandemic.
They found one: cakes and cupcakes for consumption at home. By providing more flexible, responsive service than large bakeries could offer during the crisis, and marketing to new and existing customers through social media and other digital channels, Lafá was flooded with orders for families’ Mother’s Day celebrations. As a result, the company rebounded and had recorded its best sales month yet by May, and it has maintained a growth trajectory since then.
Reaching Customers in a Pandemic
Even if businesses have products that people need during a pandemic, social distancing and lockdowns have often made it difficult for them to reach potential customers. When TechnoServe carried out a survey of micro-retailers in four African countries, the shopkeepers reported that their average number of customers fell 38% between February and May.
Faced with that challenge, entrepreneurs need to innovate and find new ways to connect with consumers. Often that means accelerating the digital transformation of their businesses, which has been slower to reach small businesses in developing countries.
That was the case with Candy Waithaka. People needed shelf-stable food like the grains she sold, but they were afraid to go to her shop. Working with a business advisor from the Pan-Africa Youth Entrepreneurship Development (PAYED) program, a partnership between Citi Foundation and TechnoServe, Candy developed a plan to market and sell her grains through Facebook and offer home delivery for her products.
Sales have rebounded to $85 per week, more than 10 times what she was selling during the nadir of the crisis. Candy sees this as a change that she will stick with even after the pandemic. “Online business has potential to grow beyond the four walls of a shop,” she said.
Of course, it’s not just entrepreneurs who need to innovate–those of us who support them do, too. While our partnership has always used digital tools in combination with in-person support, the pandemic prevented us from meeting with entrepreneurs. We had to innovate, using Skype, Zoom, phone calls, SMS to reach entrepreneurs.
Making a Measurable Difference
With this kind of support, entrepreneurs like Candy and Fátima have been able to weather the crisis and position their businesses for recovery and growth. When the National Commission for Micro and Small Businesses of El Salvador surveyed entrepreneurs in July, 64% reported that they had run through their cash reserves and could be forced to shut down. But that same month, 88% of Crece participants in the country said that they were prepared to weather the storm.
In January 2021, the World Bank Enterprise Study found that 20% of small businesses in El Salvador were believed to be permanently closed, and 69% reported that their monthly sales were lower than they had been a year earlier. Among Crece participants, however, 86% of the businesses had recovered their sales to pre-crisis levels or were on track to do so by the time they finished the program.
In Kenya, only 39% of surveyed micro and small businesses reported having emergency funds, and by July, 21% of MSMEs had been forced to close. But that same month, 75%% of PAYED participants reported that they had access to enough capital to keep their business afloat, and 52% said that their sales have increased over the past month.
These numbers show that when entrepreneurs receive support, they can innovate, adapt, and overcome enormous obstacles. But there are millions of entrepreneurs in the world, still facing down the prospect of losing their business amid the lingering crisis. Civil society, government, and the private sector must work together to reach these women and men.