When tough times hit, focus on the fundamentals of entrepreneurship
The disruption caused by the COVID-19 pandemic is unlike anything we’ve seen in more than a century. We continue to live with the uncertainty of not knowing exactly how this will all play out.
Despite this uncertainty, the markets, supplier problems and sales interruptions all businesses are facing right now are some of the same issues early stage entrepreneurs face every day. That’s why understanding and harnessing your entrepreneurial resiliency is one of the best ways to combat the chaos of a global pandemic.
Here are a few major themes that emerged from the first days of the shelter-in-place shutdown.
Cut through the clutter. In the initial weeks of the COVID-19 crisis, there was an incredible outpouring of support for small businesses. We saw a veritable tsunami of blog posts, resource guides and stimulus initiatives, all trying to provide answers. Unfortunately, so much information can quickly become overwhelming, especially during a crisis when everyone believes they need to act immediately.
Find a way to cut through the noise and stay focused on the basics. Maintain open communication with your teams, customers and investors. Assess the immediate impact of the crisis on your business economics and thoughtfully sort out eligibility for any assistance programs. Take time in a crisis to get a handle on the situation and start forming a game plan.
Focus on cash flow. Unanticipated financial disruption can be devastating to any business. That’s why having a monthly cash flow model is essential. The ability to project cash flow out at least 12 months and evaluate what-if scenarios helps to quantify cash needs and will inform critical decisions.
Ironically, in a time like this, pre-revenue startups that have raised significant seed capital rounds can be initially sheltered from major cash problems, as they are not yet relying on sales revenue for survival. Nevertheless, these businesses must be especially frugal with their cash, as there is no way to predict how COVID-19 may impact investor appetite months from now when they need to replenish their capital.
Hunker down, double down, or pivot. A defining attribute of entrepreneurship is agility, the ability to nimbly maneuver through both adversity and opportunity. For some businesses, the best immediate option may be to scale back and try to ride out this market disruption.
Other businesses may be best served by short-term pivots (caterer to personal chef, or clothier to mask maker). Meanwhile, some technology companies (startups developing remote patient monitoring applications or augmented reality tools) are looking for ways to realign more permanently with new, long-term market dynamics created by this pandemic.
Whatever the move, it should be intentional and well thought out, because agility should not be confused with impulsivity. In fact, leaning on experienced advisers, mentors and investors can make a world of difference in helping make the best decisions.
If there is a silver lining here, it’s that chaos and uncertainty will eventually create new opportunity. Times of crisis and adversity often spark new waves of innovation and entrepreneurship.
Jerry Frantz is Chief Investing and Services Officer at JumpStart Inc.