Are American businesses springing back to life? All eyes are on entrepreneurs as they emerge from coronavirus hibernation and test the environment for signs of renewal. But what about startups? Long considered a harbinger of the dynamism of the small business market, the number of startups has been lagging a booming economy.
According to the Associated Press, “Between 2007 and the first half of 2019, applications to form businesses that would likely hire workers fell 16%. Though the pace of applications picked up somewhat after 2012, it dipped again” in 2019.
But there were signs of a startup renaissance before the advent of COVID-19. Statista reports there were 774,725 businesses that were less than one year old in 2019, up from 733,825 in 2018. And if you think something as damaging as a global pandemic can curb the enthusiasm of entrepreneurial spirit, you would be wrong. A recent survey from SCORE looked at The Impact of COVID-19 on Startups and found although 43.9% of startups have a “wait and see” attitude about starting or continuing their business, 18.4% scaled up their plans and only 2.6% abandoned their business. All of which just underscores the fact entrepreneurs are a self-sufficient and determined breed.
There are plenty of examples of mega-successful businesses, from General Electric to Netflix to Microsoft, that started in a downturn. Entrepreneurs are about innovation and resiliency and seizing opportunity by the reins.
So, if you’re thinking about launching a business, here are three reasons why now is a good time to start.
Bootstrapping know-how
We are all familiar with the saying, “When life hands you lemons, make lemonade.” More to the point, bestselling author and entrepreneur Matshona Dhliwayo, says, “When life hands you dirt, plant seeds.” When a downturn hits, savvy business owners learn how to bootstrap to survive. Working with a skeleton crew, work-at-home policies, cost-sharing with other businesses and renegotiating terms with vendors are just some of the ways businesses saved money to survive the consequences of the pandemic shutdown.
With a tighter financing environment, startup entrepreneurs need to bootstrap more than ever. Consider:
- Choosing a low-investment business to start.
- Starting your business from home.
- Buying used equipment, holding virtual meetings instead of traveling, bartering with other businesses.
- Keeping your job and starting part-time.
- Using freelancers/independent contractors instead of hiring staff.
- Taking advantage of free/low-cost marketing methods such as social media.
- Focusing first on the easiest and fastest-paying projects to build cash flow.
The bootstrap mentality—a mixture of frugality, innovation and agility—can be crucial not only in the startup stage but also as your business grows.
After all, innovation is just problem-solving at its root and who better to problem solve than an entrepreneur bursting with new ideas.
Business model changes
Like it or not, America’s business model has changed—permanently. Consumers and businesses have changed the way they communicate, the way they buy, receive and deliver goods and the way they work. Across all industries, patience, ingenuity and adaptability were the ingredients needed for business survival and these new norms are here to stay. This is good news for startups. Keep these new behaviors in mind as you launch:
- Remote working. Even before the outbreak forced businesses to implement a work-from-home policy, there were over 5 million U.S. employees working from home at least half the time. Now, according to Salesforce, 62% of the U.S. workforce is currently working remotely.
- Virtual meetings. As the pandemic hit, businesses of all sizes turned to video conferencing solutions to conduct meetings. Zoom, a leading virtual meeting platform, reports usage skyrocketed from 10 million daily meeting participants in December 2019 to 300 million in April 2020. Likewise, virtual meeting platforms such as Microsoft Teams and Google Hangouts have experienced increased activity and new players are getting in the game like Facebook’s Messenger Rooms, which allows anyone to virtually chat, even if they don’t have a Facebook account. The availability and sophistication of today’s virtual meeting software makes it plausible for new entrepreneurs to launch without having to travel, which saves money and time—both precious resources for new businesses.
- Availability of talent. With so many people out of work, startups have a much larger talent pool to choose from. At the time of this writing, nearly 43 million Americans have filed for unemployment benefits during the pandemic and many are looking for new jobs. What can your company do to attract employees to work for a startup? According to a Robert Half survey, post-pandemic employees want more telecommuting opportunities, a safe work environment (coworker distancing, fewer in-person meetings) and less business travel.
Time of innovation
We’ve all read stories about businesses pivoting their business model to adapt to pandemic needs, such as switching production to mask- and sanitizer-making. That’s because smart business owners understand success depends on the ability to adapt to constantly changing consumer needs. Startups have the means to step in where bigger companies cannot necessarily fill the gaps (think food delivery services). After all, innovation is just problem-solving at its root and who better to problem solve than an entrepreneur bursting with new ideas.
Fortunately, consumers today are more open to new ideas. Buying online is no longer a novelty. Talking to a consultant via computer instead of face-to-face is a welcomed alternative. While consumers may also have less money to spend right now, they are shopping around, looking for new businesses to engage with—ones that cater to their “new normal.”
If other startups are hesitant to launch now and more established businesses are playing it safe, spending less on marketing, then starting today has an advantage. You become one of the few voices in a vacuum—one that can more easily be heard than under normal circumstances.
Don’t let the talk of a “new normal” intimidate you. Now is a prime time to reach customers who were once stuck in habitual shopping patterns and are now looking to build new relationships with new brands.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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