Navigating the Covid-19 Crisis: Advice and Tips for Entrepreneurs
Mar 31, 2020
Essential tips and advice for entrepreneurs seeking to weather the unprecedented economic challenges posed by the Covid-19 pandemic.
Have you ever heard of the term Black Swan? No, we’re not talking about the beautiful bird, or the hit 2010 drama. A Black Swan refers to an event that comes as a complete surprise, leaving major effects in its wake. Black Swan events have changed the course of history, and the Covid-19 pandemic we are currently experiencing is an apt example of this. Large-scale quarantines, travel restrictions, and significant social distancing measures represent only some of the associated challenges we are facing as individuals and businesses alike. For entrepreneurs, it’s clear that business as usual might not be enough to weather this economic storm. For these reasons, we have prepared a series of tips to help you tailor your businesses to a Covid-affected world, and to turn a period of anxiety into one of opportunity.
Cash Management and Fundraising
The Covid-19 pandemic will, in many cases, elicit a fall in consumer and business spending. Because of this, it’s important for your company to have a good grasp of its balance sheet, and, in particular, of its cash management. To begin, it would be a good idea to calculate your runway, the amount of time your company has before running out of money. Since the impact of this crisis is likely to be worse for small businesses than larger ones, knowing your runway and your gross burn rate, the amount of cash you’re spending each month, will be critical to staying afloat.
Besides compiling a snapshot of your business’s current financial health, you might need to address cash, liquidity, and cost management issues. The following tips can help you maintain control and ensure success:
Cash & Liquidity Management
- Defer/extend payments with vendors and landlords.
- Ask lenders to defer principal payments.
- Accelerate receivables – likely difficult (as others may also be trying), but still worth a try.
- Consider asking new customers for a deposit or partial payment upfront.
- Send invoices early and more frequently.
- Focus on collecting past-due accounts, and make it as convenient as possible for clients to pay.
- Put a freeze on non-essential spending.
- Renegotiate prices with vendors/service providers. In the current environment, everything is renegotiable.
- Consider compensation reductions, at least temporarily.
- Actively pursue government programs and local/international grants.
Supply Chain Risk Management
Besides cash and cost management, the Covid-19 crisis also presents risks to supply chains around the world. However, these risks can be mitigated with careful information-gathering and contingency planning. For instance, take the time to understand the impact of the crisis specific to your business by summarising high-risk products and calculating your current inventory buffer, or your current stocks. Maintain open channels of communication with key customers, to ensure the availability of your goods or inputs, and leverage existing logistic capacities to reduce replenishment lead-times. If necessary, go further and consider local/national supplier options for products and services. Finally, don’t forget to prepare for the rebound in any way you can. This crisis surely won’t last forever, and you need to remember to prepare yourself for an upswing in demand.
Entrepreneurs as Employers supporting the Team
Working as a team might be difficult enough under normal circumstances, but the Covid-19 crisis adds another dimension of anxiety to people’s lives. That’s why it’s important for you, as entrepreneurs, to think of yourselves as employers and to use both your head and your heart when interacting with your small teams. The success of your business is directly related to the well-being of your employees, so it’s critical to ensure your team’s health, welfare, and safety. Where possible, this might involve offering compensation protection, job security or financial support for costs such as childcare, elder care, and meals. Additionally, endeavour to balance team autonomy with clear and simple guidance on how to deal with COVID-19 (consistent with health agency guidelines). Your team members are likely to be experiencing a feeling of information overload, so clear, direct guidelines are sure to be appreciated. Finally, remember that you’re not alone, and that many other start-ups are going through what you are. Actively benchmark your efforts against those of other start-ups to determine right approach to support your team.
We hope these tips can provide a bit of guidance during this difficult time. In addition to all of the above, we’d like to leave you with a final note of optimism: one of our greatest strengths as humans is our ability to change, and by adapting to our new reality together we can strive for resilience and seek to turn this crisis into an opportunity.