How To Survive The Coronavirus And Keep Your Startup Afloat
Many of our customers and companies in the ecosystem will now be out of budget. But listening to your customers' need and in turn, pivoting your business model should be a norm than an exception
Founders across India, understandably, are in a dilemma on whether they should slow down operations, stop hiring, cut down spending and instead prepare for tough times ahead. However, these may still be a luxury to startups who are either in the midst of a fundraise or worse, on the runway of cash.
As the coronavirus pandemic shuts down all sections of the economy, both within the country and abroad, racing to set up contingency plans seems to be a good idea, perhaps, only next to shore up balance sheets with fresh funds. Since most face-to-face meetings with investors are put on hold due to the risk of contagion, the dynamic but fragile sector could suffer from a capital winter. While investors will become more selective, the best companies will still get funded and VC's will always be open for business.
The most visible and direct impact would be on employees and protecting them should be of paramount importance. It’s easy to recommend 'do more with less’ strategy, but that’s a whole lot harder in practice. Characters of founders will be on full display during tough decisions, so founders should still remain human and respectful about their behaviour and messaging to employees even when letting team members go.
While investors’ interests tend to take precedence, staff costs should not be looked as a hindrance. Companies have a moral and legal obligation to ensure the well-being of their employees. Putting in place a protocol to implement social distancing norms should not distract operations continuity. If need be, put in place a succession plan with disaster recovery plans and a key chain of command across verticals.
The new fiscal is about to begin and switching to zero-based budgeting can effectively mean adjusting to conditions that favour tighter cost management and modifying budgets from scratch at the beginning of a year.
The epidemic could also expose shortcomings in the business model and it is always prudent to use the turmoil as an opportunity. The markets may change dramatically and circumstances could create new challenges to solve and opportunities for startups to grow within the realm of their existing businesses. Companies that learn to stay focused on solving problems and have inerrant customer priorities will surely gain when the markets turn around.
While revising business plans and targets conservatively, founders should also factor in that they could still end up losing customers and get their supply chain disrupted if they have companies selling physical products. It is likely to be harder than usual for companies to acquire customers or meet potential clients. Hence, one should invest more time in strategising operations for the next few days compared to discussing quarterly or annual plans including a range of scenarios on revenues as well as spending. Simply put, if you can't predict, overplan.
The event has also triggered a shortage of raw material, hit consumption and impacted pre-agreed deadlines, leading to a situation where startups can review agreements that are costing a lot of money and which one might do better without. Typically, companies put the force majeure clause that permits them to terminate the agreement, triggered when unforeseeable circumstances, such as natural calamities, prevent either of the parties from fulfilling their contractual obligations and also absolves them from penalties. Even if you can’t discard them completely, it might be worth trying to restructure the deal.
Many of our customers and companies in the ecosystem will now be out of budget. But listening to your customers' need and in turn, pivoting your business model should be a norm than an exception. So don't panic, be flexible and most importantly, use the situation to sanitise your company just like you would your hands.
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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