The effects of the coronavirus pandemic are not all limiting. There's opportunity for innovation and entrepreneurial dreams can be born
There’s a common assumption that if you try and start a business in the middle of a recession, you must be a little crazy. Therefore, following this logic, those who are trying to start a business amidst a global pandemic and as we’re heading into the most significant economic slump since World War Two must be absolutely mad. However, if you think of companies like Airbnb, Uber and Burger King, you might be surprised to find out they have more than their multinational success in common - they were also all founded during major economic downturns. And far from these being exceptions to prove the rule, thousands of business owners across the UK appear to be turning lemons into lemonade by finally putting their start-up ideas into motion, even as covid regulations are growing increasingly restrictive.
Despite all the challenges that the coronavirus brings - such as being confined to your home, being forced to deal with a dip in consumer demand, and facing greater difficulties securing bank loans, there are actually a whole host of reasons why entrepreneurship during Covid is booming. Turbulent economic periods often pave the way for new and exciting visions to come to the fore, and as the prominent economist, Christopher Freeman believed, innovative ideas and disruptions to the market are often accelerated after economic downturns. However, suppose first-time business owners don’t take heed and make every preparation necessary. In that case, there’s a very big chance they can join the ranks of the thousands of UK businesses that the coronavirus has already put into liquidation this year.
So, to guide you through this turbulent time for newbie businesses, we’re going to explore the recent growth in entrepreneurship, as well as see what’s causing people to start businesses during the Covid-19 pandemic, before explaining why the present climate may actually provide fertile ground for growth. But most importantly, we’re going to take you through the main things you can do to increase your business’s chances of success, and give you as many tools as possible to help your business thrive through this unprecedented time.
RECENT RISE IN ENTREPRENEURSHIP?
You may have assumed that the coronavirus and the subsequent wave of regulations that followed would have deterred bushy-tailed entrepreneurs from starting up or continuing with their burgeoning businesses. However, the numbers are telling a different story. As findings from The Center for Entrepreneurs in October show, a staggering 572,882 companies have launched in 2020 so far - following a record-breaking increase of start-ups in June. The foundation also reported that throughout March to September, London witnessed the most significant year-on-year growth in start-ups, with the amount rising 20% compared to 2019.
In addition to this, a survey from SCORE has found that while 42.9% of the 492 UK business owners questioned had a ‘wait and see’ attitude about starting or continuing their business, with only 2.6% planning to abandon theirs, which highlights the resilience of many starting out in the industry.
Among many of these newly formed start-ups are businesses that have responded to the immediate needs of the COVID-19 pandemic. Referred to by many as the rise of the ‘COVID-economy’, the recent spike in entrepreneurship is primarily due to opportunistic players responding to the urgent needs of the market. For instance, from July to August of this year, companies manufacturing soaps and detergents increased by 64% compared to last year, while the sale of pharmaceutical goods saw an increase of 55%. However, with 18.1% of start-ups found in April recorded to be in professional & business services, and 12.9% in the restaurant and food sector, it shows that many new businesses are also aiming to cater to needs outside of the COVID-economy.
WHAT’S CAUSING PEOPLE TO START BUSINESSES DURING COVID?
So, in addition to this ‘COVID-economy’ - what else is pushing newbie business owners to take risks and launch their own projects? Well, it turns out that, as an increasing portion of the UK workforce are finding themselves furloughed or faced with redundancy packages, more and more people are having their incomes cut while their spare time increases, as we will go on to explore next.
People have more time on their hands
With the UK quietly slipping back into a winter lockdown as of November 5th, it’s estimated that around 9.6 million employees are currently furloughed as part of the government’s recently extended job retention scheme. Combine this with the sharp increase of redundancies that have occurred in the latter part of this year, and it leaves a lot of people with a lot of time to sit at home twiddling their thumbs. Aside from rearranging your room a couple of times, and binging your favourite Netflix series, many people are finding themselves faced with an excessive amount of spare time and are using it to rethink their career trajectory. This breakdown of our typical routines is giving many of us the option to imagine a better work-to-life balance, and the slower-paced lifestyle also gives us more time to explore creative and innovative business ideas. So, this increase in spare time is largely being understood to contribute to the growth in innovative ideas and business proposals that are being seen across the country.
People are acting out of necessity
For some, however, starting up their own business stems from a sense of financial necessity, rather than the luxury of simply having more time to explore creative pursuits. This phenomenon is what Robert Farlie, an economics professor at the University of California Santa Cruz terms ‘necessity entrepreneurship’. Necessity entrepreneurs, according to Farlie, are individuals who were previously registered as unemployed before starting a business. His theory outlines that necessity and opportunity are the two main drivers behind business creation, especially throughout recessions. And it’s this premise which largely explains why so many individuals are more motivated to build their own business, now they find themselves in less economically stable situations. It also explains why some entrepreneurs who have been sitting on businesses ideas for a while have finally decided to take the plunge and bring their vision to the next level.
WHY IS NOW A GOOD TIME?
Obviously, starting up a business (especially from scratch) in the midst of a pandemic and an imminent global recession isn’t going to be a walk in the park. But here are some reasons why circumstances like the present can actually be beneficial for business owners who are just starting out.
There’s a greater need for problem solvers
With something as unpredictable as the current global pandemic, we are all learning to adapt quickly to situations that we’ve never experienced before. With all the unexpected obstacles that COVID-19 is throwing at us, if we don’t respond with quick, innovative, and efficient solutions, we all risk being left even further behind. This is exactly why creative business solutions are becoming more critical than ever. With issues ranging from social isolation and loneliness to the logistical challenges of staying at home, and the increasing burden on the healthcare system, if entrepreneurs respond to the urgent needs of society, they have a much higher chance of succeeding in typically oversaturated markets. In addition to the profit these businesses can generate, they can also be responsible for improving the quality of life for countless people across the country - and you really can’t put a price on that!
Even though the coronavirus hasn’t completely dampened entrepreneurial spirit, lots of well-established businesses have already been badly hit by the government’s instructions to stay at home. While many of these businesses will likely show signs of recovery when commerce picks up again, lots of key players in their fields will not be able to reach the level of success they achieved before the pandemic hit. Even though this is a shame for many medium to large-sized businesses, it gives smaller start-ups the rare opportunity to gain the ‘first-mover advantage’ when the market starts to stabilise again. And, in many ways, this actually gives smaller, newly-founded businesses a greater competitive advantage; as they have more time to establish themselves in their respective industries.
There’s a talented job market
A sad (but inevitable) consequence of the coronavirus pandemic is that a lot of people are now finding themself without work. While this is unfortunate, it means that a lot of talent that would be occupied with work under other circumstances will be looking for their next big opportunity. Sourcing the right people for your team can be one of the biggest challenges for start-ups, so if companies are able to source skilled candidates early on in their journey, it equips them with a much higher chance of succeeding.
Additionally, the pandemic has also drastically increased the number of people in the freelance talent pool. So, whether you’re looking for someone to help build your website, look over your numbers, or improve your branding, individuals who would typically offer very high rates may be more willing to help out smaller businesses on a gig-to-gig basis. Also, hiring out freelance talent in this way is also an excellent way to move companies forward without the financial burden that comes with hiring a team of full-time staff, which can be really useful when money is tight in the early stages of an enterprise.
Markets are more open to change
One positive outcome of the coronavirus disrupting the current state of the UK market - is that customers are becoming increasingly receptive to new products. As COVID-19 switches up our everyday routines, and we settle into this period of finding our ‘new normal’, the changes that have been made to our daily lives are largely being reflected with a shift in our buying habits. Old established patterns are being broken, and the market is more susceptible to fresh, new, innovative ideas; and this provides start-ups with fertile ground for growth.
Also, with customer acquisition being one of the most expensive and painstaking domains for a new business to tackle, releasing a product or service to a more receptive audience makes this process a lot smoother, while saving the business a lot of money at the same time.
It’s a good time to receive funding
If you’re starting your business from the ground up, you’ll probably have to look for sources of funding to take your business to the next stage. While sourcing investments during this time may not be an easy process, with venture capital investments decreasing by more than half compared to last year (according to data from Crunchbase), the value of investments actually hasn’t been badly affected, with investments being higher in April 2020 than they were in April 2019. While this may seem surprising, there are many reasons why venture capitalists are still forking out the big bucks for struggling start-ups. First of all, the pandemic has brought with it a strong sense of moral obligation to give back to others who appear to be in more compromising situations. Also, with the amount of innovative, exciting companies that are popping out of the woodwork, investing in a business with a potentially strong future is a great way to give investors an even bigger return on their money.
In addition to this, interest rates in the UK are currently at an all-time low and are even expected to fall below zero in 2021. While this might bring about challenges in the long term, it also makes the present an opportune time to take out loans to fund your small business.
TIPS FOR STARTING A BUSINESS DURING COVID-19
Now, even though we’ve outlined why 2020 might not be such a hopeless time for fledgeling businesses, starting up a business in this current climate still doesn’t come without its risks. And while there’s no way to completely ensure your new business will make it through the first year of trading, here are some tips on how to give your enterprise its best chances of achieving success throughout these turbulent times.
Make sure your idea is viable
Before you can bring your business to life, you need a great idea. Although it may seem like coming up with it is the easy part, without an innovative, original, and viable idea, there’s very little chance that your company will have any chance of succeeding. For this reason, it’s imperative to do your research and make sure your idea isn’t like anything that’s out there already, and that it responds to a pre-existing demand in the market.
There are loads of ways you can go about doing this. Public data sources like Google Trends and YouGov are free to use, and provide tools to help you look for what products and services people are currently interested in. In addition to this, reaching out to people on social media is a great way to conduct your own research on consumer trends. Whatever method you end up adopting, doing your research to check if there is a demand for what your business offers is the number one way to make sure your idea is viable. And if your business idea is viable, it will have much more chance of taking off.
Make sure your product is relevant
Following from the last point, a meaningful way to improve your businesses chances of getting off the ground is to take advantage of current events and exploit the emerging trends in the market. As sobering as it may sound, the coronavirus has offered up a host of new business opportunities to start-ups, and as different demands emerge, the market is required to innovate quickly just to keep up.
This was first seen in the rapid rise of demand for personal protective equipment (PPE) when the virus first took hold of the UK in early 2020. The surge of interest in PPE created whole new industries that were solely designed to produce and distribute these products, and those who moved quickly and catered to this need saw their businesses generate massive profits.
In addition to healthcare equipment, other industries have also seen a massive rise in business as a result of COVID-19. For example, the homeware, delivery, and online service industries have witnessed an enormous surge of interest in recent months; and due to the current state of the pandemic, they aren’t expected to lose popularity anytime soon. Small businesses that are just starting out have the unique ability to fill in the gaps in areas of demand that more prominent companies often struggle to cater to. So, for this reason, it’s vital for start-ups to keep their eyes on these changing trends.
Keep your business model relevant
Just like how your product or service should aim to be as relevant as possible, so should your business model. The coronavirus has completely changed the way we conduct business; from the way we communicate with our team to the way we advertise and sell products and services. Since it looks like things may stay this way for a while, your company needs to adapt to this new reality if it wants to stand any chance of succeeding in the current climate, not to mention the long-term. Luckily, it’s a lot easier for start-ups to adjust to this covid-era style of conducting business because they don’t have to overhaul long-held company traditions. It becomes much easier to help your business to thrive throughout the pandemic, simply by doing things such as setting up a reliable infrastructure for remote working. Due to the wealth of digital technologies that are at our fingertips, it’s becoming easier than ever to start up a business while sticking to the government-mandated social distancing regulations.
Save money where is necessary
Since it normally takes start-ups a while before they start generating profit, taking care to be extra frugal while the business is still in its early stages is crucial to maximising its chances of survival. In what is often dubbed ‘the bootstrap mentality’, this idea simply refers to newly found businesses focusing their organisation on being frugal, innovative, and agile - without cutting corners on quality. Luckily, in the era of COVID-19, freshly formed companies require less initial start-up costs, because most operations can be handled remotely. This saves money on hiring out office spaces, buying expensive equipment, and providing staff with food - but on top of this, there are lots of other ways your business can save money where it is necessary.
One useful way to save money is to advertise on social media platforms, instead of forking out the big bucks on expensive marketing methods. With the average person spending 36% more of their time on social media now the coronavirus is forcing most of us to spend much more time in our homes, this is the best time to reach out to potential customers using this medium. Platforms such as Instagram, Twitter, and Facebook provide start-ups with a great way to get the word out about their products or services, and due to the interactive nature of these sites, it’s also a useful way to reach out to your customer base and foster community around your business.
Another way to practice frugality is to use freelancers or independent contractors, instead of hiring full-time staff. This gives you access to talent that is skilled in particular areas that are useful to your business, without costing you too much in your earlier stages.
This one may seem obvious, but if you really want your business to be successful in its respective field, it’s important to move as fast as possible. With trends in the market changing on the daily, business-savvy entrepreneurs are always looking to fill gaps in the market whenever they arise. Therefore, in order to stay in front of the competition, it’s essential to be assertive with your vision; and to try to find funding for your start-up as fast as possible. Whether it be asking for seed-investments from friends or family, appealing to the economic development department of your local authority, or seeing what government grants are available, there are loads of ways to give your business a little help initially lifting itself off the ground.
All things considered, despite 2020 being a blessing in disguise for start-ups in numerous different ways, propelling your business to success during a time of such social and economic instability is never going to be an easy thing. It’s important to understand that, no matter what preparations are made, newly-formed enterprises will inevitably be faced with obstacles and challenges at some point or another. For this reason, it’s important to do your research and to prepare extensively before launching. Remember, even though it’s useful to be optimistic, it’s also necessary to be realistic about your businesses chances of success.
Your Kriya Payments story starts here
Your Kriya Lending story starts here
Your Kriya story starts here
Explore related posts
Autumn Budget 2021: what SMEs need to know
Chancellor Rishi Sunak presented his third Budget today. But what was in there for small businesses? We've rounded up the points you need to know.
5 ways COVID-19 has accelerated software development
While the effects of the pandemic have been difficult for many businesses, tech companies that focus on software have been doing well
What impact will the COVID-19 vaccine have on small businesses?
The UK's vaccination efforts are so far proving successful. What does this mean for SMEs and what do business owners need to do?