We are in for tough times. The world is locked in an economic downturn with the outbreak of COVID-19 spreading to the West, weakening Asian economies that were already facing contraction from the first wave.
Indices around the world have nose-dived, and three years of gains have been wiped off the Dow. China, who many look to for guidance on a post-outbreak recovery model, finds itself struggling to rebound. And if financial gloom and prolonged social distancing were not enough of a mood dampener, political uncertainty and fluctuating oil prices continue to nip at everyone’s heels.
There is, however, room for optimism.
Statista shows that digital payments in Asia will continue to grow, which means the unbanked segments in Southeast Asia will still need financial solutions. Commerce platforms such as Alibaba, JD.com, and Amazon US are also ramping up hiring to meet surging orders.
As startups, we are in the best position to adapt, especially in turbulent market conditions. So, from one startup to another, here are some things my team is implementing here at Nium that you can apply to your business too:
1. Build trust
Keep open channels with your investors, partners, and customers. Give them an honest appraisal of your business continuity plan or any potential delays due to nationwide lockdowns. Now is the time to strengthen relations, and you may just receive trust and confidence in return.
2. Reassure your employees
Be clear on business direction and policies—things can change fast. If everyone is working from home, schedule “virtual water cooler” sessions to check on morale, swap stories, and clamp down on unnecessary overtime.
3. Evaluate your cash runway
Look at your cash flow. How much longer can your company march on? You need at least 12 months to outlast investor uncertainty or to endure the inevitably longer fundraising cycles. Ideally, you should aim for an 18 to 24-month runway.
4. Adjust your burn rate
You need to study your burn rate. What is necessary for current growth? Where can you lower costs? Be early and decisive. You can justify higher burn rates if there is strong growth potential, but remember that burn goes up when revenue comes down. Focus on your core business. Nascent or experimental projects should not be competing for your attention at this time.
5. Prioritize cash flow
Find the right talent for the right mix of roles to maximize your operating cash flow. Offer freelance or contract positions if there is no room for a full hire. Similarly, streamline your investing cash flow by renting or leasing as much as you possibly can; save the luxuries for later.
6. Review supply chains
Now for external affairs. Get regular updates from your suppliers for better forecasting and try to work through any bottlenecks together. Harvard Business Review has a timely reminder on resilience principles such as redundancy, diversity, and modularity that everyone should read. (Look at temporary supplier agreements)
7. Assess sales performance
Regardless of which market you serve, you will want to periodically update your sales forecasts in time with major economic developments. Fintech startups should consider boosting their marketing efforts to generate more sales leads and avenues, bearing in mind Point 4, when you increase your marketing spend.
8. Think bigger
Indulge in some lateral thinking: what, where, and how can you pivot your business to adapt? You may need to shift to a greater online strategy with all the travel restrictions in place. Or maybe you can tweak your products to better serve customers in this time of need. Zoom, for example, has exploded from a business teleconferencing app to a cultural phenomenon.
9. Encourage “Blue Activities”
The Shirlaws Group came up with a three-colour system to contextualize business activities, and Blue refers to “revenue-generating functions and are customer-related.” These include staff training, reviewing company culture, updating customer service policies, and so on—the sort of activities you may have put off doing. Clearing these now sets you up with more valuable time in the future, and that’s something you need plenty of to prepare for a new, post-crisis world.
10. Planning for future
Many companies have implemented “work from home” policies with the spread of the outbreak. Initial feedback from many was that they find working from home more efficient. Long meetings are replaced with VCs and project managed over tools such as Slack. It is good to note all the efficiencies brought about by such work tools, and perhaps timely to evaluate whether such policies can be extended during normal business climate.
There are many other things we can work on, but the most important tip I can share with you in managing your business is to be flexible. Crises have a way of showing us that we are more resilient than we think we are. Since we cannot wish these times away, the next best thing is to let them shape us into something more durable for the future.
I hope at least some of these tips are helpful to you. Stay safe.