Five Tactics That Can Help Entrepreneurs Get Through The COVID-19 Crisis
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As the current COVID-19 pandemic runs its course, companies across the world, regardless of their size, are grappling with the economic impact that it is leaving behind. From Fortune 500 companies to early-stage startups, no one can deny the drastic damage this crisis has caused, resulting in both temporary and permanent damage. Indeed, I have personally felt the repercussions of the pandemic while leading my latest tech-based venture, Airzai.
While we had been able to raise US$3.5 million in seed funds for Airzai, most of it was spent on R&D, and we critically needed additional funding to begin production of our flagship product, Airzai Aroma, a smart home diffuser that utilizes our Swiss-made premium fragrances made from natural ingredients. Now, it is because this project carries incredible future potential that we’ve been fortunate to raise the largest seed round by a startup in Canada, and bring some well-known and well-respected investors to invest in our company. And due to the continued current and future opportunity and investors’ appetite for our venture, we were on the verge of raising another $2 million in funding from new investors back in February of this year to kickstart production.
However, because of how fast COVID-19 was spreading in China earlier in the year, factories remain closed past the Chinese New Year, and we were forced to halt initial production. This was followed by even bigger financial uncertainty, with economies shutting down and stock markets crashing. Ultimately, all of this led to our investors opting to put a hold on the deal at the last minute, which ended up putting our entire company on the verge of bankruptcy. Being at the pre-revenue stage, we had a limited runway before our capital ran out, and so, instead of waiting for the seemingly inevitable failure of Airzai, I made a few imperative decisions to quickly pivot our business and ride out the storm.
This resulted in our team developing an entirely unique and innovative product called Airzai Care Air and Surface Disinfectant, which in itself has become a very profitable product line with a promising future for the company. Throughout this unprecedented journey, I learned a great deal about leadership, strategy, and communication. In fact, as the economies start to open and lockdowns start to ease, the investing environment is starting to get back on track, and we are very fortunate to see the inflow of investors in Airzai as well. Not only did the temporary pivot help us in weathering this unprecedented storm, but it also presented us with a lucrative permanent revenue stream that will continue to grow as we get back to launching and manufacturing our flagship product.
In reflecting on my experience, there are five fundamental tactics and eventually lessons that allowed our startup to continue to thrive during the pandemic. For business owners, startup founders, or even CEOs of bigger companies that are facing any sort of adversity during these unprecedented times, here are what I believe to be the five most important things you need to know:
1. Curb the burn It all starts with optimizing the monthly burn in order to maximize the runway. Payroll is always one of the most significant expenses for a company, no matter the size. When facing uncertain times, it’s easy to panic and make cuts right away. However, it’s important to never make the impulsive decision to let go of key staff members. It’s essential to maintain as many jobs and relationships as possible, as the unstable times will not last forever, and exceptional talent is hard to come by. The best way to tackle this delicate action is to have individual conversations with each employee, and explore different options ranging from part time, contract, or even completely letting go from the position, based on company’s need and that individual’s performance.
2. Optimizing fixed expenses Although expenses like phone, software, and office bills seem unavoidable, there are things you can do to reduce the cost as much as possible. These are the expenses that can easily add up and be more costly than you think. For example, if you are renting out an office space, have a chat with your landlord to see if you can find a creative solution to defer payments. Or explore the option of subleasing part of it. To avoid overspending, designate one person on the team track expenses on a daily basis on company credit cards, as these petty payments can easily be overlooked by the management. This will create constant optimization, and ultimately reduce or eliminate frivolous spending.
3. Find creative ways for funding All businesses are in the same boat when it comes to an unprecedented crisis like the one we are currently facing. This usually means that both the government and private banks are offering creative ways of funding to help businesses stay afloat. It’s important to explore every avenue for extra funding. An example of this is applying for different government loans, both on federal and local level. Grants can always be beneficial in these situations. Also, try speaking with your company’s bank to see if there is a line of credit that can possibly be extended. Lastly, utilize credit cards to your advantage, and look into an increase in credit limits to make sure funding is available if necessary.
4. Pivot your business model temporarily to drive revenue Some of the most well-known, successful organizations like Airbnb, Uber, and more emerged during a time of crisis. Eras like these can present an opportunity for businesses to innovate. Before all else, identify the market and align your team to work on something that can drive short-term revenue that will keep the cashflow going, no matter what the circumstances are. In Airzai’s situation, during COVID-19, online e-commerce and sanitization products were rising astronomically. We utilized our experience in air products to develop an air sanitizer and started sales through setting up a Shopify store in a mere 48 hours.
5. Maintain a positive mindset Aside from the strategic guidelines listed above, having a positive mindset is as important as tactical strategies. The belief that adverse situations are only temporary and having a “this too shall pass” attitude is not only important for yourself, but something you should instill in your team members on a daily basis. Moreover, seeking active advice from mentors or reaching out to experts in the industry through platforms like LinkedIn will play a vital role in this process. There are always people who have been through similar situations in the past who are more than happy to offer their guidance.