07.01.2021

5 start-up lessons from 2020

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5 start-up lessons from 2020

 Show Interest
What new businesses can learn from those that have survived and thrived through the past few extraordinary months

Ian Duffew, a consultant working with business growth advisors Elephants Child, has advised companies as they grappled with the challenges posed by the Covid-19 pandemic. He previously worked at a senior level across industry sectors and has served as a non-executive director on the boards of several SMEs and believes there are some essential lessons that start-ups can learn from those that thrived in 2020. 

1. Stay close to your customers

Start-up companies have enjoyed real success by staying in regular dialogue with their key customers and providing a responsive and supportive service.  As a result, these SMEs were in the right place at the right time to assist clients who needed help. Companies that survived prioritised their key customers, continuing to meet with them on a planned and scheduled basis. Normal service continued. 

Where it was possible, they met in person, obviously taking precautions and sticking to strict social distancing rules, wearing PPE and washing hands regularly. However, where face-to-face meetings were not possible, these companies made maximum use of technology by becoming proficient with Teams, Zoom and other meeting applications. They looked for new and innovative ways to communicate and then adapted quickly.

2. Be prepared to step outside of your comfort zone

In 2020, smart businesses responded to requests for support that were not necessarily part of their original offering. With the pandemic throwing up many different types of challenges, customers needed (and still need) support that probably wasn’t in any initial business plan. Successful SMEs took the risk, stepped outside of their comfort zone, and learned quickly.  

Ian says: “A great example of this is an engineering SME that set up to provide equipment maintenance. They secured an order and started work on a client site, servicing assets.  Within a week, the client came to them and explained that another supplier he regularly used for general site infrastructure maintenance was temporarily unavailable. The client asked if the SME would be prepared to take this work on. After an internal Teams meeting that afternoon, and an assessment of the potential risks, they agreed to take on the extra work. As a result, the original order was extended by 90 days, the SME has a new string to its bow, and a significant amount of goodwill is now stored up with that client.”

3. Look after your cash 

Start-ups that survived 2020 managed their cashflow very carefully. Overheads were kept to an absolute minimum and robust plans were in place to drive down debtor days. Those that are still trading frequently took the opportunity to negotiate better payment terms, both with customers and suppliers. Some moved to pro forma invoicing as standard, significantly reducing the risk of the bad debt that has seen some start-ups fail in the last 12 months.

Making good use of government support, such as the Bounce Back and CBILS loans has also been an important ingredient for success. Ian says: “Many companies have taken these loans in order to survive but some have used this cash injection to grow, looking at ways to invest this money and make it work hard for the business.” 

4. Keep on trading

In the early days of the pandemic, when the furlough scheme first provided the opportunity to get people off the payroll, a lot of start-up SMEs took the decision to ‘mothball’ for three or even six months. Others opted against this, recognising instead that this was an opportunity to grow into competitor space and, whilst some scaling down may have taken place, these businesses took the decision to keep trading and were there to fill in the gaps being created.   

Re-starting any business, having spent months out of action, is always difficult. Many of those re-entering the marketplace faced competition from active and thriving SMEs who had maintained a presence, stayed close to their clients and responded to additional requests as a result of gaps in the supply chain. Ian adds: “If you’re still operating when others aren’t, there will always be more opportunities available. Those that succeeded made sure clients knew they were open for business and were not afraid to ask for the work. The smart start-ups didn’t just assume they would automatically fill the vacuum, they were pro-active and positioned themselves to respond.”

5. Cash in on goodwill

Many customers that were well supported remained loyal to those who stepped up during 2020. In an unprecedented year, the creation of customer goodwill was hugely prevalent for those start-ups that kept going, and in difficult moments, some were able to cash in on the credits they had previously earned, both with customers and suppliers.

Ian recalls: “I was so encouraged recently by the news of a nine-month start-up that was struggling to continue. They had bent over backwards for a major customer throughout the summer but other orders they were expecting had been pushed back to 2021. They approached the customer to ask if there was anything he could do to help. Reflecting on the excellent support he had received from this business, he decided to bring forward and award them a project from his 2021 budget, with favourable payment terms too.” 

Many organisations generate high levels of goodwill.  Those that survived were not afraid to cash in on it. There have been few periods in recent decades that were as difficult for businesses than 2020. Start-ups that want to succeed in the future need only look at those companies that have thrived to find lessons that can underpin their own success long into the future.
 

Elephants Child Consultancy provide a consultative, analytic approach to leading, developing and implementing successful business strategies, and they are a corporate partner of St. James’s Place. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

 
  • Entrepreneur
  • Financial Adviser
  • SME
  • Financial Advice
  • Start up business

As a Chartered Financial Planner and Fellow of the CII, I have satisfied rigorous criteria relating to professional qualifications and ethical good practice.

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