Startups in sectors like leisure, travel, and hospitality will have their revenue severely affected by the pandemic. Businesses that do not have a cash war chest for survival are likely to have a difficult time overcoming the loss caused by the spread of the disease
Fremont, CA: The COVID-19 pandemic has changed life as we know it. As the world prepares to emerge out of lockdowns and strategizes to live in a world with COVID-19, business executives need to realize that the way they run their company might never be the same again. Startups are the worst hit of the lot. Startup companies need to comply with a swarm of government policies and laws designed to help them survive the pandemic.
The impact on each startup also differs. Startups in sectors like leisure, travel, and hospitality will have their revenue severely affected by the pandemic. Businesses that do not have a cash war chest for survival are likely to have a difficult time overcoming the loss caused by the spread of the disease. At the same time, specific sectors have seen an increase in demand for products as the virus continues to spread, such as sanitizers, masks, disposable gloves, and others. Companies that were able to raise capital shortly before the lockdown will also be able to ward off the challenges faced.
The next few months can be very challenging for every business and may even make or break one. Here are a few tips for startups more focused on survival than growth, to help them emerge out of the pandemic stronger than their competitors.
Maintaining Cash Flow
Not running out of money should be on the top of the mind for startups. Venture capital firms are asking their portfolio companies to build 18-24 month runway cash for survival. This has forced many startups to throw out their existing business plans and adopt new ways to generate cash. This can involve reducing costs and deferring capex, shifting the company's sole focus to its star product, or even a significant pivot in the company's strategy to adapt to new market trends. Businesses that look for new investments in the present climate will end up yielding to investor-friendly terms. Besides, it will be much easier to draw investments from existing investors rather than approach new ones, as most investors will be aiming at pushing existing portfolios rather than investing in new ones.
A Team Approach
The health and safety of employees and clients should be of top priority for all companies. Any employee that may be visiting the workplace has a possibility of contracting the virus. Startups need to implement safety policies and ensure they are compliant with all the relevant health and safety laws issued by the government. Companies need to keep a check on cash flow. What is being paid out as remuneration must be cut short in every possible way. Look for incentivized programs issued by the government. Startups need to take a critical assessment of the intersection between their cash runway, their staff numbers and their top talent. Reduction in working hours, freezing salaries, imposing voluntary unpaid leaves, and offering compensations through equity plans are some of the steps startups can take.
Communicate with Key Stakeholders
Be it consumers, staff, suppliers, or shareholders, leadership and efficient communication is essential for all companies. Leaders need to be at the frontline of the battle and prepare their teams for facing the situations. Business executives need to explain the situation to their employees and make them understand the measured taken by the company to tackle the same. Startups also need to understand the case from the perspective of their key stakeholders and how it is affecting them. Building trust and loyalty with your key stakeholders is crucial in the long run. Given the current situations, startups that effectively communicate with their key stakeholders are likely to have backing through the pandemic.