It may feel counterintuitive, but the best of economic times may not be the ideal moment to launch a small business. Conversely, a more challenging economic climate, such as we have now, isn’t the worst time to start a new venture. This is because economic downturns can help pave the way for new disruptive business ideas, just like the 2008 global financial crisis created the conditions for the sharing economy to rise.
The coronavirus has brought its own unique set of challenges. Yet, these in turn have brought significant opportunities for some businesses. Video conferencing apps, like Zoom, for example, have done very well as almost everyone switched to telecommuting overnight.
Despite the trauma, some sectors will thrive as a result of the lasting changes brought about by COVID-19. The challenge is to capitalise on the opportunities. What follows are my tips for how a nascent small business can do so*.
Identify the key pain points
To find what’s needed, identify the gaps, deficits and pain points that have arisen in response to the unique circumstances of the pandemic. After the 2008 financial crisis, people could no longer afford to stay in hotels while others struggled to afford rent. Airbnb created a two-sided marketplace for people to rent their homes for holiday lets, earning homeowners extra money towards rent while providing a more cost-effective way for people to take a holiday.
So what are the changes and challenges, and what do people want now? Here are some thoughts. There’s less demand for office space in city centres and less business travel. There’s more demand for home working and the things that enable it. People are more conscious of the need to maintain good mental health. They want online privacy. And they want lifelong learning to adapt to a mercurial job market and the growing presence of AI and automation.
The hospitality industry, which I know well, has been one of the worst-hit by the pandemic. As the recovery gets underway, now more than ever, venues need systems that lure diners back by offering effective and efficient services that help minimise contact and reduce costs. On the other side of the market, diners are looking for more effective use of technology within venues, with 71% of under 45s saying that technology could be used to improve the dining experience.
Businesses that can identify and solve new pain points will find loyal new customers. And gaining a first-mover advantage in a disruptive market can quickly establish you as a market leader.
Embrace digital transformation
Coronavirus aside, almost every industry has had to face the challenge of digital transformation over the past decade or so. With technology changing so rapidly, it has been hard for many businesses to keep up and there is a lot of fear and hesitation around implementing digital technology. Many business owners have taken a piecemeal approach or ignored the issue altogether.
However, these businesses are quickly being challenged or outright replaced by new disruptive businesses that have integrated the latest technology from the ground up. These lean, agile, tech-enabled businesses can operate more cost-effectively and provide completely new products and services.
To return to hospitality, apps like Just Eat and Deliveroo have made dining at home much easier, with a plethora of options to choose from and cost-effective home delivery. Meanwhile, physical venues have barely changed their approach since the dawn of civilisation.
Here and elsewhere there are significant opportunities for any small business that can enable the technological transformation of key industries and help them reinvent by embracing technology as they recover.
Be flexible and move quickly
No one quite knew how to manage a global pandemic. It was an unprecedented situation. The rules changed rapidly, with local lockdowns put in place quite suddenly and policies changing almost weekly. If you began developing a solution at the start of lockdown, it may not be fit for purpose by now.
However, if you can be agile and resilient enough to weather the storm, adapt to the new conditions and continue to add value; agility and resilience will be in your company’s DNA and serve you well for years to come. An incredible 50% of Fortune 500 businesses got their start in the midst of a recession, yet there have been far fewer recession years than non-recession years.
Find your focus, your goal, and work towards it quickly and flexibly. If something doesn’t work, drop it. If new rules or conditions require you to change your approach, then change it. Do whatever you need to do to adapt to market conditions and you’ll emerge from the crisis more adaptable and resilient and with a strong market proposition.
Harness the financial power of the god
It is very slow and difficult to grow without funding, especially as a small business. If you can’t gain a significant chunk of the market quite quickly, someone bigger will come along and copy your approach. Your value to the market relies on your speed and efficiency.
Unfortunately, despite the potential for growth during a downturn, institutional investors are often nervous and will wait for clear signs of recovery before investing in riskier start-ups. Smaller investors, Angels and VCs, offer more potential. Equity crowdfunding, especially through EIS-approved rounds, is also much less risky for smaller investors.
Equity crowdfunding also brings hundreds of potential new customers and brand ambassadors to your platform, as investors become loyal and supportive fans. Any business emerging from a recession with hundreds or thousands of loyal customers stands to quickly gain the trust of further investors and customers, helping your business grow rapidly.
As the old Chinese proverb says: in every crisis lies opportunity. While the economic impact of the coronavirus pandemic is likely to create significant challenges for individuals and businesses, small business start-ups able to solve these challenges will be in an excellent position to aid recovery and emerge as market leaders.
*This article has been adapted from one that first appeared in AI Journal in August 2020. back
