COVID-19 has caused shockwaves all over the business world, affecting businesses of all sizes in ways that will be difficult to recover from. No one has suffered as much as start-ups, though, with the financial uncertainty that goes hand in hand with a global crisis just one of several issues that small businesses need to overcome, on top of the already difficult process of starting a new company.
For startups right now, survival is the only thing they should be focusing on. Where marketing, growth and profit were all important for small businesses just six months ago, most companies are now realising that life in the post-coronavirus world means that their business plans and projections are effectively useless.
“Companies are realising their business models aren’t designed to deal with this,” says Stephen Oldroyd, head of strategy at WorkinStartups.
“Businesses put their sales staff on furlough because there’s nothing to sell the clients, and when focus goes from high growth to survival, new hiring for innovation is paused.”
This means that companies are faced with new challenges, and the ways in which they deal with these challenges will be key to ensuring that they are able to move forward in the future.
Here are some of the key challenges startups should be focusing on right now.
Right now, the most important thing for any startup to consider is how they manage their money, so that they can stay operational and prepare for any further emergencies down the line.
It is looking likely that the pandemic will continue on for a number of months, with social distancing and other measures in place for much of this time, and there is the possibility of future lockdowns causing companies to have to close their doors for a time once again.
Investors are still working and looking for businesses to invest in, but there is less security in this, and business valuations are much lower in the current climate, meaning that the money that you are able to get into the business may not match your wants or needs.
Look for new ways to generate cash that don’t cost you too much and are sustainable even in lockdown scenarios. This may mean changing your business model temporarily or cutting back on expenses. It is a good idea to work with an accounting service to identify where your business could save money, and in what areas it is best placed to succeed.
Leading a company is far more complex during an unprecedented situation such as a global pandemic. It is crucial that you remain open and honest about the situation, what is currently happening and what your employees and customers can expect from you going forward. In difficult times, people look to understand what people and businesses they can trust, to give them a sense of security.
Now is the time to begin working on your company’s core values and missions and proving to your workforce and customers that you are sticking to the promises that you make. This means showing empathy and working on making your team feel like a community where everyone is important.
Because many businesses are being hit hard financially, it is possible that you will have to let some staff go during this time. You can do this and still boost your image, as well as working on your business community, by showing total transparency in the choices you are making, why you are making them, and who is likely to be affected. Make decisions based on long-term goals and work hard to keep your employees in the loop.
Letting employees go may save money in the short term but losing your top talent to competitors and being unable to bring them back later will only harm your business in the long run.
Whilst pivoting your business model is a very serious decision to undertake, it is also one that many businesses have made during the COVID-19 crisis successfully.
It is notable that many startups have actually thrived during the pandemic because they started out in an area that became more essential, whilst others faltered because they found it hard to appeal to their target audience and sector.
Pivoting means that you take the business and sector you currently have and adapt it so that it works in the current crisis. This may be as simple as taking your physical shop and moving it online. Or you could seek to provide a service that people do need during lockdown, or to make their lives easier during the crisis, using the skills and materials you have.
A number of companies have found success in teaming up with complimentary rivals, combining their resources to launch a product that is in greater demand than either of them would have found with their existing lines.
To stay afloat until such time as you are able to return to your existing business model, money management should be top of your list. Working with a company such as The Financial Management Centre will help you to stay on top of your finances, working with professionals who are better placed to help you with decisions that will boost your saving and spending power. We can help you to:
- Do a deep level cash analysis. You need to know exactly what you currently have available to you, how much money you are owed and what you owe – and how you are going to balance these elements. Once you understand your complete financial situation, you will be better placed to make good business decisions.
- Monitor your spending. You need to be keeping an eye on your bank accounts and lines of credit every day, so that you know exactly where your finances stand at any time.
- Keep paying your bills in full and on time for as long as possible. Many startups went into panic mode as soon as it became clear that their finances were going to be affected by COVID-19 and stopped paying their bills. This is actually likely to cause more issues in the long term. A good accountant can help you to understand where you are at, so that you can keep paying what you owe for as long as possible.
- Review your subscriptions. You may be paying for apps and services that you don’t need, don’t use or could use a free version of. You would be amazed at how much you can save simply by reviewing your regular monthly payments.
- Identify opportunities. A better understanding of your financial situation and fresh eyes could help you to understand what direction you can go in now.
Why not get in touch now to see how we can help your business grow and prosper –
Call us on 0800 470 4820 or send us an email at [email protected] – we look forward to speaking with you.