How to Keep Your Start-Up Alive Amidst Coronavirus Pandemic
It is no secret that COVID-19 is spreading fast despite the preventive measures. Due to the social distancing requirements, businesses are reporting low earnings. The decrease in revenue is attributed to changes in consumer behaviour and distribution problems brought by travel restrictions. Supply chain dysfunction and low employee productivity are unbearable for many big companies, but start-ups are more vulnerable. With the acceleration of the coronavirus spread, many start-ups are staring at the possibility of facility closures. How will budding businesses raise funds to service loans and pay employees? While the challenges may seem overwhelming, entrepreneurs can protect their businesses from threats caused by the novel virus.
Determine Your Burn Rate
Some expenses in business are fixed while others fluctuate monthly. Therefore, you need to determine how much of your cash reserves go to fixed costs like rent. Variable expenditures fluctuate regularly, and they include salaries, commission, supplies, and business consultants. With records of your expenses, examine your cash inflow and find out if they cover the burn rate. Use actual cash inflow for your assessment instead of the revenue forecast. If your income exceeds expenses, your business is on the right path. During the pandemic, your burn rate will likely be higher than the revenue, which means you have to look for alternative finance to keep the business afloat.
Communicate With Investors
During an economic meltdown, business finance is a crucial element for business survival. Unfortunately, venture capitalists and investors are also analysing how the pandemic will affect their business. That means they will decide which company to save and the sacrificial lambs. If your start-up has high burn rates, you will have to seek other sources of funding. Therefore, communicating with investors will help you determine whether your business is still a priority. Together with the venture capitalists, you can come up with a new business model that will keep the business alive.
Invest in Remote Working Technology
The COVID-19 has caused reduced productivity, which is a significant concern for many entrepreneurs. Employees who fall sick have to stay at home for weeks to recover. Besides, if the city goes into lockdown, all business operations halt. However, you can maintain productivity by encouraging your staff to work from home. While most people own a computer and a smartphone, they may lack all the necessary resources to work from home. You need to provide essential resources such as virtual working and conferencing platforms to allow your staff to work from home.
Reduce Expenses to a Minimum
Irrespective of how well the start-up is doing, cash is always tight. Therefore, as the market goes into recession, entrepreneurs need to get rid of any dead weight to keep the business afloat. When slashing expenses, you must make tough decisions. Some of the choices include cutting salaries, holding off hiring, finding affordable premises, or renegotiating rent and lease payments. You may also have to shrink your marketing budget and limit sales campaigns. If, after the above measures, your business is still suffering, you need to consider laying off employees.
Restructure Your Business Contracts
When reviewing the business expenditure, you should also restructure the contracts. Check the agreements with suppliers, if the expenses are avoidable, terminate those contracts. However, you should ensure the termination is legal to avoid legal problems. If your supplier is affected by the virus and unable to fulfil the contractual obligation, consult with your legal team. You may be lucky to find a clause that allows you to terminate the contract early. It might also be worth it to strike a deal with the supplies to review the terms of the agreements. For instance, if they can offer discounts on some of the supplies, you can use the extra money to cover other costs.
Encourage Your Customers to Access Your Services and Products Online
City lockdowns are limiting people’s movements, which means they are unable to walk to your business premises to access your services. Therefore, if you do not already have a website, you need to create it and list your services. Encourage customers to shop online by offering discounts, free deliveries, or returns. You should provide the best customer services and extend return time to boost sales.
Use Your Creativity to Find the Silver Lining
Creativity and innovation are essential qualities of a successful entrepreneur. While the main priority during an economic crisis is to survive, you can still use your creativity to keep your business alive. If you can invent a product or service that is useful to people, your business may soar to greater heights. Since new markets and ideas are going to emerge after the pandemic, you need to keep your creative juices flowing.
While the future seems bleak, keeping your business alive is vital. Therefore, you need to have a business continuity plan in motion and stress test your start-up to ensure survival.