Strategy for building a lasting business: key into essential needs
The lockdown has taught every consumer and business owner one critical lesson. It is that when push comes to shove, the market will sacrifice non-essentials. Segments and sectors such as luxury fashion, dinning out, cinemas, sports, hospitality, and tourism are being sacrificed for health, fintech and foods.
Building a business around core human needs is essential. This however does not mean sporting services, eating at KFC, shopping for luxury brands, or visiting Safari’s are not good products and services but they are ‘feel-good’ businesses that require owners to put in place strategies to reduce the effects of sudden shock. When the economy is depressed or pandemic strikes the non-essential services and products will be sacrificed by consumers as wallet thins.
How does an entrepreneur survive or beat the shock that renders the non-essential sectors irrelevant:
a. Target essential sectors at concept development stages – According to Business Insider, Unilever, a consumer goods conglomerate recently found out that sales in its skincare, shaving and hair products have declined significantly during the COVID-19 pandemic. However, the business has seen a surge in its other segments such as home-cleaning products. This suggests that “consumers are investing less in personal grooming regimens’ but patronizing other vital areas. Fancy, beauty, and related feel-good services will be sacrificed for what truely matters in life such as health products, food, money transfer and cleaning when the economy tumbles. Put on Maslow’s scale, self actualization, love and belonging, esteem will be sacrificed for psychological and safety-anchored products and services. These latter needs are air, water, food, shelter, reproduction, covering; in additions to health, personal safety and employment. These are survival level needs. Businesses built around these needs will be the ones that will ride out this present economic disruption.
b. Hedge non-essential products and services – Human needs are constantly influx. A shift that is not matched with innovative response from market players may dent the future. To stay the course in the face of such shift, business owners must learn to hedge their businesses. It is not merely about putting money into hedge funds but:
- Building diverse portfolios to mitigate the effect of a slip in one segment and the overall impact on the business – Unilever has succeeded in that as people buy less of its beauty care products. The conglomerate extensive product lines are sure hedge. Aside that, it expects to see a surge in subscription for its Dollar Shave Club for shoppers who favour digital shopping.
- Keep enough cash to stay liquid for an extensive period of market slip – It is instructive for business owners to hold cash that could help ride out any hiatus or market slump that may last 1-2 months. This will help cushion losses until market revive.