Starting a new business is going to be an altogether different ball game in the COVID era. Needless to say, you will need the same levels of commitment and passion that startup entrepreneurs bring but things are going to differ on the money front. Times are tough today and things can get even more difficult ahead, with a global slowdown being on the horizon. Financially, you can expect some major challenges ahead, whether you are just starting up or are at the initial stage of the business because even new ones need finances consistently to keep them going. In any case, proper financial planning can keep you afloat. Additionally, there are some smart strategies that you can embrace to steer your new enterprise through the crisis situation and keep it alive.
Focus on survival
Right now, your focus should only be on survival, more so if you have just landed your business in the market. Though you will probably have some wonderful plans and ideas to become a big company with world-class products in the future, your aim at present should be just to scrape through. You will get plenty of opportunities ahead if you are able to survive but none of your dreams will matter if you fail to get through.
Remember that cash is king
Startups often meet their end because they run out of cash. And the risk gets just higher right now when the market is shattered due to the coronavirus crisis. Moreover, you need cash all the more to transition to the remote model of working. Now is the time to switch to the cash conservation mode. It would be great to have a minimum of twelve months of cash on hand, even if you have to fund it with a small loan. A good reserve can be life-saving because you can expect turmoil in the wake of the crisis, even after it ends.
Forget about raising money at present
Although angels will continue to invest in new businesses, you can expect smaller rounds and a selective approach with the uncertainties looming ahead. For the portfolio companies, the unexpected market downturn, coupled with business disruption in almost all domains, may even cause the fundings to stall. It would be realistic to assume that the pullback will last at least until after the crisis is over and even a few months after that. So it is best to be prepared and not expect to raise money from external sources right now.
Stay ahead of your taxes
Another major concern for startups is taxes and staying ahead becomes even more vital in the current scenario. Thankfully, the IRS has pushed ahead of the filing deadline to July 15, but it is still important to consult a seasoned tax attorney for guidance. While they ensure that you do everything to stay on the right side of the law, these lawyers can also help you cut down the tax bill with special cuts and deductions for startups. Obviously, every penny saved goes a long way in such tumultuous times.
Revenues are likely to diminish
Yet another fact that entrepreneurs looking to survive through the existing situation need to understand is that revenues are most likely to fall short of your expectations. For example, things may not get through if you have been counting on contracts and deals in the pipeline to close. You may even face cancellation of existing contracts, particularly the ones that have a clause for the same. Just like your startup, most big companies and especially small and mid-sized businesses will also get into the survival mode. Moreover, revenues will probably be deferred for now unless you are supplying an essential product or service.
Capitalize on the available opportunities
The survival game is tough but startups that are able to identify opportunities and capitalize on them can breeze through. Consider aligning your business to provide a solution to the current problem, such as moving on to manufacturing sanitizers instead of your core offering or transitioning to online selling from the brick-and-mortar model. Although this may take some initial investment, you will certainly end up surviving and thriving.
When there is a question of survival, you must absolutely consider the decision to downsize, however painful it may sound. Look for the areas where you can cut on costs, whether it is by slashing salaries (make sure that you take the employees in confidence first), curtailing marketing and sales spend, or calling off sub-contracts. It is a good idea to downsize early on because a quick decision can facilitate survival in the long run.
The right approach can save your business in this complicated situation and you must go the extra mile to adopt these measures. After all, there will always be chances to recover and come back strong if you are able to keep it alive.