As many businesses start to close due to the global pandemic, the thought of starting a business during this crisis is unthinkable for many people. However, if you can get your business right, this can be a surprisingly good time to start a business, with more room for success than you might think there. The current crisis is a unique time for entrepreneurs, and Covid can big some huge changes to customer needs and preferences that you can capitalize on.
Analyze Your Burn Rate And Go Lean
During any kind of crisis, an entrepreneur needs to be very conservative with their projections. A lot of companies are struggling at the moment, only surviving month to month, but this is no way to live your business life. As an entrepreneur, you don’t have to be able to predict the next pandemic or global crisis, but you do need to predict that things will go wrong in the future, either with your business or your industry. When things do go wrong, you should be prepared to withstand those problems for another 12 to 18 months, even if you have no revenue coming into your business for a while.
What is your business spending every month? What are the expenses do you have that are non-negotiable? Which costs can you cut back on without sacrificing the standard of the work you’re doing? For example, can you cut back marketing budgets, scale down your team size, or swap an office for a virtual answering service?
Cutting back on parts of your business is always going to be difficult, but you should take an unemotional view of the situation as much as you can. What would you do if you didn’t have your business already? Ask yourself if you have a good business right now with the resources you currently have. Can you keep morale up as you do this?
Know Where You Sit On The Value Chain
In order to make decisions like this, it will be important for you to acknowledge where your business sits on the value chain. Are you delivering a staple good that is needed right now, and are there potential substitutes on the market that could render your offering obsolete or semi-obsolete when a shock hits your industry?
For example, take a look at the differences between food and travel right now. Travel has no real substitute, so it should be safe, but it’s not a necessity like food or shelter is. Food is a shock-proof item to build your business on. No matter what’s going on, people will always spend money on food. This doesn’t, however, mean that the service providers of food, like restaurants, are shock-proof. Only the food itself is, so your business needs to be braced.
No business has any real foresight at the moment into what the next weeks will look like for their operations, let alone the next several months or next year. While this is still the case, the best choice is to adopt a business model that will allow you to have the maximum amount of pivot potential. New entrepreneurs are now choosing to start more flexible, less fixed overhead, less liability-based models, where they don’t have to take on contracts that they are then restricted to for twelve months.
One way you can embrace more flexibility in your business is to find ways to diversify your revenue stream. Bricks and mortar businesses are closing all over the place, if they don’t have other ways to earn. Businesses who already had an e-commerce component in place for serving products, as well as marketing campaigns and CRM to support it, aren’t struggling nearly as much, despite all the challenges COVID has presented.
A diversified revenue stream allows you to earn more revenue and also means that you have more ways of reaching more customers who now have some different needs as a result of the pandemic. See it as new opportunities, not a definite business killer. How else can you make money?
Mindset is also very important. It might be tempting to pivot into offering current popular products like masks or hand sanitizers, but large corporations will likely have that area covered much more effectively than an entrepreneur new to business would be able to. Being relevant and future-proof doesn’t have to be an either-or choice if you can design your products and services with a mindset of adjustments likely being needed in the future.
Be Aware Of Direct And Indirect Competition
Success as an entrepreneur, especially during a situation like this pandemic, is almost never an accident. Success is usually only the result of very careful planning, positioning and a strong knowledge of your industry and what you can offer.
Start by studying the businesses in the same area as you that are still thriving, and learn what they’re doing differently. What about businesses in different areas? Where a lot of entrepreneurs fall short is by not looking at what the indirect competition is doing, and only focusing on direct competition. Looking at companies that are solving their problems can be very useful, even if those issues look completely different from your problems. From this point, you need to find the needs or pain points that your target customer base currently has and focus on solving them effectively.
It’s important to ensure that your position is sustainable if you want to avoid being nudged out of the market later on. Competitive differentiation is great, but sustainable competitive differentiation is much more useful as it means none of your competitors, direct or indirect, can copy your idea later on, even if they’re better funded than you are. By doing this, your business will be a lot more attractive to investors and partners.
Entrepreneurship is always an exercise in pivoting and reacting to roadblocks that might get in your way. The pandemic is no different. Try to approach it with the same rationality that you would any other roadblock.
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