Survival has to be the imperative focus for startups these days. This pandemic is very different from the financial crisis in 2008. Not all firms are losing out. With the value of some companies getting increased on the stock market and certain businesses are witnessing more demand than they were prepared for. Some companies are even hiring.
However, in contrast, many businesses are not able to use their traditional supply and have temporarily closed or are facing reduced demand. In this regard, we provide some tips for startups to face this crisis and stay in control of their operations.
1. Cash Management
The biggest issue that many startups face is cash management. Many estimates recommend that it’s likely to take 12 to 18 months (and this too in a positive scenario) until a vaccine is found and approved. However, the post-crisis effects may continue for even longer.
But such thoughts give rise to a rudimentary question: how can startups survive during this period? Companies are required to prepare for further lockdowns. Preserving cash for this period is crucial for many reasons. In addition, the investment market has also shifted. Valuations are down significantly, so putting money into the business is and will be very difficult during these times.
Cash-poor startups should focus on evolving their core business model. For at least the next 18 months, the goal should be to make sure that they can stay afloat.
The process of valuing startups has become more conservative as well. It is harder to attract funding and the companies that are trying to raise money likely lose even more equity. One harsh reality of the coronavirus era is that their expected returns are much higher as compared to the normal times.
The best way to deal with the crisis is to wait until the market clears the impact of the pandemic before up-rearing money again.
3. Leadership Complications
Leadership has become more complicated. Honesty and transparency about the situations are keys to establish and deepen trust between management & employees. Dealing with a variety of emotions has also become important. It is important to stay faithful to the values & vision.
Business leaders should consider having mentors, but also a coach who is not involved in the company and understands the reality of your job. Coaching contributes to well-being and helps in making wise decisions.
4. Changing Space
Meeting virtually can be particularly effective for drawing on existing social ties, and integrating this digitalization movement will help startups in emerging as a strengthened establishment amidst the crisis.
5. Consider Pivoting
Pivoting the business model is something to be considered during these tough times. Many startups have modified their ways to offer value to different customer groups during the crisis, like for instance, going online. Thinking about different ways to offer values to new customers in existing customers can pave success.
During the crisis, responsible management practices and stakeholder treatment become very transparent. Hence, making decisions transparently, fairly, and quickly will go a long way.