New businesses start up every day. Entrepreneurs take their dreams in one hand and the risks in the other and weigh up whether to take the plunge. But with the Covid-19 crisis sending billions of people in Hong Kong and across the globe into lockdown, governments scrambling to cope and massive changes to the world economy, surely if you’re planning to start a business right now, the most sensible idea would just be to … wait a bit? Well, not necessarily. There are some surprising upsides to starting a business in the current climate, as well increased risks. Only you can decide if the pros outweigh the cons.
Ecommerce is booming: and the signs are that these gains will continue after lockdown ends. Average online transaction values in March 2020 rose by 74% against the same period in 2019, with products specifically linked to staying indoors showing an even bigger surge –DIY equipment has risen by 136%, and online gaming companies have seen a rise of 97%. Customers are willing to pay for express shipment options, which have tripled in the past two weeks(1) .
Reduced competition: if you offer a service that can operate during lockdown, competition from traditional businesses is at a low ebb. For example, restaurants have been forced to close, allowing food delivery services to step into the gap – Papa John’s and Pizza Hut are hiring 20,000 and 30,000 new workers respectively to meet demand. Both companies were quick to bring in new, no-touch protocols – if you can adapt around restrictions, you may find a vast, hungry market waiting for your services.
Online Traffic: there has never been a better opportunity to connect with your target consumers through advertising, social media and digital content – even if they belong to groups who might have previously spent less time online. The received wisdom is that ads do not do well if placed with “bad news” articles; however a recent poll found that only 16% of consumers said they would be less likely to engage with an advert if placed next to corona virus coverage(2).
Government support: The Hong Kong Government is offering a range of support including a SME loan guarantee scheme, a Branding, Upgrading and Domestic Sales fund supporting projects in the Mainland or specific areas abroad, plus financial support to companies to participate in virtual exhibitions and events(3). Outside Hong Kong, governments are offering support such as allowing tax and VAT payments to be deferred, and even grants for start-ups. Research what is available in your jurisdiction and business sector to see if you could benefit.
It’s not a quick fix: if you’ve never considered starting a business before the crisis and are instead reacting to another event – perhaps redundancy or the need for flexible working hours – don’t just rush in. A new business typically requires far more input that the standard 40-hour week and can take several years to show a return that matches an average salary.
Government support for new businesses varies: although there is some support available for start-ups, often the bulk of governmental funding - furloughing support for staff, self-employed top-ups, etc – has been designed to help established businesses survive in the short term, not help new ones get off the ground.
Choose your business wisely: Some sectors are incredibly hard-hit by the crisis – now is not the time to start up a service that relies on face-to-face contact or customers having to travel. Businesses which are showing strong reductions in revenue include events, transport, tourism and (surprisingly) online dating(4).
The future is hard to predict: No one can guarantee what the business landscape will look like in even six months’ time. All businesses will probably find themselves having to adapt to radically changing circumstances, and then adapt again.
There is no denying that these are challenging times, both for new businesses and established companies. But it is also an opportunity for a company which is agile, responsive to changing conditions and fulfils a genuine need in the market to succeed and grow.
1. Source: ACI Worldwide
2. Source: Integral Ad Science
3. More information here
4. Revenue for the sector as a whole fell 8.9% according to Essential Retail