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Coronapreneurs: How Austrian Entrepreneurs Manage an Exogenous Shock to the System

Tags The EntrepreneurEntrepreneurship

03/17/2020Hunter HastingsPer Bylund

Key Takeaways and Actionable Insights

Two methods of applying reason to the analysis of changing circumstances can be particularly helpful during cases of external, or exogenous, economic shock, such as the current coronavirus panic.

The first is thinking in terms of economic output. The second is systems thinking.

Applying these methods can help Austrian entrepreneurs to make sound decisions amidst the high speed rate of change of economic conditions.

1) Identify the ecosystem in which you operate and analyze expected changes in output. If you operate in the health care ecosystem, output can be expected to rise. More hospital beds in use, more cleaning services utilized, more deliveries to hospitals, additional workers hired. If you operate in the food and beverage ecosystem, output may stay the same but the location of consumption may shift, for example from bars and restaurants and company cafeterias to homes. If you work in the physical mobility ecosystem of cars, buses and planes, output can be expected to decline. In the digital mobility ecosystem of Slack and Zoom and webinars, it can be expected to increase.

Try to approximate the output potential of your ecosystem over the next few weeks.

2) Next, review the conditions in your own micro-system of suppliers, customers and support services (such as banks). Dr. Bylund advises us first to look upstream to suppliers and vendors. The key economic tools here are communication and information. They will not know your business needs in these changed circumstances unless you reach out to tell them. Call them on the phone, talk person-to-person, let them know what you expect and what you need. You’ll be reducing uncertainty for them and you’ll be strengthening your relationship and building trust, with beneficial long term consequences.

If supply might be interrupted, you will benefit from contingency planning which looks at all possible scenarios, which is a characteristic of the Austrian view of uncertainty. Dr. Bylund suggests we look at a worst case scenario, a best case scenario and one in the middle. This will narrow your uncertainty and the range of possible actions and make them more manageable.

3) Next, look downstream to customers and consumers. If you are a B2B entrepreneur, your customers are in the same position as you relative to your upstream suppliers. Talk to them, build relationships and find out their needs. How can you facilitate new value for them? Offer assistance. If you are able to help them with their cash flow or their inventory management or other aspects of their business, it’s an opportunity for long term business building. Extended terms, discounts and bonuses, if you can extend them, have the potential to pay back in the long term via loyalty and extended relationships.

For B2C businesses, the same mindset applies: how can you facilitate new value experiences under changed circumstances. Some of the same tools might apply, such as extended terms, discounts and savings. Or the answer might lie in new distribution methods, such as home delivery or curbside pick-up outside restaurants. Always keep the value process in mind: consumers still want value from you, but the way they experience that value may change.

Of course, in both cases, you must carefully manage your own cash flow, and this is a critical metric under these circumstances. Weak cash flows are the biggest small business killer.

4) Therefore, it also makes sense to look laterally across your ecosystem to collaborators and enablers like banks. Be clear with them what your requirements are, and make sure they communicate clearly to you what new facilities they are able to extend, both of their own volition and in response to new legislation coming from the Federal government. We Austrians are skeptical about government intervention in the economy at any time. However, it behooves all business owners and manages to be up-to-date in their knowledge of available assistance.

Additional Resources

"3 Ways to Safeguard Your Business as Coronavirus Spreads" by Dr. Bylund: Mises.org/E4E_57_Article

"Coronapreneurship" (PDF): Mises.org/E4E_57_PDF

Share your comments, suggestions, and ideas on the Mises For Business LinkedIn page: Mises.org/M4BLinkedIn

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Authors:

Hunter Hastings

Hunter Hastings is a member of the Mises Institute, Business Consultant, and co-chair of the Rescue California Educational Foundation. He is also host of the Economics for Entrepreneurs podcast.

Contact Per Bylund

Per Bylund is assistant professor of entrepreneurship & Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. Website: PerBylund.com.

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