The global pandemic of 2020 has forced more than 70% of startups to terminate their full-time employee contracts. This is a very trying time for startups.
Investors and venture capitalists are being more cautious with committing new investments and are more aligned to focus on their existing portfolios. This is compelling entrepreneurs to find a new source of finance to keep their venture going.
Startup Genome recently launched a global startup survey, which indicates, there are only 26% of startups without any terminations since the pandemic.
An astounding 40% of startups are on the verge of the financial crisis with only enough money to run their normal operations for 3 months or less.
Most of the damage was felt in the startup and MSME environment, as these businesses need a steady flow of capital to function.
The primary cause of the loss for businesses during the COVID-19 arose due to the effect of the pandemic on the industries they serve.
B2B startups have taken a severe hit as most organizations are in search of options to cut their cost during this time. In such crucial times, managing startups have become a highly challenging task
Observing this crisis from a vantage point, we can see that several industries and businesses are adapting well to benefit from this situation.
As this is not an economy driven financial crisis, and things are just brought to a standstill, few sectors have eagerly seized this turn of events to make a fortune.
The key to overcoming this troubling times is to well adapt to the new normal and modify your business model to serve the need of businesses and customers at the moment
The new normal of online shopping, social distancing, staying away from traveling and crowded places, etc., have presented us with new opportunities and challenges.
Government bodies across the globe have come up with rescue packages to save the startups and MSME platforms to avoid severe economic meltdowns.
How Governments are supporting local businesses and start-ups during COVID-19
The COVID -19 pandemic has affected the lives of citizens in more than 150 countries globally. This crisis has started to affect the financial and economic situation as well, with severe setbacks for international trade.
Governments were quick to react by closing the borders and imposing lock downs and social distancing to slow down the spread. Governments are also giving priority in improving the healthcare infrastructure to cope with this situation and are also initiating relief packages to support the employees and businesses during this unfortunate crisis.
The United States of America had initially announced a $310 billion relief package to support small businesses during this pandemic. The U.S has also announced several grants for businesses, including the ‘save small business fund,’ which started on April 20, availing $5000 for small business with employees between 3 and 20.
India has recently announced a huge relief package, which is worth 10% of its GDP ($265 billion) to support small businesses and citizens.
The UK government had announced 330-billion-pound to be made available to business owners as loan amounts. Through a business interruption, the loan scheme business can apply for a loan amount equal to 5 million pounds to meet their daily needs amid this crisis.
Similar relief packages are announced in European nations as well, with Spain and Italy announcing a stimulus package, which is estimated to be 7.3% and 5.7% of their GDP, respectively. France had also announced a stimulus package valued at 9.3% of its GDP.
How to sail through the COVID-19 crisis?
Setbacks in businesses are common. Entrepreneurs are well equipped to tackle the common setbacks, but a pandemic of this proportion happens once in a blue moon. On a serious note, nobody ever thought that managing startups will get so difficult. No expert can predict such a global crisis.
Here are a few things which business owners and start-ups can follow to focus their activities and stay productive during this time.
Prepare a 2 month and 6-month plan
During a highly unpredictable situation like these, entrepreneurs have no other option but to bet based on their current conjectures.
Build a 2 month and 6-month plan based on your current beliefs and expectations and re-evaluate that plan every week based on the new information you gather about the crisis situation or your business situation.
Observe and analyze what has changed about your business
The way people conduct has changed with this crisis. Your business will not be different, observe what has changed in your line of business, and analyze its implications. Is there a change of trend in your business?
Do you need to modify your products and services to improve the business? Do you have to change the usual ways in which you conduct your business?
Ask yourself these questions and analyze how you should adapt to the new normal
Managing startup smartly- Invest wisely in marketing
Prioritize promoting revenue-generating services and campaigns and cut down or pause the campaigns brand building and awareness campaigns that don’t have immediate revenue generation capabilities.
It is always better to opt for online advertising and marketing activities during this time as the audience spends more time online now than ever, and digital channels deliver the best ROI with measurable results. Find out your best performing marketing campaigns that give ROI and double down on those campaigns.
Delay payments if it is possible.
Negotiate to extend your pending payments by a couple of months if you are experiencing a shortage of money. Banks are availing moratoriums for all term loans. Engage in deferment discussions with your landlords if you are not using the office space.
Most businesses have shifted to remote working, shifting to remote working allows you to cut the infrastructure costs. Give priority to your employees and providers who fall in a low-income bracket.
Postpone discretionary expenses
Previous business purchases and subscriptions that you have scheduled prior to the pandemic need rethinking. Expenses like hiring a new employee, purchasing or developing software, or even buying a new coffee machine can be postponed for a few months.
Human resource costs
If your business is equipped with employees to meet the demands of the pre-pandemic market, you will find it challenging to keep all your employees engaged due to a sudden drop in your clients.
As indicated before, almost 70% of MSMEs will only have a financial backup to run business up to 3 months without a minimum revenue generation. In the worst-case scenario, you have to be prepared to impose salary reductions, deferral, or variable payments. If that doesn’t cut it, you have to reduce the headcount.
Outsourcing is a good option for small and medium businesses under current circumstances. Especially for technology startups, it will be challenging to maintain their own team of developers and manage them remotely. IT requirements can be outsourced for a fraction of the amount you need to maintain your own team. Entrepreneurs can resort to outsourcing companies providing startup IT solutions.
Improve productivity while working remotely
Remote working has become the new normal, entrepreneurs should be prepared to maintain or improve productivity while managing remote resources.
Encourage daily team huddles during morning and evening. Ensure that the team is well aware of the priorities of that day and what they should complete within that day. Invest in remote collaboration tools like Slack, Google Meet, Microsoft Teams, or Trello.
Boost employee morale
Do not forget to motivate and encourage your employees. Invest your time and resources in creating online events where employees can gather for quizzes, webinars, or just a casual, fun group video call.