How the coronavirus destroyed small and medium-sized businesses in Russia. What should an entrepreneur do to stay afloat in any crisis?

The coronavirus has caused enormous damage to businessmen and coronavirus destroyed businesses in Russia and throughout the world.

After the damage from the coronavirus pandemic in other countries, a helping hand was extended to business, while our businessmen are forced to rely on themselves in the struggle for existence.

The coronavirus is not the first phenomenon that contributes to the crisis, but this time the situation is especially global.

Business suffers, people lose their jobs and the world is going into a steep dive, but we should think about how to act in a difficult situation, or rather what measures had to be taken to survive today, literally and figuratively.

The article will fully help a businessman prepare for the next crisis and give an understanding of where to correct mistakes.

1 the coronavirus hits small and medium-sized businesses

2020 has become a year of rethinking for every entrepreneur around the world, the coronavirus has become a big threat to both life and business. But this especially affected Russian businessmen.

The news feed is replete with news of media personalities from actors to video bloggers that they were not ready for such a turn of events.

There is little good in the crisis, but still I saw one positive point. I constantly communicate with entrepreneurs and every second (until 2020) conducts business in the old way.

This means that Russian small and medium-sized businesses were sorely lacking in financial planning. Businessmen worked, received income and were not interested in anything else.

What were the most common mistakes made by Russian businessmen?

Lack of a reserve fund, both personal and for business; Mixing personal finance and business finance; Lack of understanding at what stage the business is; planning for completion or transfer of business; Lack of personal financial planning, etc.?

During the global crisis and the coronavirus pandemic, these and other mistakes in financial planning have put Russian entrepreneurs on the edge of the abyss and no one knows how it will end.

Below I have tried to outline the solutions in order to learn from the 2020 crisis.

2. How an Entrepreneur in Russia Prepare for the Crisis

2.1 Engage in personal financial planning, clean up the family budget

As my practice shows, the biggest mess for a Russian entrepreneur is precisely in personal finances.

People learned how to do business in the 90s and do not want to change anything.

They are so used to it. And the world has long gone ahead, on the verge of digitalization of society.

A modern entrepreneur is a young man who posts photos on Instagram, uploads videos to YouTube and moves freely around the world.

The sale takes place in the moment. Online business is winning today, the rest is under attack.

I want to outline the problem – entrepreneurs who conduct business in the old way are far behind reality and, as we see, the crisis will deprive many of their favorite business.

Personal financial planning is one of the fundamental principles for the modern businessman.

If the entrepreneur had a personal financial plan, then this would enable him to preserve the business today.

Firstly, you would have a reserve fund for which your family could live for half a year – a year.

Secondly, this time you could do something, adjust to the situation and stay afloat.

This money you would spend on current needs – food, travel, communications, paying bills.

2.2 Family financial security

The 2020 crisis clearly demonstrates how necessary this is. The coronavirus took the lives of many people, and some of them fed and supported their families for a long time and now he was gone.

The family was left without a main source of income.

It is good if in such families the main breadwinner was protected by an insurance contract and the family received an insurance payment and was able to maintain a standard of living.

We conclude that an entrepreneur must be insured for a large amount so that in a critical situation the family can preserve life and dignity….

We also know that many have become infected and are undergoing long and expensive treatment; people urgently need masks, an antiseptic, and ventilators.

Here again the question of protection arises – personal, protection of family members.

Insurance policies against coronavirus began to appear “in every stall”, and if they do appear, then there is a huge demand.

And again, the obvious things happen – many of those who want to get a policy and payments on it can no longer get it, because they are infected and sick.

If a person had a VHI policy against an accident or emergency hospitalization, then today he would receive treatment, all the necessary tests (including for covid-19) and not spend a lot of money.

But in Russia they continue to be skeptical about life and health insurance, and most of course do not have protection.

Let’s hope the 2020 crisis and the pandemic will force a rethinking of the Russian approach to life and health insurance.

Conclusion

– An entrepreneur and his family must have health protection tools. VHI policies for emergency hospitalization, current medical care and protection from critical illnesses.

2.3 The entrepreneur must understand what stage his business is at

Any business has several stages of development: Appearance and formation; Development and growth; Transfer or Liquidation.

This is what many do not understand. You must clearly know “where” your business is located.

To do this, you need to soberly assess the situation based on how you are doing.

If for 5 years your business has not brought anything, it only feeds loans and you are working at 0, then this is the stage of completion and it is time to prepare for liquidation.

Every entrepreneur opening a business must know the approximate way of developing his business and clearly understand what he will do with the business at the stage of completion – transfer or liquidate.

We have decided on the periods of the “life” of the business, now let’s think about the monetary processes of the business, there are also problems here.

2.4 Business Cash Fund

While making a profit, do not forget that tomorrow the unexpected may happen and you may need a large amount of money.

Today we see that thousands of entrepreneurs in Russia were not ready for the fact that business would “stand up” and the state would not help in any way. And this mistake will cost many to lose their business.

The fund is needed so that in a difficult situation you cannot panic and stay afloat.

Money may be needed in order to continue the business, make purchases and pay obligations to employees, or close all obligations and freeze the business so as not to go bankrupt.

Maybe you will make a decision, adjust to the situation and start a new business in a new popular field.

In short, you will need money in any case,

and it’s good if you have a special fund created in advance for this.

2.5 Withdrawal and accumulation of part of the profit

This is what 90% of businessmen in Russia forget about.

When your business is going well and you make money,

the first thing you need to do is set aside some of the earned money and form cash funds,

for example, a personal NZ and NZ business.

Get in the habit of paying yourself first, and it will serve you well.

2.6 Protecting business partners

A friend of mine told me how his business suffered today. He owns a sawmill for 2 with a partner. The partner is an elderly person and recently left our world.

The partner’s wife did not want to deal with lumber and offers to sell a stake in the business for a cheap price,

and then close the sawmill in order to use the land for other purposes. There are a building and equipment on the site, and you just can’t sell it all for a pittance.

This situation occurs often when entrepreneurs are 50/50 in the share of the business

and do not think about what will happen if one of them dies. This situation can be easily overcome by cross-insurance.

The business is assessed (for example, this is 10 million rubles), each partner is insured for half the cost of the business

– this is 5 million rubles, and if one of the partners dies,

then the other receives a payment equal to half the cost of the business.

Naturally, in the insurance policy, the partners of each other are listed as beneficiaries.

2.7 Separating Personal Money and Business

Money The mistake is that our entrepreneur keeps all his money in a heap.

There is no planning and a clear understanding of where personal money is, where business money is.

The business works, brings income, a person takes off the cash register every day or once a month and immediately orders:

Part for the purchase of goods or equipment – pouring money into the business; Part for groceries, shops, gifts, travel – for life; something remains – although it is unlikely.

This is how the average businessman lives from month to month from year to year. And the farther the worse and I do not want to deal with all this.

This is a huge mistake. In order not to stumble, here you need to distinguish between personal money and business money. First, decide at what point you will withdraw profits.

It is better to do this at intervals of once a month, quarter, six months, a year. Depending on the specifics of the business. When you make a profit, you have a specific amount.

Then you need to make all calculations separately for business,

separately for personal life and indicate all items of savings and expenses.

Now, for example,

you get once a month a profit and you have before your eyes the calculations of how much money is needed to maintain the business and how much for personal needs.  

We put it off first. We deduct from the profit for personal NZ, for NZ business,

then we distribute the money according to the items of business expenses and the current expenses of the family.

If necessary, we modify it, modify it, somewhere we decrease it, somewhere we increase it.

Thus, you organize order and discipline in both business money and personal finance. You will see all the cash flows,

how much you save and how much you spend, in the process you can optimize some items.

In general, iron discipline in money is the key to salvation in any crisis. Calculate how much is needed for business needs

2.8 Ability to leave on time

Our entrepreneur constantly relies on credit money. There comes a time when the business only starts to take away and does not generate income.

I mean that in a critical situation, a business produces, receives income, but after paying off loans,

obligations to employees, etc. nothing remains or, even worse, the budget goes into negative territory.

It is at such a moment, if this continues for a long time,

that it is time for the entrepreneur to take responsibility and close the business. It is better, of course, to predict and foresee this and not get into debt. To part with the case at the break-even point if possible.

3. How an entrepreneur can save himself in a crisis

3.1 Engage in personal financial planning

The more steps you take in financial planning, the higher the chances of saving your business in difficult times.

Start with personal financial planning, ensure that the family has half a year of cash,

have a financial security plan, and protect the family with various insurance mechanisms.

Keep a separate budget for personal money and business money, do not mix personal money and business money.

Know exactly at what stage of development your business is and soberly assess its chances of existence, do not be fooled.

Have a personal financial plan that will both motivate you and act as a guide to life.

3.2 Be Prepared for Business

Crash 24/7 Of course, do not forget that an entrepreneur is always at risk from many circumstances – politics, taxes, territory. These and other factors can always affect your business and 90% out of 100

it will be a negative influence that will require a lot of will and ingenuity from you to keep the business.

We live in Russia and if you are 30-35 years old,

then in your memory, there are at least 2 crises (not counting 2014, 2018), in which life turned upside down. 1990 and 2020.

In the 90s, the state became different, it is possible that something similar will happen after the coronavirus pandemic. Crises happen periodically and it is worth remembering this.

If you have a business in Russia or just want to open it,

then it is worth remembering that working as an entrepreneur for freedom of action you will have to pay with many risks that will always lie in wait.

In conclusion

The crisis, coronavirus and any unforeseen circumstances bring house into our lives, ruin businesses,

take away loved ones and turn our lives upside down, and many of us are not ready for such a storm.

But there is always an opportunity to prevent any risks, to be prepared for a critical situation. In the article, I have listed enough approaches to stay afloat in a difficult situation. Leave a request for consultation and together we will implement each item that I highlighted today.

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