The circumstances of 2020 have brought about very difficult circumstances for small businesses and startup founders. Workflows have been interrupted, revenue has dried up, and in many cases business owners are wondering how and when they’ll be able to start growing their companies again — or if they’ll be able to even keep their doors open.
Given the scope of the problems the national economy is facing, you may not be able to help every founder experiencing difficulty. But if you’re managing an incubator or are otherwise in a position to advise and support founders, it’s your job to try. To that point, this article will look at some of the most effective ways to help founders navigate the financial difficulties so many are experiencing this year.
Set Up a Community of Support
In May, we discussed how best to serve founders in turbulent times, and outlined the idea of founder focused roundtables. These groups can serve a number of different functions, but as we wrote then, the ability of founders to share their most critical issues and “provide each other guidance and support” can be extremely valuable. Support is nice in and of itself; it can help a founder to know that he or she is not struggling alone. But discussing financial difficulty and other problems with others who are in similar situations can also lead to effective brainstorming. Setting up or moderating a community like this can therefore be an excellent way to provide support.
Discuss Debt Issues
Right now, when a lot of founders have taken a hit, the idea of paying down debt can seem oppressive. It’s easy for a founder to focus on more immediate needs and put off these kinds of payments as long as possible. Generally though, getting rid of debt as quickly as possible is the more strategic approach — particularly when it’s not clear when revenue might pick up. Discussing debt management strategies — such as assessing what’s owed, knocking out the most expensive debts first, and exploring consolidation options — can certainly be helpful to founders, if even just to get them to start thinking about how better to manage finances in tight times.
Help With Budgeting
Debt management should just be a part of a thorough budgeting strategy for any founder or small business owner. Your clients may appreciate if you devote some specific energy to guiding them through establishing a new budget in light of recent struggles. Often enough, founders will stubbornly stick to existing ideas and strategies, and sometimes that perseverance is rewarded. But when financial difficulty strikes and there may be more struggles on the horizon, it’s a good idea to revisit budget strategies.
A recent techcrunch.com article explained that the pandemic has caused some investors to focus on resilience and adaptability, and the same is true of founders, particularly those who are still in fundraising stages. There simply isn’t as much investor capital making the rounds right now, especially in certain industries, which means founders may need to change their growth strategies. Some might be able to maintain relationships with investors without actually seeking capital just yet. Others may turn to different fundraising strategies, or explore ways to grow without an injection of cash. Whatever the specifics, having an adaptable mindset can be key.
Help Identify Causes Beyond the Symptoms
As you help founders withstand the difficulties of the economic downturn, you may naturally assume all issues stem from the COVID-19 pandemic. Though the current global crisis is likely a factor, the deeper truth is that there’s rarely a single reason that a business struggles. Difficulties caused by the pandemic may turn out to be symptoms rather than causes, revealing any of a number of underlying vulnerabilities or inadequacies in a business. InBIA member Centre for Entrepreneurship Education and Development (CEED) in Halifax, Nova Scotia, Canada, has established critical assessment programs created specifically to help companies determine and address the real, fundamental reasons behind vulnerabilities and failures. “While it was COVID inspired, it certainly is not COVID specific,” CEED senior manager Paul McGinn said of the program. “It can be used to address any financial crisis faced by the business and is designed to put the business owner on a direct path to recovery and optimization.”
Discuss Emergency Reserves
Another topic to address with clients is how to build up emergency funds. This strategy can generally relieve stress for entrepreneurs, and it’s true that any founder can benefit from having some funds available on standby. New founders are particularly aware of just how quickly financial conditions can change, though. In helping them through the budgeting process, you might also want to put it in their minds to start developing emergency reserve funds, so that the next crisis can be managed more easily.
Article written by Daniella Norton
Exclusively for inbia.org
Daniella Norton is a freelance business blogger. Her goal is to help businesses who are struggling and provide actionable tips. When she isn’t writing she loves to hike.