Pursuing entrepreneurship is a risky endeavor under normal circumstances, but has recently become even more unstable. These are uncertain and stressful times for businesses of all sizes, but especially for startups and small businesses. According to McKinsey research, between 1.4 million and 2.1 million U.S. small businesses could close permanently as a result of just the first four months of the pandemic.
While there is no one-size-fits-all approach to navigating crisis, there are some high-level best practices startups and small businesses can implement during rocky market circumstances. There are no guarantees, but these tactics may help you better position your startup to make it through these choppy, uncertain waters:
Be flexible and adaptable
In general, flexibility and adaptability are important traits for a startup to have, but they are more important now than ever. Whether it be cutting your budget, pivoting your product, or rethinking your market strategy to better align with current conditions, startups need to be able to think and act quickly and adapt to change. The key here is being proactive rather than reactive to this evolving situation.
Increase your capital efficiency
This one should be obvious, but cash is king. One of the most significant threats to startups and small businesses is running out of cash. Your current runway probably looks very different from what you had initially planned, so it’s crucial to re-think your budget and try to stretch out as much as possible. Streamlined cash flow is always important, but is even more so now. In our recent blog on cash flow management, we talk more in-depth about ways you may be able to better manage your cash flow.
While you may have less control over incoming cash flow during this time of crisis, you can take steps to better control cash flowing out of your business. In a financial crisis, it’s prudent for businesses of all sizes to cut costs to some degree – some, of course, in more drastic ways than others. Nobody wants to lay-off staff, so start by taking a critical look at your budget and see where you cut from first – this could be non-essential software, redundant software licenses, and marketing and/or PR spend, just to name a few. Other tactics could be freezing hiring, reducing 401k matching, or reductions in compensation. As a last resort, you may have to furlough or layoff some of your team. If it does come to this, Henry Ward, CEO of Carta, offers a masterclass on how to handle this tough decision with compassion and transparency.
Make lemonade out of lemons
No one can predict where we’re headed, but this is a good time to think outside the box and make the most out of the opportunities at hand. Adversity can force innovation out of necessity. In fact, many successful companies were born during economic downturns.
Needing to pivot your business is not a failure; many business are doing so out of necessity right now. Things are not “business as usual,” so companies must get creative with how they can continue to serve their customers under these new and changing circumstances. Are there areas of your business that you can shift to better serve home-bound consumers or even contribute to the fight against COVD-19? Brands that are able to tap into this should leverage this potential opportunity.
Take care of your team
Between financial anxieties, health worries, adjusting to new routines, and taking care of family – everyone is under a tremendous amount of stress right now. One thing startup leaders can do to mitigate some level of uncertainty is to be transparent and communicative with their teams.
As we all adjust to our new normal, which for many of us, means working remotely, it’s also important to try to maintain company culture. For us, that has been a company-wide weekly digital happy hour where we can see each other’s faces, catch up on life, and stay connected. In ln lieu of leaving the office a little early for “Summer Fridays,” we offer staff a couple of “Free Fridays” each month to give the team some extra time to unwind.
With so much disruption, it’s easy to feel easily discouraged or overwhelmed. However, for entrepreneurs who are proactive rather than reactive, flexible, and open-minded, it is possible to find opportunities within the chaos. While no one can predict exactly how or when this will pass. The market on the other side will certainly look vastly different, but the companies that are able to make it through will only come out stronger on the other side.