The Covid-19 pandemic has heavily impacted household and individual level earnings in Bangladesh as about 13 percent of people have become unemployed in the last few months. The lower and middle-income classes of the country have experienced a significant drop in their earnings.
Consequently, national poverty is forecasted to increase by 25.13 percent, according to the Bangladesh Institute of Development Studies (BIDS).
The pandemic has taken a toll on all other areas of the country, as it caused a reduction of exports by 16.93 percent, imports by 17 percent, and also decreased average revenue for all SMEs by 66 percent in 2020 compared to 2019.
All these indicators at the core demonstrate that the disposable income of the people is declining, while only the remittance inflow has seen an 11 percent increase. Certainly, as the domestic market has not grown as expected, the hardest hit has to be absorbed by the private sector, especially, the cottage, micro, small and medium enterprises (CMSMEs).
Adding up more pains to this scene, private job-holders have observed a significant pay-cut of up to 40 percent, many have lost their jobs, some are not getting salaries for the last five months, and some have been ill-treated in job places as no bonus might was disbursed to their salary accounts even on the occasions of the Eid festivals.
This critical situation has put the middle-class into a classical dilemma again, which is, whether to continue with their existing job forgetting all downsides as that job has been a comfort zone for a long time or start a new business though there is a gap between required investments and savings. Or else, go for both at the same time? Or looking at it differently, private sector employees are willing to do something new so that they can bring back their previous level of income in this trying economic situation.
The first rule of thumb to follow before opening up any business is to see the macroeconomic condition of the country, whether it is stable or slipping away; and second, what are the challenges that other similar business-domain entrepreneurs are facing and how they are overcoming those.
Being pessimistic, many are unwilling to make investments during this world recession, but when recalling the past business success stories, we see that the General Motors launched in 1908 when the US economy was in chaos after the financial crisis of 1907. Meanwhile, Burger King tossed its first patty in 1953, when the US was again in a downturn.
So, a recession stands for an opportunity for a true entrepreneur, nothing less than that.
Nevertheless, an individual looking to become an entrepreneur should consider the three major aspects before starting a business:
Active income and passive income
We had seen during the great economic recession of December 2007- June 2009 that people all over the world were trying to increase their income in very interesting ways, which left good lessons for all of us to follow.
To diversify the income portfolio, you can first split your income channels into two broadways: i) Active income channel, ii) Passive income channel.
Many of us find doing a job monotonous and count it as working for others' prosperity! But, let us put it in another way, when you are working in a place, you are investing your very precious time and rigorous efforts there, which ultimately result in you getting a guaranteed amount after every month. From this point of view, it is even a good business, which is giving you a sure profit. This kind of earning through active and regular involvement is termed as 'active income'.
On the other side, while we talk about 'passive income', we refer to an income-generating mode of participation in which, one does not have to look after an activity regularly but, still it will benefit him with a profit or earning.
For example, it can be a profit earned from fixed deposit scheme opened in a bank or national savings certificate bought from Bangladesh Bank, it can be in a mode of stock or bond market investment, or else, it can be also an investment made in a business initiative taken by a fellow and visionary group of people where your role can be as a major investor and your business-mates decide to lead the day-to-day business operations.
On top of that, you can diversify your active income channel too, like, if you have a cooking skill then by using social platforms - Facebook, Instagram etc, you can promote photos of your dishes and take orders from there. Many are now making a good chunk of money out of that. Some are utilising their marketing skills to retail clothes, cosmetics, and lifestyle accessories. The advantage of running social media commerce is that the business risk is less as it does not require a big investment and it enables wider customer-base to reach.
Similarly, if anyone possesses research and writing skills in a particular subject or multidisciplinary subject, he or she can earn money in outsourcing websites like Fiverr, Upwork, Freelancer, etc by writing content and scripts, using their spare time efficiently. Fortunately, in this digital world, an individual can work remotely but earn globally.
Competitive market vs brand value
Nowadays, the market is very competitive and just a bit of a high price can take away a potential customer. But, at the same time, strong and fascinating brand value convinces and inspires people to buy a quality product even if it has a high price tag.
As an entrepreneur, you have to create a balance between product quality and the offered price. Very importantly, innovation is required to address people's forecasted preferences that change frequently and act accordingly on the entire value chain process, from production to marketing and distribution, to strengthen position in the market.
We see in Bangladesh that six to seven months prior to Eid-Al-Adha there is a trend of many people undertaking cow or buffalo fattening projects and recently, some are taking Biofloc projects. Any such initiative is laudable, but before bringing this into reality, an Agri or Aquaculture entrepreneur has to consider the distance of the project area from the market, price of the product at the market, transportation mode and related costs, as well as costs and quality of the animal feeds and other raw materials required to establish and continue the project.
As organic production is gaining traction among urban people, agri/aqua-projects can focus on that to create better brand value.
Business planning and business partner
The success of a business or any venture depends almost entirely on proper business planning and proactive business partners who are eager to pursue the same business vision. Many successful entrepreneurs like LinkedIn Co-founder and Executive Chairperson Reid Hoffman had waited for years to start a business while going through experimenting with several small projects to come up with an innovative business plan.
When you are going to start a business, you will get two types of advice from the people around you for free: i) Business is not for you, you will not be successful; ii) There is nothing to plan much about business, just start a business right now, you will automatically learn from failures.
In reality, two of these may not be applicable specifically to you, as, the first one sounds extremely pessimistic while the second one is hyper-optimistic. As an entrepreneur, if you sketch your business plan properly according to the market research findings, then you will know better than others about achieving success.
On the other hand, it is not necessary to jump on a business today or to taste failure for must to learn business strategies. You can also learn from others' experiences shared at different platforms, or if you want to take hands-on experience, you can go for grabbing an internship opportunity in your targeted business domain.
Along with the business plan, your business partners will help you with more inputs in shaping your business as a sustainable one, and you can also consider tagging some experienced business leaders who can assist you in expanding your financing networks to utilise when required for scaling up your existing business. A good network will also help you to foresee the market and make a good business continuity plan.
It should be mentioned here, the export earnings in July this year stood at $3.91 billion, which was $3.88 billion in the same month of 2019 ,and registered a 13.40 percent growth over July's strategic target of $3.44 billion. And also, the inflow of remittances crossed $2.50 billion mark in July before the celebration of Eid-Al-Adha, which is the highest ever the country received in a month.
This indicates that the domestic market has a good potential to recover the Covid-19 hit sooner if export and remittance receipts continue this pace. It can be viewed as a piece of good news for starting a business.
Enamul Hafiz Latifee is the deputy secretary, Trade Facilitation and SME Development Departments, Dhaka Chamber of Commerce and Industry (DCCI). Email: [email protected]; Website: www.ehlatifee.com
Md Sajib Hossain is a senior assistant secretary, Research and Development Cell, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). Email: [email protected].