By Financial, best practices during crisis, Business continuity
From cutting personnel expenses to receiving funds from the government, financial decisions are vital for businesses during this time. Not only will they impact revenues, but also the financial health of the company which can suffer in the longer-term if owners will not be cautious when choosing the right way to manage the business’ budget.
Since there are many predictions made by people with expertise in the banking and business sectors, we gathered some resourceful information coming from entrepreneurs and specialists. During these times of crisis, it is essential to listen to advice coming from people with many years of entrepreneurship experience, dedication to start a business from scratch, and more importantly, to hear out those who have been through an economic crisis before.
Financial advice for startups seeking stability during the crisis
Startups might find it harder to tackle the current situation than other businesses that have already found a way to swim through the uprising economic crisis. The future indeed looks unpredictable at this point, but from a wider perspective, public institutions like the European Union or the European Central Bank, are already making efforts in maintaining a sustainable environment for businesses, which means that there will be growth opportunities.
For startups that find it hard to keep their balance during this time, one key recommendation is that they should not put their activities on hold. Instead, they can take their time in thoughtfully planning how to influence decisions that will require an extensive business impact analysis related to investments.
Here is a takeaway with advice coming from Finnish investors, shared within an article on financial planning concerning startups:
“All actions should lead to increased credibility and fundability” - Sami Lampinen, Managing Director at Inventure and Chairperson of the Board at FVCA
“The best and growing companies will, of course, continue to get funded and there is still plenty of VC funding in the market, as many new funds have been raised in the past few years. The investment pace will, however, slow down. Seed and pre-revenue stage investing will likely see a bigger drop, as the liquidity of the angel investors especially is decreasing. In the Nordics, the governmental actions should kick in to help the startup ecosystem get over this turmoil.” - Inka Mero, Founder & Managing Partner at Voima Ventures
“Angel investors and family offices are likely to invest less and focus their investments on their existing portfolio companies. Also, the VCs with existing portfolio companies will focus on supporting their portfolio by follow-on investments and will make fewer new investments. Those VCs that had their closings within the past year and have dry gunpowder in their arsenal will make new investments. However, due to the decrease in available capital in the markets, the valuations will go down.” - Reima Linnanvirta, Angel Investor and Chairperson of the board at Fiban
So remember, the first essential step in reaching stability during uncertain times is to seek the help of your investors. If that doesn’t work as expected, the next step is to ask your customers and partners to support the local economy and startups in the following period.
Keep an eye on the local measures that have an impact on your business’ financial status!
“Panicking will only create more sleepless nights for you. Maintain a ‘buy and hold’ mind-set. The best thing you have going for you right now is time. Don’t try to time the market. You must stay in the market to get market returns. Remember, you are buying companies, not just stock. Businesses are still running and the world is still operating.” - Deena Katz Evensky, Professor Emeritus in the Department of Personal Financial Planning at Texas Tech University
While there is an increasing chance of a recession as noticed in many markets, banks represent a resource that can provide investors “opportunity to add exposure rather than panic and sell,” according to Steve Brice, Chief Investment Strategist at Standard Chartered Private Bank.
Added to that, the Chief Investment Strategist has signaled that the main investing strategies should be done gradually and diversified:
“Market volatility is something that investors should be prepared for, despite the recent volatility being quite extreme [...] Start small and ensure (you) are diversified across major asset classes (equities, bonds, cash and gold) and major regions/sectors.”
Turning our head towards German banks which have already been proactive in helping the government to support businesses further, and this is only one such example since many countries are working towards this direction.
A bakery in Mecklenburg-Western Pomerania needed help with its budget to pay the bills estimated at €110,000, so it became the first client of the Deutsche Bank. Marcus Thiel, a Deutsche Bank relationship manager, stated that the client had the availability to access the money in approximately 24 hours later, and he confirmed the efficiency of the process:
“We filed the application on Monday morning and received the approval within a few minutes at 8:20am [...] So far, the system is working amazingly well”
But he was not the only one to respond to the promptitude of the program, as Günther Bräunig, Chief Executive of the State-Backed KfW Bank, which is delivering the emergency lending to the German corporate sector showed his positivism towards the current situation:
“Never before have we managed to launch a programme as quickly as this one”
Nevertheless, specialists signal businesses that they have to stay true regarding their continuity possibility. When interviewed, Fred Schweikert, Head of Corporate Clients at Volksbank Odenwald, a co-operative bank in a rural area south of Frankfurt, showed his positivity towards the emergency lending, capable of mitigating the current crisis. Still, he also raised awareness regarding some of the weakest businesses:
“We need to be aware that not every single client of ours will survive [...] Some of the weaker ones will surely go under.”
Under these circumstances, leaders should try to build a stronger community not only for the benefit of their businesses but also for the entire economy, as Corneliu Bodea, CEO ADREM & President Romanian Energy Center states in one interview for Call for Leaders:
“I believe there has never been a greater need for entrepreneurs than now. Romanian economy needs our resilience and skills for the reconstruction we have. In this period, we must be resilient, solution-oriented and vigilant. I know is difficult in the context we do not have a strong plan of actions from government, but the thing we need most is solidarity!”
Receiving funds should be an easy road during challenging times, but sometimes there can be many factors that will interfere along the process. To increase the chances of receiving the funding that you need for your marketing strategy in 2020, choose a team who’s goals align with the needs of your business continuity plan!
Final thoughts
From a financial perspective, you have to take a moment and look past the challenges your business is facing right now, transforming them into a background that will show you what matters for your business’ growth. So let your new focus be that of constantly evaluating your business needs.
Find out how you can keep up in these challenging times, adapt, and even transform a crisis in an opportunity by joining our series of free weekly webinars. If you want to be updated with our online activities and share your experiences with other businesses, you can also join our business community groups on Facebook and LinkedIn.
To close in, keep in mind another brief saying from Dhruv Arora, CEO of digital wealth manager Syfe:
“Times like these stress test not just the market, but individuals too ... Try not to be swayed by your emotions. Unless you have an immediate need for cash, do not sell your assets out of panic”
