By How to Finance a Startup During the Covid-19 Pandemic Era
Among many sectors of the economy, business is one of the sectors that has been hit hard by the coronavirus pandemic. Small and Media Enterprises (SME) are among those which have suffered because of the pandemic. A survey done by the US National Trust for Historic Preservation indicates that more than 25% of small businesses that will not be able to survive the pandemic will be out of business in 2020. Despite that, some businesses have been able to grow during the pandemic, mostly within the small business sector.
With changes in consumer behaviors, there is a massive opportunity for wannabe entrepreneurs to launch their businesses. Before starting a business during this pandemic season, it important to deeply research the current customer needs for your products and the challenges involved in obtaining finances for your startup.
What Products Are You Offering and Why Start Now?
According to most research institutions, currents startups are in a better position to provide unique products and services. The main reason for this is their flexibility and ability to introduce fresh products into the market without having to undergo things like rebranding and more.
For your startup business to be successful during this pandemic era, you have to do in-depth research and understand the market demand and supply flow.
Research on Areas with High Demand
The sudden change of things has brought advantage to certain areas of business. Several sectors reflect a goldmine of opportunities for startups; this includes digital marketing, health tech, and financial services. However, there is a projection that there will be a rising demand for services like cleaning, delivery services virtual training, and many more.
A potential business startup owner can do a quick Google trend search to know the current market needs. Think of how to satisfy customer needs and identify the strong areas in your business during the pandemic.
Find out if Your Products Satisfy the Market Needs.
One of the biggest failures you can make as a business owner is to provide services that are not able to solve the needs of the customers. For new businesses in the pandemic season, a deep market evaluation will play a major role. You will need to get reviews from customers to ensure you they are satisfied with your products and services.
You must be ready to touch the main points of your customers to both remain relevant to the market and make a reasonable profit.
Considering the Cost
It is important to know the expenses that you are likely to incur in your startup. It not only helps you manage your business but also helps you gain trust from potential investors and get easy loans from banks. Many businesses do not keep records of what they have used to get their business running. However, as simple as it may seem, this is a red flag that keeps bankers away.
How can You Determine Expenses for Your Startup?
Startup expenses do vary depending on different businesses; however, they can be calculated using proven steps.
- Have a business plan: this not only gives you an estimate of your expenses but also gives your business direction
- Consider running cost: companies need to have enough capital that will keep it running before they start gaining profit.
- Engage your network: get to someone you are connected to who is in a similar line of business, they could be excited to help.
It is however important to calculate your potential expenses then try to scale down to reduce it.
Finances for Your Startup
Businesses have a wide range of choices for financing ranging from loans, finding investors, or even using personal savings. The global pandemic has greatly affected the level of funding from banks; this has left many startups shifting gears to finding investors.
How can Startups Determine the Best Type of Funding?
As a startup, it is very hard to get a bank loan considering the strike evaluation by banks. For you to qualify for a loan in most banks you must have a good; credit score, collaterals, and sustainable cash flow. Startups do not have cash flow; therefore, you will automatically be disqualified. You can otherwise go for smaller lending institutions with less strict lending conditions.
You may as well want to go for other sources of funding such as finding investors or some like crowdfunding and business credit card.
While launching a startup during this Covid-19 season has many challenges such as a sudden change of market preference and lack of proper funding sources, it also has its benefits. Those business owners who will be able to sail through and have their startup running will be in a better position to grow even as the pandemic continues to create challenges for many SMEs.
