What Is The Impact Of COVID-19 On Entrepreneurship
With entrepreneurs being fighters, optimistic and resilience written in their DNA since every crisis is not limitless, they can eventually always undertake something.
In the face of the worldwide COVID-19 pandemic, Entrepreneurs must face a new reality: it is not only a huge sanitary and health crisis affecting millions or even billions of people all over the world but also an unprecedented downturn on the global economy revealing its breakability and fundamentals.
The government, public health and economic responses are tremendously different if you are an entrepreneur based in USA or in Europe. As founders, you also don’t have the same action plan to put in place depending on your sector and industry. Compared to online shopping, food delivery, video gaming or video conferencing industries all currently booming, while businesses in the hotel, restaurant, retail, entertainment and sports industries, could take the opportunity to innovate with more digitalization and disruption implemented in their business models to increase the touchpoints with their customers.
Those Entrepreneurs should be ready to lose 50 to 80 per cent of their turnover as well as their valorization. The Lime start-up (the urban mobility e-scooter star company), for instance, lost 80 per cent of valorization in one month. Last year, it's last fundraising ($310M USD) established its valorization at 2,4Billion USD which according to theinformation.com has now dropped to $400M USD after laying off over 15 per cent people.
Nevertheless, with entrepreneurs being fighters, optimistic and resilience written in their DNA since every crisis is not limitless, they can eventually always undertake something.
A basic reminder: a company needs 3 assets to be profitable and sustainable:
Money (access to capital)
Know-how or a specific expertise
A team (people)
Your 1st asset: Money
Keep playing to win, not to survive:
Manage to survive and at the same time, you’ll prepare for the day after the crisis exit.
Action 1: The Diagnostic
Accept your previous business plan is now irrelevant, outdated then prepare and plan for a worst-case scenario. You need to face reality:
- Where were you at the beginning of 2020 (in January)? Were you in good shape or not and why?
- Where will you see yourself in Q3 or Q4 2020?
- How much money do you have in Cash today?
- How much money do you need to stay alive during the coming 18 months? Prepare Q1 plan for 2021
Action 2: Cash (expenses and revenue sources)
Cash is key. Reduce your cash burn rate and make your company leaner by transforming your fixed costs into variable costs in order to become more agile. Reduce marketing, events costs, and other non-essential daily life costs.
Pinpoint and look after your revenue sources and encourage faster payments from your clients.
Action 3: Access to capital
Evaluate and calculate potential risks. Seek help from your VCs, your shareholders, your partners, your banker, your trust relationships during this crisis. Secure your funding to survive for the next 18 months.
Position your company for growth, as a downturn is the best opportunity to improve your fundamentals, see below.
Your 2nd asset: Your expertise, your value proposition, your market-fit product
Take this opportunity to improve your fundamentals and to make them more robust.
Use this time to improve your product and train your tech team to new technology software (online and free open platform).
The executive team: Improve your market fit and determine your real value proposition. Try to step back, change or adapt your strategy and put in place new processes.
The sales and marketing teams:
Take this time to talk and innovate with your best customers, analyze your net promoter scores, understand why they love your product and why they could leave you. Using your customer database find your advocates and missing features: do you have time to implement them and improve your product/service?
It’s also time to innovate with new collaborations, using online tools and (for example, introducing take away for restaurants, adding online content, delivering with UberEATS or other delivery food apps).
3. Your 3rd asset is People: Reimagine your new future and way of working
Employee commitment and regular company communication is crucial to reduce uncertainty in order to keep your employees relieved. Make their safety and wellbeing your priority. Practice honesty, integrity, and transparency with your teams. Bear in mind, remote working offers more flexibility, but it will kill serendipity time, spontaneous time (decision taken at the coffee machine). Trust and humility are critical to reinvent or innovate your managerial practices. Be closer to your teams. Find out how employees imagine their new normal routing and allow different cultural shifts.
The most disruptive or interesting companies have taken off after times of crisis – Google, eBay, LKDN after 2001 and Uber, Airbnb, Instagram, WhatsApp, after 2008 – which means there are great opportunities for great leaders!
After the COVID-19 crisis the lessons learnt will be:
The travel limitation of goods and business travellers (more remote working and remote meetings) due to the impact of physical distancing. There will be other sanitary crisis or new wars due to the global overcrowding.
The potential growth dematerialization of products and services: we could witness the booming of 3D printers to produce masks and ventilators locally.
Agility is when we see Apple changing their operations to design, produce and ship face shields for medical workers.
The low-cost model where China and India, are the worldwide manufactures will be ended. Globalization as well. This crisis will change the relationships between countries and states, new challenges, new stakes, new dangers, new threats (health and climate). Governments must and will demand to be independent and autonomous with critical medical supplies and medicines to reduce future vulnerabilities. A world less open and probably less free is to be expected based on examples of person tracking and facial recognition in countries like Korea, Singapore and Taiwan.
With containment in the main parts of the Globe, new needs leading to new opportunities for entrepreneurs will arise. New business models, new offers in dematerialization must be invented. In the coming years, the new king of the world will be the “Amazon of dematerialization” and Entrepreneurs will be the ones who will implement this new world.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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