Sara Green Brodersen, co-founder and CEO of UK FinTech Canaree
2020 turned out to be a year of unprecedented chaos – and like many other business owners, I had to find a way to manage my finances amid the uncertainty.
Myself, along with my co founders, had originally planned to close a fundraise for our fintech company by summer, but when the covid crisis hit it was clear our plans would have to change. As often the case with new companies, liquidity became a problem, and suddenly we had to find the means to stretch our runway by an extra four months.
Being an early stage fintech startup it wasn’t easy to stay on budget- it never is – but with some help from our investors we eventually raised enough cash to keep the lights on. Although the amount wasn’t worthy of major headline news, it gave us the breathing space to not only strategize and plan but to actually grow during the pandemic.
During this turbulent time, we gained some valuable experience about surviving financial difficulties that’s worth sharing with other entrepreneurs, who, like us, have to navigate the challenges that still lie ahead. And, as we all know, there’s plenty of them to overcome.
As 2020 draws to an end we’re hoping for a calmer New Year . There’s reason to be hopeful, with progress being made on the Covid front. Several vaccines are in the final stages of development and one is officially ready for take off. Of course, we won’t see the widespread impact of its effectiveness until mid year- and the jury’s still out on how Brexit will unfold.
It’s safe to say that it will be awhile before we’re in the clear of the repercussions of 2020 – which is why entrepreneurs should be prepared to weather the storm and strive for growth.
But how?
SMEs and startups hard hit
Even without a pandemic or economic crisis, SMEs and startups have a low survival rate, with some saying as few as 10% making it through the first year.
There have been many studies investigating the biggest causes for this failure. Quite a few of them suggest that the wrong product market fit and cultural issues among teams are the most critical issues.
While these are major problems, our experience tells us that an equally pressing factor is the entrepreneur’s preoccupation with managing finances and not having a clear overview of runway or understanding what’s needed to either generate enough revenue or raise external capital. Burning through the cash runway too fast is the knock on effect of not developing a sound, financial business plan for the year.
The pandemic has only exacerbated these weaknesses, therefore it makes sense that during this crazy economic period startups and SMEs must d everything they can to optimise their business model for success.
How to make your business thrive in 2021
While there is no magic bullet, here’s three things that we’re doing to keep our business thriving over the next year – which every startup owner should consider:
Have contingency plans
However much you try to predict the months ahead, it’s undoubtedly difficult to determine how your finances will look a year from now.
Setting up and working with various financial scenarios is a good way of reflecting on worst/best case outcomes.
Make a habit of revisiting the plans every 1-2 weeks so you keep on top of your options as your assumptions change.
The more insight you have the better decisions you will make.
Keep your business operations flexible
It’s very likely you’ll be working according to plan A for some time before having to quickly switch to a plan B when unforeseen things happen.
For the switch to have the most impact you must have the agility to switch between plans quickly.
Keep some operational costs flexible to make the transition as smooth as possible, such as opting for office space that allows pay-as-you-go and pay- on-demand services, rather than tying up the company into lengthy contracts.
In fact, now is the time to renegotiate contracts and come up with a setup that will work for your business in the long run.
Reflect and enhance what did go well
We’re giving 2020 a lot of hate and rightly so.
However, this was also the year where we all learnt to work remotely and some were even efficient while doing so!
Often, when we are challenged the most we actually take the biggest leap in learning and growing. Now is the time to reflect on what actually went well.
A few days ago, I was speaking to a fellow startup CEO who was impressed by how they had adapted their business model to offering events online.
They had found a lucrative market niche and it was their plan to focus on this in 2021 and even beyond the crisis.
Perhaps you also found a new business avenue to explore, a way of working that went really well, or lucrative partnerships that were formed – advances that would otherwise never have been possible without the pandemic.
The entrepreneurs steering their companies safely through a year like this will emerge on the other side with invaluable leadership skills for the future.