Why it is worth starting a business during a crisis – expert opinion
Experts have repeatedly indicated that the COVID-19 epidemic already has a much greater impact on the economy than the biggest financial crises of previous years. Many companies face huge losses that they are facing with pay cuts and sending employees on unpaid leave. Nevertheless, there are areas of trade that derive profits and additional income during the spread of coronaviruses. Why it is worth starting a business during a crisis – read the article.
Why is it worth risking your business
Eric Rice, author of the bestselling book Business from Scratch. Lean Startup Method to Quickly Test Ideas and Choose a Business Model ”, highlighting several reasons why you should put your business in jeopardy.
1. Experience of successful companies
Some of the world’s largest companies, such as General Motors, IBM, Disney, Toyota and HP, started during the economic downturn or during the Great Recession and World War II. Referring to the 2008 global financial crisis, AirBnB founder and CEO Brian Chesky said in a recent interview that the company was “born in a time of crisis.”
note. Although Airbnb closed in a crisis, the current economic downturn associated with coronovirus devastated the company. According to media reports, a startup that recently raised $ 1 billion from investors could run out of cash in a year.
2. Cost Reduction
During a crisis, many production costs are reduced. For example, wages and rental costs are reduced. At the same time, loans are becoming more affordable. In particular, central banks in many countries have already lowered interest rates and introduced incentive packages aimed at ancillary businesses.
note. Earlier we wrote that some Ukrainian experts expect a sharp drop in salary in the second quarter – more than 12% of the current average of 10.847 UAH, or up to 9.5 thousand.
To reduce the negative impact of quarantine on small and medium-sized businesses, Kyiv authorities resumed cooperation with the Entrepreneurship Development Fund. Due to this, capital entrepreneurs will be able to obtain financing for the implementation of their investment projects on affordable terms at the level of 13% per annum.
The Ukrainian government also made changes to the state program. Loans of 5-7-9% are available to small and medium-sized businesses in relation to the spread of COVID-19 in the country. Now, companies with annual income of up to 100 million can get financial support. The maximum loan amount has been increased to $ 3 million. Extended are also the purposes for which loans can be provided under the program.
3. Changeover time
As Rice noted, many previously successful business models and strategies become ineffective during a crisis, as current problems require new solutions and approaches. Also, during this period, employees more than need their companies’ support, however, some managers prefer to “hide their heads in the sand” in times of difficulty, not knowing how to effectively respond to difficulties. – Why not tempt good experts?
note. In Ukraine, support for its employees was organized by state-owned Privantbank. For the quarantine period, the financial institution introduced an additional payment for employees who work with customers in branches, provide cash circulation and are responsible for the smooth operation of terminals and ATMs. In addition, during the quarantine period, the bank increased the remuneration of scavengers and security guards of all branches of the bank.
Shopify, Canada’s e-commerce platform, has allocated $ 1,000 per person to its employees so that they can buy the right equipment to work from home for the duration of the epidemic.
How to start a successful project
Eric Rice also outlined 3 steps to start a successful project:
- Start with a customer: Use polls and reviews to get a clear idea of what consumers want right now.
- Create a minimally viable product to realize your idea quickly.
- Constantly test and improve your product to eliminate any deficiencies.
note. Earlier, we wrote that the Alipay payment system owes its success to solving the problem (lack of pain) of Chinese residents’ access to payment services, which was solved by digitizing the population.
According to Rice, during the coronovirus period, startups appeared that help solve today’s pressure problems. For example, there are now companies that are engaged in the production of medical supplies using 3D printing. By the way, Vladimir Polakov, a business developer at an international payment provider and a direct acquaintance of ECOMMPAY, touted Medtech as one of the potential promising business trends of 2020.
Even earlier, Vladislav Rashkovan, deputy executive director from Ukraine at the IMF, identified the top trading areas that would “benefit” from the epidemic:
- Online trading and delivery
- Online learning
- Streaming services
- Gambling along with online gaming services
- Social networks, instant messengers and other services for communication
- Peripheral equipment for home work (printers, copiers, routers, etc.)
- Sporting goods dealers
- Utility provider
The Forbes website also highlighted several promising areas for business that would be relevant during and after the epidemic, including cleaning and distribution services, remote work applications, and cyber security (Hi Zoom!).
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