Silicon Valley teacher and entrepreneur gives tips on how to prepare a startup or small business to face the crisis
With the new coronavirus pandemic, the world economy has changed. The measures of confinement and social isolation changed the consumption habits of customers, production lines and sales. In a blog post, entrepreneur and scholar Steve Blank made a survival manual to be followed by startups and small businesses to deal with the Covid-19 crisis. He reiterates that the virus’s business impact will be so great that it will change the way we shop, travel and work over a long period.
For him, the essential thing is to try to keep clients and employees safe in relation to business and jobs. Blank prepared a guide with four questions that orbit a central question: “What will happen to my company?” Check out:
1 ° What are my expenses?
The entrepreneur recommends that a balance of the company’s monthly expenses be made first. Put fixed expenses, such as rent, and variables, such as salaries and commissions, at the tip of the pencil. In the end, if your income is positive, it means that you spend less than you receive. If your balance is negative, it means that you are having a loss.
This exercise is largely for you to be able to calculate the time your company has until the money runs out.
2 ° How is my business model?
This second question serves to somehow solve the problems generated by the first question. The pandemic scenario in which your startup or small business is currently inserted is totally new. Your business plan will inevitably change. Steve Blank warns: if your plans are the same as they were a month ago, you are probably in denial.
He suggests that some points about the company should be questioned: if you operate with a B2B model, do your customers’ sales fall? Will your customers close soon and / or fire employees? If so, your revenue projections should be reviewed.
The same tip applies if you are inserted in the B2C model. It is also worth asking yourself about the position in the market in which your business occupies. Do customers continue to buy from this industry? The fact is that nothing is normal and it is up to the entrepreneur to be aware of any changes.
3 ° How long is the problem?
Will the crisis last for another three months, one or three years? Projecting the duration of the injury is a way to prepare yourself to face it better.
If the answer is three months, start thinking about freezing variable expenses, such as hiring and staff travel. If you notice that the problem will last longer, prepare a plan B. Find the minimum that your company needs to stay alive and bet on it.
Assuming the crisis lasts for a year: consider reducing variable spending. During this time, it is possible that layoffs and reduced commissions and salaries may occur, for example. In addition, find a way to renegotiate fixed expenses. Try to change your sales strategies and invest heavily in e-commerce.
As for the possibility of dismissing employees, Steve gives a tip: the first option to be chosen before the dismissals is to reduce the remuneration of the highest positions (following, of course, what is allowed by law). In this way, it is possible to guarantee the employment of employees at lower levels. Another tip is: if you have to fire someone, act with compassion. Make sure and do your best to pay your salary for the next two months at least.
Again, it is important to review your business plan. In a crisis like these, everything is possible: from product repositioning to the creation of new values.
But, if the planning is extended to the next three years, it will be necessary to cut everything that is not strictly essential for the survival of the startup. Study ways of operating on social isolation models. Explore online selling options and delivery systems. Again, think about a product repositioning: adapt to the new needs created by the pandemic.
4 ° What will my investors do?
The professor begins by stating that a fundamental element for the survival of a company is access to capital. Startups and small businesses must recognize that their investors are also part of the pandemic scenario and facing difficulties. Venture capital investors are struggling with the question “What should we save?”
As the liquidity of startups is not usually so high in the early stages, they may not be in the sights of investors at the time of the crisis. Therefore, be prepared to count on less interest from them in the analysis of new offers.
iWEBAPP Web Design Thoughts – How we can help?
You must be asking, how can I continue with my business?
See alternatives to work around the problem.
1. Start with online sales
If you have the possibility to offer your products or services online it is better to take advantage. Without being able to visit malls and shopping centers, consumers are turning to shopping on websites, especially when we are talking about essential items, such as hygiene products and food.
2. Try to negotiate expenses
In order not to run out of resources quickly, anticipate contacting suppliers to negotiate expenses. As the problem is global, there are companies that are willing to negotiate in order not to leave the loss. Also try to negotiate bank charges and seek a longer term for the payment of debts.
Also, avoid making unnecessary expenses. The moment is of instability and there is no prediction of when everything will be normalized.
3. Liquidation and promotion
Look for promotions of less-sold products and sale of products that have been in stock for a long time. Check the possibility of delivery services and expand the payment methods to keep customers.
4. Take advantage of online tools
Do you provide in-person services? Take advantage of online chat tools like Skype, Duo and Hangout to schedule meetings or give courses and consultancies. The quarantine period can be a good opportunity to study new subjects that will add you as a professional. For example, how about taking a digital marketing course or a financial education course?
5. Be a good leader
Also assess your social commitment and the needs of your team. Services that can be done remotely must be released to the home office. Do not keep people together in the same environment, make stopovers or release your employees. It is very important that we join forces to prevent the spread of the virus and to control the number of infected people in the country.
Was this article helpful to you? iWEBAPP is together with Canada in the fight against the spread of the coronavirus. Therefore, we emphasize the need to redouble health care and hand hygiene whenever possible.
Take the time of social isolation to read more of our content and apply it to your company. Also follow our social networks on Facebook for more entrepreneurship tips.
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