Are you a business founder? Do you find it difficult with the current situations of COVID-19 pandemic? These five pieces of advice are typically for you during this crisis.
Without sugar-coating, the pandemic is getting worse than anyone expected. It is affecting the whole world and stopping the cycle of businesses without any further notice. It exposes many sectors to uncertainty and open-ended questions. However, the mentality of business people should always focus on solutions and adaptations. In a nutshell, it is how to manage your business for the coming quarters without any external financing.
#1: Understand the Real Situation
There will be a dramatic downturn in businesses. The effect of this drop will probably last for one to three years, and this estimation is based on the following facts:
- The number of confirmed cases is increasing by 15-30% daily in many European countries, but the actual statistics are doubtlessly higher than that.
- Scientists say that the pandemic is reaching a stage of non-stop, so the only solution is social distancing to slow down the spread of the disease (unless a cure is discovered).
- The two previous facts are leading us to the conclusion that the isolation might tie us to our homes for a longer period, and that will affect the economic cycle as a sequence.
Goldman Sachs Chief Economist Jan Hatzius says: “The global economy is not just experiencing a recession, but a sudden stop without precedent in postwar history.” Kenneth Rogoff writes: “We are experiencing the first truly global crisis since the Great Depression of 1929.” And Nobel laureate Robert Shiller adds: “The crisis is still underestimated.”
#2: Shift to Survival Mindset
After understanding the situation, business founders should look for ways on how to survive rather than how to grow. Meaning the businessmen should look for the minimum ways to keep their costs covered.
- Revenues will drop as most of the existing projects will be postponed, and customers will be standstill. In most crises, people tend to stick to what is known for them and avoid experimenting with the unknowns.
- Sources of funds will be limited in such a crisis. Privet investors, angel investors, venture capitals, and philanthropists might turn their focus from external wise to internal wise, again survival mindset.
With the given information, the best steps to take are:
- Cut the costs by analyzing what is needed more than wanted.
- Extend the run-rates by keeping the break-even reached with minimum expectations for financings.
- Adapt with the new changes as quickly as possible, the average business model is no longer sufficient, and a new urgent model should be followed.
- Anticipate opportunities in this wave to grab the best chance possible.
Sequoia wrote that in some ways, business mirrors biology. As Darwin surmised, those who survive “are not the strongest or the most intelligent, but the most adaptable to change.” (Sequoia, 5.03.2020)
#3: Adapt in a Few Practices
Underestimating is the opponent of any business; founders should give the situation a realistic analysis by comparing the previous crises of 2000/1 and 2007/8 in creating sustainable plans.
- Before taking the first step, the worst-case scenario should be considered. Creating a worst-worst case and preparing everything based on it.
- Systematic thinking is the key; this is a corona canvas as a new model for businesses during this time. Visit this website: https://ibb.co/86cYRxD, the canvas is prepared by Mogalle, M. & Kluth, A. (2020).
- Understand the customers, like their current problems, potential gains, and pains, so it is easy to react towards it.
- Reviewing the channels and customer relationship; how social distancing is affecting that? What is the realistic budget for that? Probably the current people and channels are not valid anymore.
- Streaming of revenue is more into an instant mode. The customers are cautious and not interested in long-term deals.
#4: Ways to Financial Support
With the current situation, it is not an easy time to finding an investor that can fund your finances. The best way is to keep an internal focus. Thus, creating your urgent plans with low-expectation is mandatory, especially for the next couple of quarters.
- Recalculate your revenue by cutting off 50% of expected orders or with 0 turnovers.
- Act quickly by concluding any financing round.
- Monitor the liquidity and track it more regularly.
- Keep an eye on public funds, R&D projects, and other supporting schemes and programs.
#5: Be positive
With all the warning signs that this pandemic has, it is still an opportunity for faster communication and faster adaptation. It is a forceful way to ride the wave of digitalization. So, there will be quite improvements in many sectors. This crisis can be a window of an opportunity to stand out. Being afraid and stressed might take you back a few steps, therefore be radical, bold, and brave to face this situation. It might be the right moment to plant your seeds!
Sequoia wrote that “Many of the most iconic companies were forged and shaped during difficult times. We partnered with Cisco shortly after Black Monday in 1987. Google and PayPal soldiered through the aftermath of the dot-com bust. More recently, Airbnb, Square, and Stripe were founded in the midst of the Global Financial Crisis. Constraints focus the mind and provide fertile ground for creativity.”