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What is the real way to assess the cost/benefit of Re:Starting your business? 

Market intelligence we have gathered in the past few weeks revealed that 5 out every 10 startups and small businesses will not survive the current COVID-19 crisis. As gut-wrenching as it is to accept this unprecedented loss of resources and human capital, it is just the hard reality of business life. We should also note that, prior to the health crisis, various metrics alerted astute observers that the world economy, and the US economy, in particular, were in an over-extended growth trajectory and a slowdown was looming on the horizon.

An Assertion – Taking in account the devastating impact of the crisis on the world economy, coupled with a dramatic change in consumer behavior, destruction in value of real assets, and an increased length of time it will take for any kind of recovery, we are almost certain we are heading for a recession! 

At this time of crisis, any thinking observer of business reality is noting the following relationship:

[Global Slowdown + Negative Consumer Sentiment] X [Length of Time] = RECESSION

Human beings are hard-wired to hold on to dreams, aspirations, and a comfort zone they have been used to. In addition, we have learned that it is important to try to stay positive at times of adversity. Experienced professionals know that decisions based on loss aversion, status quo bias, and groupthink have a high cost and are high risk for all stakeholders. We say “hope is not a management strategy”, to say the least.

Startup founders, small business owners, and medium-size companies owners and executives will be forced to “Grow-Up” fast and make tough business decisions, Today! Time is not on your side!

They will have to ask themselves the following questions:

  • Do I want my business to survive? – The answer is not automatically yes. The reality is that if your business did extremely well prior to the COVID-19 it might have a higher survivability rate, than if your business did not do that well, in which case the success rate of a re:start is stacked against you. Depending on the state of your business prior to the onset of the health crisis, the right decision might be to wind it down or close the doors and move on. It is not necessarily a bad outcome, all emotions aside.
  • Is my business capable of surviving? – If you choose to join the fight to survive, the question is if your business is capable of surviving and thriving. Simply surviving is not an objective. You have to survive and thrive, by organic growth or acquisitions. Are you in a financial, operational, human capital, and market position to re:start? Can you scale up? Before you put more money or borrow to keep your firm afloat, ask the question: “Am I pouring good money after bad?” You have to dig deep into your core operations and assess if your business will be able to sustain the re:start, which may be slower than initially anticipated. How will you craft your growth trajectory in the middle of the pandemic and a financial slowdown?
  • How will I do it? – Developing a re:start, an exit strategy out of a crisis mode into a recovery, relaunch, and growth mode requires a completely different mindset, especially when you are doing it at the same time while entering into a “New Normal” business environment. Trying to repeat what you know and have done in the past will not cut it; not at this time around. It will require deep thinking on developing new, creative, and inventive strategies that will be translated into a new effective execution plan. And thus the critical question arises; will you be able to execute the plan? Are you ready for a demanding, brutal, 3-year personal commitment? Can you attribute probabilities to each outcome? Look at the scene and the possible scenarios objectively, not emotionally. 
  • How will my business look – The Day After?– You have a hunch already that clients/consumers are most likely to change their buying habits dramatically. You also know that your business operations post-COVID-19 will have to look radically different than before. When you decide to re:start, you will have to create a vision on how you operate, approach your customers, market your services, and look for growth opportunities in the “New Normal.” Do not assume that your previous customers will be there to stand in line waiting for you. If you don’t grab the opportunity, rest assured that your competitor will; for she/he is evaluating her/his options as we speak. Throw all your biases and related assumptions in the wastebasket; they are likely to cause unnecessary losses and pain. 
  • What will be the cost? – In a re:start and or a re:launch mode, specifically coming out of a crisis situation and stepping into a slow recovery, we know that it will take a lot more capital than you are projecting. Friendly advice: use the 2.5X factor in your calculations. Your business burn rate will be much higher than you anticipate. You, therefore, have to ask the ultimate question; is your business able to sustain a higher capital investment without getting deeper in the hole? How far in the future is the point of recovering your investment?

You don’t have to hold on to your business. You have options you can choose from; no answer is right or wrong. But an answer is required with urgency. You need to be honest with yourself or choose someone who can help and will work for you and your stakeholders. Staying as you are is not an option. You have to be proactive. All of your stakeholders depend on your decisions. 

What are you planning to do today? 

The clock is ticking!