If you're an aspiring entrepreneur trying to get your business idea up and running during this tumultuous year, pay attention to these key mistakes to avoid.
Starting a business in 2020 has been met with an unprecedented storm of crises and risks: a pandemic, nationwide protests, recession and more. The economy is slow, it may be more difficult to get startup capital for your business, it may be hard to conduct business operations in a normal type of office environment, and your customers may be cutting back on spending because of the economic uncertainty.
And yet, despite the many challenges, a recession can sometimes be a good time to start a business; some of America's best-known businesses, such as General Motors, Microsoft and Trader Joe's, were founded during recessions.
If you're an aspiring entrepreneur trying to get your business idea up and running during this tumultuous year, avoid making the following mistakes.
Not picking the right product or service
The post-COVID world might not be the best time to open a dine-in-only restaurant. But what if you could pivot your business idea to suit the new opportunities?
For example, can you shift your restaurant concept to carryout only, a food truck or pop-up catering events conducted outdoors?
One reality of the COVID-19 crisis is: Anything that can happen online will happen online. People still want great products and customer experiences, but many of these things need to shift to an online model or a hybrid model of online and in-person experiences.
Not adjusting your business plan
Many entrepreneurs create a business plan that has optimistic projections. They expect a certain level of enthusiasm from customers, they believe they can capture a share of the market, and they believe that opportunity is plentiful.
The COVID-19 crisis requires entrepreneurs to adjust their expectations. Be optimistic, but be realistic, too. What if you have to adjust your product development or change your go-to-market strategy?
Review your business plan with a few questions in mind for the new realities of COVID-19:
1. What if you need another year to reach your revenue goals?
2. What if your market shrinks by 10% this year?
3. What if you cannot open a new location for your business because of COVID-19 restrictions?
4. Has your target market changed because of COVID-19?
5. How are your target customers experiencing this crisis?
6. Do you need to broaden your marketing to reach different customers or a wider audience of customers?
7. What if some of your marketing strategies – attending live events, networking at industry conferences, etc. – are currently impossible because of COVID-19 restrictions? Can you change your plans to account for this?
Not hiring talent
Forty-one million Americans are out of work. Recessions can be an ideal time to hire new talent because more people are looking for jobs and fewer companies are competing for talent. It might be worth hiring sooner than you thought you would, if you can get the right people on board quickly to help the company get to the next stage of growth.
Here's what to consider when hiring talent during a difficult economy:
Can you find the right talent for working remotely? More people than ever before are comfortable with working from home, so don't assume you can only hire in your local city; you could conduct interviews by phone/video conference, and hire people all over the U.S. and in other countries.
Will you hire full-time employees or freelancers/independent contractors? Hiring freelancers can sometimes be a better deal for new businesses – you have more flexibility in how to hire, without the commitments and overhead costs of full-time employees.
- Can you provide a safe working environment? If you need people to be onsite at a specific location, are you ready to deal with the costs and complexities of keeping people safe during COVID-19? Can you provide COVID-19 screening, personal protective equipment and ensure that people maintain safe social distancing and safe working practices?
Along with their overly optimistic financial projections, some new entrepreneurs make the mistake of not thinking carefully enough about the risks facing their business during a pandemic. Consider the following and create a plan for each potential risk:
1. Do you have adequate business insurance?
2. What happens if you can't get your revenues up to speed as soon as you thought you could?
3. What happens if the pandemic drags on longer than expected or takes a turn for the worse – how will that affect your business?
4. What if your business is affected by some other natural disaster, fire or flood? Can you continue your business operations even if your company headquarters is out of commission?
5. Are you adequately backing up your sensitive business data in case you need disaster recovery?
Failing to control costs
You need to be ruthless about controlling costs and avoiding any unnecessary spending, especially if your business is not yet profitable. Ensure that any business spending is directly connected to key strategic goals: product development, customer acquisition or risk management.
Here are a few ideas on how to control costs:
Find the right size office space. Thousands of companies of all sizes are suddenly realizing that they don't have to come into an office every day to be productive. Find or negotiate a cheaper lease, or consider moving your office to a home-based environment. Or consider signing up for a coworking studio or shared office space where you can split the costs with other businesses.
Reconsider full-time employees. Even though a recession can be a great time to hire, don't assume that you need to have full-time employees. You might want to start with freelancers or independent contractors and just pay for performance, or pay for specific deliverables to get done. Full-time employee headcount can get expensive quickly.
Reevaluate spending on software/platforms/marketing tools. Do you plan to spend money each month on multiple user licenses for different business software/platforms? Take a closer look at your spending on things like marketing automation software and customer relationship management systems. See if you can eliminate duplicates.
- Renegotiate deals with lenders/landlords/suppliers/vendors. If your cash flow is tight, this might be a good opportunity to ask for a better deal from your bank, landlord or suppliers. Vendors might offer you better payment terms, banks might allow you a few months of forbearance because of COVID-19, and landlords might let you miss a few months of payments in exchange for a longer lease. Don't be afraid to get whatever relief you can, but make sure you don't damage relationships with suppliers you need who can help your business.
Not being strategic about sales
Remember, sales is the most important part of your business. If you're not selling, not booking new business, and don't have a full pipeline of sales prospects, your business won't survive for long. Make sure you are dedicating full effort and focus to sales. Some new entrepreneurs aren't natural salespeople, or they feel that their product is so good that it should sell itself.
Here are a few key tips to get strategic about sales:
Make a big list of sales prospects. Do you know who your target customers are? Start from the inner circle of your company – friends and family – and make a list of everyone you know, and everyone they know, who might want to buy what you sell.
Create a detailed sales process. Even if you're a solopreneur or small business, create a consistent, repeatable system to work customers through the buyer's journey. Make it simple: one, contact with customer; two, demo your product/service online; three, talk with other stakeholders; four, share estimated ROI of the product, or show how it helps your customer; five, answer final questions, and, finally; six, close deal.
Keep track of your sales efforts. Every company needs a CRM (customer relationship management) system. Whether it's a spreadsheet or a more elaborate program like Salesforce, you need to keep track of every customer conversation and point of contact. Take notes. Keep track of which customers are highest priority and most eager to buy, and which ones need more time to decide.
- Sell every day. If you want to be a CEO, you also have to be the chief sales officer. CEOs need to sell the company every day at every possible opportunity.
Starting a company is never easy, even during "normal" times. But if you can avoid these mistakes, your business will be more likely to thrive during COVID-19. Good luck with your entrepreneurial journey.