Most of the startups were not prepared for this tough period and are now fighting it hard to find ways to survive and remain afloat. Raising capital has become tougher than ever before and the buying sentiment of the consumer is at an all-time low. COVID-19 is a global emergency with every industry being hit. Retail chains are shutting down, companies are filing for bankruptcy and unemployment is at its highest. Work from home has become the new normal. The situation is very grim for small entrepreneurs who have fewer cash reserves to manage the sudden lockdown and the impact the downturn it has created. These effects of closure will also have a huge impact on our economy.Here are 5 things that a startup must do to overcome this downturn:-
1. Runway and burn rate
- Make a plan for the next 3 months, 1 year and 3 years of survival as the economy will take some time to get back on track.
- Take all the stock of your current gross burn rate and calculate how much cash you are spending every month? How much-fixed expenses do you have? And how much money goes into variable expenses?
- Take a look at your actual revenues, Make sure you don’t forecast, have real numbers.
- To get the net burn rate, subtract your monthly gross burn rate from your revenue.
- Check all your accounts and see how many months your company can survive in corona downturn
- Calculate your runway to last until you raise your next round of capital.
- It is a good idea to diversify your business in this tough time.
- It is always good to have different sources of revenue so that you can save your existing business and pay your employees too.
- Go digital, take your products and services online. Since you already have a set backend, building on new functions like delivery, online payment, etc. should not be such a difficult task.
- You can start an online service like; a paid webinar, online coaching, can make viral videos. You can also try your hand in food retail or can partner with some healthcare company.
3. Line of credit
- Taking a line of credit can be very useful for your business. Line of credit is a business loan where the moneylender fixes the upper limit and the borrower can take any amount within the upper limit at any time. The interest will be charged on the amount that the borrower uses. This service can help you in securing your business.
- Try and take a line of credit as soon as possible as post lockdown financial institutions might be strict on providing loans easily.
- For the entrepreneurs, it is your priority to keep your employees and customers safe
- Start with changing the employee policy based on the situation.
- Let them know that the company cares for them and they are safe.
- Try to engage them in multiple functions. You may not know about the hidden talent of your employees.
- Try to motivate them and ask for their support.
- Keep a daily track report of their work and analyze their potential.
- Ask your team to share creative and innovative ideas on a regular basis.
- Raising money is easy when the economy is strong but in recession, it can get worse.
- Try to eliminate side projects, new ventures or any underperformance unit.
- Focus on your employee performance at the top to contribute to the company.
- It is important to understand whether they are default alive or default dead. It is also a good way to measure the health of your company.
- Try and cut down on all your extra costs if your office is on rent either request the landlord to reduce it or try and shift to a cheaper office space