Advice To Start-ups On the Essence Of Business Continuity And Survival Tactics
Maintaining a healthy cash flow to ensure business solvency and maintaining operational continuity can emerge as a key concern area, especially for early-stage start-ups
The outbreak of the COVID-19 pandemic has exacted a terrible toll on human life and created unprecedented financial turbulence on a global scale. Industrial and trade activity the world-over has come to a virtual standstill with global economies facing huge job losses and large-scale unemployment. The impact of the pandemic can be all the more brutal on small businesses and start-ups which operate on smaller margins and have lower cash reserves at their disposal.
Maintaining a healthy cash flow to ensure business solvency and maintaining operational continuity can emerge as a key concern area, especially for early-stage start-ups. In times marked by economic uncertainties, start-ups will need to meticulously track their cash runways. A volatile market environment may lead to faster cash burnout for start-ups which may face an existential crisis and fail to tide over this moment of crisis. The business plan of any start-up should factor in the emergence of unpredictable emergencies like COVID-19. The onus here should be on building a financially resilient organization by maintaining a healthy cash reserve which could last for around six months. This will help in building a sustainable framework for the start-up organization and strengthen its capacity to withstand future shocks. Frivolous and unwarranted expenditure should be completely avoided during times of financial emergencies like COVID-19. While this is easier said than done, cash flow management will need to be treated with utmost frugality. The key aim has to be to lengthen the runway to the maximum extent possible.
Start-ups need to remember here that the crisis has emerged as the new normal and will take a considerable time-span to abate. Businesses need to plan their business strategies and work efficiently to minimize the risk of the pandemic and maintain sustainability in operations. Going ahead, start-ups will need to realize that investors will only put money in organizations with strong cash flow statements. Investors are most likely to refrain from investing in businesses with histories of weak cash flows. Start-ups will need to demonstrate smart money management techniques to assure investors of a higher return on their investments. They will need to be cash-flow positive and demonstrate the capability to gain a wider market share in the post-COVID-19 phase to be in a better position to factor in capital raised from investors.
One positive thought towards this could be to see a crisis as an opportunity in reverse. This is the time to lay the foundation for a solid base by assessing one’s strengths and weaknesses. Start-ups will need to be proactive in concentrating their energies and leveraging their expertise to visualize emerging business trends in their areas of specialization. They will also need to place emphasis on building a strong product/services portfolio and ensure flexibility in their products to meet evolving demands and maybe even pivot to suit the customer needs. Small businesses will need to strategize on building scale, expanding their customer outreach, and create inroads for their brands.
Start-ups should also make use of this phase to reach out to their customers, investors, and channel partners. A detailed plan of engagement should be drawn to reach out to each of these stakeholders. This will not only help in tapping future business opportunities but also play a key role in expanding the customer base of companies.
This is also the right time for start-ups to take a prudent overview of their business activities. They will need to take a call on cutting loss-making propositions, cull their portfolios, and right-size their business. The trick here is to be fast but balanced in one’s decisions. Small enterprises will need to stop doing things that don’t create value for their business. They should not be sentimental about forming legacies.
The world-over, businesses are staring at economic uncertainties and start-ups are no exception to this trend. It will make fiscal sense for start-ups to put their business expansion and fundraising plans on hold. They can go for shopping for capital in the post-COVID-19 phase when things settle down. This is a time to be patient and build one’s operational strength and scale.