Wounded: effects of the coronavirus crisis on micro-entrepreneurs, and their recovery

Our entire society was extensively affected by the coronavirus pandemic. The sudden crisis in the operating environment that came from outside put many micro-enterprises in a difficult situation, the effects of which can be, figuratively speaking, referred to as wounds. The implications of the coronavirus crisis on companies were physical, mental and economic. In addition to actual business activities, the effects could also be felt by the entrepreneurs themselves or their family and friends.
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From the perspective of companies, the pandemic dramatically changed the entire operating environment and the purchasing behaviour of customers, which possibly led to a short-term or permanent contraction in demand. For micro-entrepreneurs whose financial buffers and strategic preparation based on anticipation were low, the sudden contraction of business and the changing activities of customers were a big blow. Not everyone got wounded, but some people had deep cuts. Some survived with scratches and some people’s wounds healed relatively quickly. Due to the differences in wounds, the medication and recovery schedule have also varied.

Entrepreneurs can also be vulnerable

Micro-entrepreneurs do not usually have large financial buffers, so disruptions in the operating environment are quickly reflected in the company's financial situation (Fairlie, 2020), as well as in the entrepreneur’s personal financial situation. Moreover, in an acute social crisis, entrepreneurs’ rights to social security are not comparable to those of salaried employees, such as access to occupational health care required by law, or the right to unemployment benefits.

Entrepreneurship is strongly associated with perceptions of success and strength. Such personal characteristics include heroism (Drakopoulou Dodd & Anderson, 2007), a pioneering attitude and controlled risk-taking, and pursuing a goal in the middle of uncertainty and changes (Baron, 1998). The vulnerability of entrepreneurs is not recognised, although the rapidly changing situations and risk-taking included in entrepreneurial activities make them vulnerable and sensitive to disruptions, both as individuals and in terms of the business they manage.

During the coronavirus crisis, entrepreneurs were faced with a new, surprising situation, and the crisis did not treat all entrepreneurs in the same way. In spring 2020, at the time of the outbreak of the crisis, the University of Oulu launched a project with the aim of supporting micro-entrepreneurs to cope with the crisis situation and maintain and strengthen their own agency through coaching. Sole entrepreneurs and small employers from Northern Ostrobothnia participated in the SISUa ja Digiä coaching. At the heart of the coaching was the notion of the importance of the entrepreneur’s own active agency in coping and strengthening their resilience. In addition, the training supported the development of the entrepreneur’s competence.

In the research interviews conducted during the project, twelve entrepreneurs who participated in the coaching described the effects of the coronavirus crisis on themselves as entrepreneurs, the needs for competence development identified during the crisis, and the support provided by the coaching to strengthen their active agency. (Simunaniemi, Halonen, Salmijärvi & Impiö, 2022.)

Deep wounds, rapidly healing cuts and surface scratches

In the interviews with entrepreneurs, we identified three types of wounds caused by the coronavirus crisis: deep wounds, rapidly healing cuts and surface scratches. Deep wounds were situations where the coronavirus pandemic caused sudden and significant changes to business operations, for example, by bringing them to a complete halt. The situation sometimes caused a substantial stress reaction which affected all areas of life, and the treatment of which needed both financial assistance and guidance from professionals. It is important to note that any entrepreneur could suffer a deep wound caused by the crisis, regardless of their earlier success. It was very difficult, almost impossible, to prepare for the shocks in advance. On the other hand, coping with a deep wound could provide the entrepreneur with an empowering experience of coping and increased resilience. Accordingly, the entrepreneur could later create a narrative about themselves as a survivor of a crisis.

The rapidly healing cuts were dealt with relatively quickly and easily already during the months of coaching. In such situations, the entrepreneur reacted to the crisis by changing their business activities, or the circumstances contributed to improving the situation. For example, for providers of various digital solutions, the coronavirus crisis resulted in a rapid increase in sales. Recovery could also be accelerated if the total amount of stress in the entrepreneur’s life was reasonable or the entrepreneurial activities were part-time, in which case the entire livelihood was not based on a single business model.

Surface scratches were classified to include situations where the implications on the company’s business and other effects remained non-existent, small or short-term. For example, a surface scratch could be explained by the fact that the corona crisis had little impact on the company’s sector. Some entrepreneurs benefited from the fact that they had introduced digital services already earlier. This allowed them to continue the company’s digitalisation process during the coronavirus crisis.

Competence development supports coping with crises

According to our research, micro-entrepreneurs try to adapt to the situation by redirecting their business activities and developing their competence. In the interviews, the entrepreneurs identified different needs for developing their own competence. Digitalisation, self-regulation skills and marketing and sales emerged as significant areas of competence development. This can be seen as an active attempt on the entrepreneur’s part to fix and heal the cuts, and to make themselves less vulnerable in the ongoing crisis. Longer-term planning emphasised the strategic management of business operations and the importance of crisis preparedness, as the coronavirus had identified the need to anticipate and prepare for future crises.

Supporting entrepreneurs’ agency increases their vulnerability threshold in crisis situations

In order to cope with the crisis, it was essential to understand one’s own opportunities to exert influence, make use of networks and have a perception of self-efficacy. Our results reflect the importance of proactive business planning. In the SISUa ja Digiä coaching programme, micro-entrepreneurs drew up a six-month plan in which they described practical measures and the ways in which these measures were linked with their own long-term goal. Business operations, digitalisation and the entrepreneur’s own well-being and coping were considered separately in the plan. The entrepreneurs reported that this helped them ‘reorient’ and ‘reactivate’ themselves after the temporary paralysis caused by the crisis situation.

This study confirms that, although entrepreneurs cannot generally be considered a weak or fragile group in society, as individuals, they still experience the same uncertainty and vulnerability as anyone else in crisis situations (Sischarenco, 2018). Crisis situations challenge entrepreneurs’ active agency, and coping with the changing situation requires learning new things. Business advisers and other operators offering training and guidance to companies should support active agency in coaching related to crisis situations. The best results are obtained by combining the entrepreneur’s active agency with the setting of short-term and long-term goals, strategic planning, consistent implementation and continuous evaluation of operations.

‘In a successful process, the entrepreneur’s own defence system or self-regulation skills correct the situation. The wound will leave a scar, but at best, the scar will tell the story of the victory achieved and how the problem was overcome.’ (Simunaniemi, Halonen, Salmijärvi & Impiö, 2022)

Anna-Mari Simunaniemi, PhD, MSc (Tech), Research Director, Micro-Entrepreneurship, Kerttu Saalasti Institute, University of Oulu.
Santeri Halonen, MSc (Econ & BusAdm), Doctoral Researcher, Kerttu Saalasti Institute, University of Oulu.