Startup ecosystems across the world have felt the brunt of COVID-19 and India’s robust entrepreneurial landscape has been among the hardest hit. According to a recent survey, around 70 per cent of Indian startups have been adversely impacted by COVID-19 and 12 per cent have shut shop since the outbreak. Yet, while a large number of startups have suffered as a result of the pandemic, India’s entrepreneurs have also risen to the occasion and adopted unique survival strategies to tide over the crisis. In these difficult times, it’s important for entrepreneurs to be agile and alert to weather the novel coronavirus pandemic.
While all businesses should take preventive measures to deliver better outcomes in a crisis event, it’s especially essential for small businesses to have a ‘crisis management’ blueprint ready.
Here are five crisis management strategies to aid startups sail through the pandemic and emerge stronger on the other side:
1. Prioritise risk management
For the good part of the year, businesses have been compelled to navigate the unknown and tackle unforeseen challenges. COVID-19 has made entrepreneurs more aware of the risks to their business, be it legal, financial or manufacturing-related. For instance, startups in the automobile and manufacturing sectors, with high exposure to China, struggled for profitability and encountered low cash reserves. The disrupted global supply chain only added to the risk and economic ramifications of doing busines in the new normal.
One of the biggest lessons from the pandemic for startup founders has been the realisation to put in place a business model that will assess potential risks, and explore ways to mitigate and respond to them. In this context, it is essential that legal issues are anticipated well in advance to better manage potential contract disputes with overseas suppliers. A crisis manager should assess supply chain and production risks, and ensure stable cash reserves even before the next crisis shows up at the door.
2. Have liquid cash available for emergency situations
COVID-19 has made small business owners understand the criticality of conserving capital effectively for the long-term. The focus should be on prudent cash management by cutting down on marketing spends and other expenses that can wait until business picks up again. For those startups facing a cash crunch, founders should consider liquidating investments to meet the financial needs of the business during the crisis. They can also leverage the opportunities presented by various fundraising options available to access capital to tide over financial problems with a mid-term view.
3. Overcommunicate with stakeholders
A crisis like the COVID-19 pandemic has put the spotlight on business leaders to effectively guide their enterprises and show empathy to the broader ecosystem of stakeholders. It is important for resilient startup founders to lead from the front and ‘overcommunicate’ with their employees, investors, vendors, customers and other stakeholders about how the ship will be run during the crisis. Maintaining open lines of communication with stakeholders will prevent misinformation about the company spreading, thereby safeguarding its reputation. If leaders communicate in an authentic and empathetic manner during a crisis like COVID-19, it will reassure key stakeholders that business continuity is maintained. Crucially, it demonstrates a sense of optimism that the crisis is perhaps a silver lining to usher in new opportunities.
COVID-19 prompted startup founders everywhere to communicate early and often with their stakeholders. For example, Deepinder Goyal, founder, Zomato, released a statement that transparently acknowledged the challenges facing the company, such as temporary cutbacks and downsizing, among others. Airbnb’s CEO Brian Chesky sent a note to 1900 employees expressing his anguish at letting them go.
Despite the tough decisions startup founders have had to take during the pandemic, they have been lauded for their open and transparent communication strategy that displayed their own vulnerability. Many businesses have also set up a coronavirus task force and ‘war rooms’ to build an effective response mechanism to combat COVID-19.
4. Rally around your team to innovate
Innovation doesn’t exist in silos. As we look to the future, startup founders should view the pandemic as an ‘experiment’ that helped them understand the real essence of innovation that is possible only through team work. Startups everywhere had to be nimble and empower their team members to think about the bigger picture and produce innovative work to combat the challenges posed by COVID-19.
The pandemic has shown that when innovation flourishes during a crisis, it could lead to new revenue opportunities for businesses. For instance, Bengaluru-based EV startup Emflux Motors empowered its team to pivot and innovate in a new area when its core business came to a standstill during the lockdown. The company’s team of engineers ventured into designing face shields to meet the heavy nationwide demand for PPE and are committed to contributing their bit to the ‘Make in India’ movement.
Thus, startups that were able to effectively evolve their business model and seize into emerging opportunities are most likely to survive for the long haul.
5. Plan for the unpredictable
COVID-19 has highlighted the need for startups to be prepare for the worst as scientists have predicted the occurrence of more pandemics in the future. One thing is clear—ad hoc responses from the leadership team will not sustain the organisation’s efforts to safeguard the interests of employees and other key stakeholders in the startup ecosystem. A firm course of action is required to get through not just the current humanitarian crisis, but also any future crises.
Startup founders should assess their company’s level of preparedness to accomplish their short to mid-term goals and revisit their strategy at frequent intervals. They should carefully execute plans, as consumers, venture capitalists and industry observers are watching their response to the COVID-19 crisis.
If startups have to prepare for a post-pandemic world, they must find ways to build a support system and strengthen their ties with the larger innovation community. They must rethink business as usual and leverage their capabilities to face a new tomorrow.
While the startup ecosystem cannot be completely protected from the potential adverse impact of another crisis, these five strategies can help soften the blow and turn a disaster into an opportunity.
T-Hub help startups gain access to better technology, talent, business networks and funding. Join us today, https://bit.ly/3fIJW21.
