Until the end of the COVID-19 pandemic, startups will likely be struggling to survive. In this quick survival guide, we advise startups, their owners, and managers on how to withstand the crisis and keep their business under control.
This pandemic is not similar to the financial crisis the whole world faced in 2008. Not all companies are losing, the value of some companies on the stock market is growing and the demand for some companies is higher than they were prepared for.
How Startups Can Survive During Crisis
Future companies will have to adapt to the new regulations and consider the following five ways to mitigate the risks and withstand the economic downturn caused by the effects of COVID19.
1. Cash management
First, the biggest problem most startups face is money management.
Many estimates suggest that finding and approving a vaccine is likely to take 12 to 18 months in a positive scenario, although post-crisis effects may linger longer.
Thoughts like these raise a fundamental question — how can startups survive this time?
Organizations need to prepare for further bans. Saving money during this period is critical for several reasons.
While most investors stick to transactions, some do not. Also, the investment market has changed.
Bonds fell significantly, making it difficult to invest in business. Even for companies in high-demand sectors (such as healthcare), investors are more cautious when it is likely to take more than a year to repair goods. Besides, certain opportunities for short-term money creation have been frozen.
On the flip side, weaker startups are less likely to deviate from their end goals, attend too many side events, and may focus on developing their core business model. The goal for the next 18 months is to make sure they can stay afloat.
2. Tracking expenses against the revenue status
During this time, it is essential that companies correctly estimate both their fixed and variable costs and their actual profits.
This assessment provides a clear picture of a company’s financial position and helps them plan for the current turbulent market. This strategy can be applied even after the pandemic has subsided.
If you are considering terminating contracts, it’s not recommended to do so.
Most large corporations, government customers, and especially small and medium-sized businesses, are in survival mode. Unless you are offering a product or service that you believe is critical, you can expect a delay in sales of at least six months and possibly longer.
This is a good time to review your own contract cancellation clauses.
3. Forget about raising money
Venture capitalists and business angels continue to invest in companies, but expect there to be fewer who do so as they are understandably being much more select. Even some good companies don’t get funding.
Don’t expect anything to change here until the COVID-19 crisis is over.
In the meantime, continue to communicate well with your investors by giving them the good news and bad news.
4. Leadership complexities
Management has become more complex. Transparency and honesty about the situation is the key to building, strengthening, and deepening trust between management and employees.
Secondly, stress is impacting professional relationships. Dealing with emotions is as important as showing empathy and connecting people. It is important to stay true to values and visions.
Business leaders should consider having not only mentors, but a coach who is not affiliated with the company and understands the reality of your job. Mentoring can promote the well-being and quick self-reflection of executives and help them make informed decisions.
Having to lay off key employees is a traumatic experience. This crisis is selective, affecting some companies while others develop. The labor market for more talented people is still active. Shooting top talent more often means that they find a lot of deals elsewhere and will never come back once the crisis is over.
This is yet another reason why startups need to be very strategic in managing next year’s cash.
5. Consider pivoting
Fifth, changing your business model is one way of balancing these changes.
Many startups in different industries change their value proposition for different customer groups during a crisis. We have seen 3D printers that have been reused to make protective equipment and hand sanitizers!
The key to success lies in finding existing customers and adding value to new potential customers with different characteristics.
Another consideration is whether to work with some competitors and resources to bring new products to market that may be needed more.
If you’re doing eCommerce and running a store, try to use the plugins that are most relevant and necessary. Don’t waste your time and energy on unnecessary and irrelevant plugins. A WooCommerce product video plugin is the best for representing your products in detail.
Fast, transparent, and fair decisions are key to survival and progress.
The ideal ways how startups can survive during a crisis are to manage cash, manage well, consider pivoting, and be transparent about your business with your customers and vendors/suppliers.
When communication is transparent, customers can empathize with companies in crisis. Communicate with customers to understand their perception of the product/solution you offer.
Understandably, it can be difficult to pay vendors/suppliers during a lockdown. However, it would be helpful to notify your salespeople, vendors, landlords, etc., when payments are late so that payments are ready and not be bitter even in an already difficult time.