In a matter of a few short months, our way of life has changed on a global scale. Businesses and governments have had to change the way they operate in response to the COVID epidemic and it is certain that because of these changes things will never be the same. So what does that mean for entrepreneurs that wish to start a business? Should they even bother taking such a risk during these times?
As a general observation, there is a spike in new business and innovation after each global financial crisis. This happened after 9/11 and the 2008 Great Recession and even the Great Depression in the 1920s. Each spawned new business and introduced an innovation that changed our way of life as a result of having to adapt. Social media and e-commerce came after 9/11, the gig economy introduced ride-sharing, property rental, and online payments after the Great Recession. Many more businesses were affected as a result of these innovations and created opportunities where none existed before. However, before these new businesses could position themselves in the market they had to adhere to the needs of the market and follow social guidelines that existed after each crisis.
As a result of COVID, the needs of the market have changed and businesses that aim to begin during this time must look at factors that could impact how they serve their potential customers. This begins by conducting an extensive analysis of the market in order to find indicators that could affect how the industry has changed. For instance, retailers must now take a hard look at e-commerce as part of their business model. Due to staying at home, directives because of COVID, most people started shopping and interacting online that previously had never done so. This created a bigger online market for retailers already positioned to serve these new online consumers and it also challenged businesses not capable of doing so. Restaurants that did not have pick up or delivery before COVID quickly saw the need to adapt that process into their model and many will not stop providing it after they reopen their seating areas. New businesses must take a good look at their own industry markets and understand how COVID has affected the way business is conducted and adapt that process into their model if they wish to succeed.
Across all industries, social distancing has made changes with how customers and businesses interact. Safety practices dictated by the CDC are now front and center. Managers and owners are providing better training and safety guidelines for their employees that follow these new guidelines. New businesses must also include this in their operations and sales plans if they are to conform to new social guidelines regardless if their workers have direct interaction with customers.
Finally, the impact that COVID has had on the economy has made it challenging for new business owners to see the benefits of investing their own money during these uncertain times. However, this is no different than if a business were to begin during any other time. Entrepreneurs must review their financial position and conduct financial projections for their new business in order to plan for any circumstance. A business should never start without a financial plan. Local banks and other lending institutions require a business plan and financial projections in order to consider the risks associated with lending to new business regardless of the economic conditions.
“Business Tips” was written by Alejandro Castañon, Certified Business Advisor of Angelo State University’s Small Business Development Center. For more information on the topic of this article or the services of the ASU · SBDC, contact him at Alejandro.Castanon@angelo.edu.