5 Things to Consider When Starting a Covid-19-Era Business
Five lessons that can't be ignored or avoided in the age of Covid-19.
Opinions expressed by Entrepreneur contributors are their own.
Starting a new business is never a casual proposition, even without the complications and risk factors in a world of pandemic infection. So, what are the considerations specific to this environment, at this point in time, for this unprecedented and unpredictable set of operating conditions, hovering between the potential of new lockdowns and the promise of a vaccine?
Uncertainty isn't extinguishing the small-business economy. New business starts are spiking — according to the U.S. census, there were 1.6 million applications in the third quarter, up 77 percent over the second quarter and dwarfing startup rates of the last decade. For all those people, and anyone electing to place that bet on themselves, I'd offer five lessons that can't be ignored or avoided in the age of Covid-19.
1. Safety in numbers
It's time to formally retire the lore of the courageous, self-standing heroes. Instead, embrace the wisdom of entering the high-risk world of small business ownership with a do-it-together mindset when covering areas like real estate and the law, technology and financial planning.
Tax season is frequently the forcing mechanism for small business owners to reach out for the expertise of an accountant, even though cash flow is overwhelmingly the No. 1 reason for small business failures. Accounting services are available via organizations like the Small Business Administration, local CPA firms or bookkeepers who specialize in small business at rates that work at the right level until the business is stable and growing.
2. Data trumps intuition, experience or even work ethic
Once, businesses spoke in terms of strategies supported by information technology. Today, there is no such thing as a business strategy that isn't also an information technology strategy. Passion and judgment still matter, of course, but when a black swan event like the pandemic slashes the margin for error, accurate, real-time financial and customer data available in the cloud becomes non-optional.
Beyond the data for business decisions, technology choices are fundamental to enabling remote work, contactless payments, digital sales, and the security of customer records. The overarching lesson of pandemic resilience is that businesses capable of shifting to digital operations fared far better in protecting revenue and jobs.
3. The difference between budget planning and scenario planning
Doing a budget is required. Actively using it as the baseline for projecting a range of financial scenarios and planning for decisions for any outcome helps you sleep at night.
A static budget is far less valuable than a clear view — based on high-integrity data and the input of trusted experts — into the most likely outcome, the best case scenario or the worst case and all the implications for cash flow, staffing, investment options or capital requirements. Reactive positions are rarely positions of strength.
4. The value of cheap money
With interest rates sitting at around 5 percent, debt is cheap, so consider using it as a weapon. We tend to turn to credit when we need it, often late in the game when it's more difficult to make a compelling case to a lender. Establishing access to a line of credit and using it are two different things.
5. It's the customer
Consumers want to support small businesses, assuming we can meet them with a product or service they want and within their definitions of safety, risk, convenience and value. When the virus hit, reliable offerings like pedicures and air travel fell off the radar, while paper towels and stationary bikes sold out.
How can tech entrepreneurs know what will be this holiday season's version of the summer's outdoor dining and curbside pickups? State-by-state, local governments will make different decisions on public health and economic recovery. Regions of the country will recover faster than others, so businesses operating in the cloud and with the technology to sense customer behavior and shifts in demand will have a major advantage in the quest to find markets and buyers.
There is some certainty emerging.
The summer delivered surprisingly strong growth to many small businesses. Winter will change some of the options that became available in summer, but the summer will return, a vaccine is visible on the horizon and we can begin to feel the end of this grinding, open-ended uncertainty.
For small businesses, those are more than encouraging indicators. We don't need forever plans, we just need next summer plans.
If we can see a path — based on real data, considering a range of scenarios, drawing on the expertise of trusted advisors — that gets us through winter to the warmer weather, there's every reason to believe the small business economy can lead the broader recovery and reward the courage of people who bet on themselves in the most uncertain of times.