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How businesses can thrive in the New World Order

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How businesses can thrive in the New World Order

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Credit: Prateek Katyal, Pexel

  • July 31
  • Tags Our news, Economics, COVID-19, Coronavirus, Entrepreneurship

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Adversity is opportunity. We are currently in the middle of a massive reshaping of the global social, economic and political climate, which has been accelerated by the COVID-19 pandemic. For some this is completely disrupting their traditional way of life – millions of jobs have been lost, entire industries have gone extinct. For others, this global dislocation presents an exciting opportunity to build, mold and grow the future. Entrepreneurism is the tool that will allow us not only to survive but thrive in this new world order.

Entrepreneurism is the tool that will allow us not only to survive but thrive in this new world order.

I say this from first-hand experience. I took an incredible risk and joined my first start-up on 1 April 2009 during the deep depths of the Global Financial Crisis. The same dynamics were present in the world at that time – massive market dislocation, widespread fear, a feeling that it all may come crashing down. However, within this uncertain environment opportunity abounds if only we can step back, think strategically, and take calculated risks. The startup that I helped build during the Great Recession ended up being the most financially successful of my career. Adversity was an opportunity only because we capitalised on uncertainty.

Adversity was an opportunity only because we capitalised on uncertainty.

Fast-forward to the present. I am now the CEO of Stellenbosch University LaunchLab, which is effectively a startup that builds startups. Some could look at this situation as multiplying risks to almost exponential proportions. Startups are risky, right? A startup building startups?! Whoa – way too much risk. I vehemently disagree. The pandemic has provided us an opportunity to step back and examine the business we are building. It has forced us to become laser focused on the few items that truly matter for long-term survival therefore allowing us to say no to many divergent paths. It has brought us closer as a team centered on a clear mission – to transform seemingly impossible into world-shaping.

So, what businesses will thrive in the new world order? I break this down into two categories:

  1. General characteristics of rock-solid companies that will have the runway and the flexibility to seize opportunity.
  2. Based on macro trends that have now been exacerbated by the pandemic.

Let us look at the first category in this article:

The world has been flooded with cheap, risk seeking capital for the last 12 years. This has allowed many unsustainable business models to live longer than they should by effectively supplementing negative cash-flow from operations with cash-flow from financing. This dynamic has come to an end. Businesses that will thrive going forward will be real businesses.

Businesses that will thrive going forward will be real businesses.

I focus on three metrics to help define this point:

  1. Cash is king. All early-stage startups are simply trying to locate product-market-fit before their runway ends. This simple fact highlights the components of our first important metric – cash in the bank vs burn rate. You always want to have > 24 months of runway. Businesses that can generate cash or minimise spending will outperform as they give themselves the time to find product-market-fit.
  2. Fixed cost as a percentage of revenue will be a key determinant of success. The more fixed cost the less flexibility to pivot & iterate the business model to meet changing market needs. Agility will win. Make your business agile by trading fixed for variable costs. There are creative ways to do so. Making it happen may be the difference between going down with the ship or smooth sailing.
  3. We must re-examine our customer value proposition. Products that worked in the past have become obsolete overnight. If you have seen recurring revenue drop or customer churn skyrocket, then you will know this is the case. At SU LaunchLab we use Design Thinking to connect with our customer. By following the five stages – empathy, define, ideate, prototype, test – we design a product and platform that is educated by and meets the needs of the market. We will know we are moving towards success when we achieve 300%+ year-over-year revenue growth with a high percentage coming in as recurring revenue from customers that love our product as demonstrated by little to no churn.

Let us be clear – the world will never be the same. That’s not a bad thing, it’s simply a fact.

Let us be clear – the world will never be the same. That is not a bad thing, it is simply a fact. The businesses that thrive will be the ones that subscribe to metrics that matter then focus on executing them with laser focus. By doing so they will help us all see the bright light at the end of the tunnel. Global disruptions are here to stay. By thinking strategically, you can ensure your business is as well.

This article was written by Joshua Romisher, CEO of Stellenbosch University LaunchLab.

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Advice for entrepreneurs

USB News

Entrepreneurs hit hard by Coronavirus – ways to stay afloat

  • MAR 23
  • Tags COVID-19; Coronavirus; global recession; entrepreneurship; Small Business Association

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Seraj Toefy, Custodian of Entrepreneurship at the University of Stellenbosch Business School (USB) says that according to the Small Business Association, the average cash safety net for small businesses is estimated to last only 27 days. 

It is often said that the elderly and those with impaired immune systems are most at risk due to Covid-19, but small businesses are just as vulnerable, with many who are not going to survive a global economic shut down.

… the impact on businesses across the country is monumental … our government does not have the resources to offer the scale of economic stimulus packages as other countries can.

“The South African Government has communicated clearly and regularly around their safety plans, and they are taking decisive action to flatten the curve, but in so doing, the impact on businesses across the country is monumental.  This is not unlike what is happening in other countries, but with one very substantial difference, our Government does not have the resources to offer the scale of economic stimulus packages as other countries can.”

Toefy says that although fear and panic is rampant entrepreneurs now need to rely on one of their strongest traits: perseverance.

“As a small business owner, you often don’t have a larger shareholder to rely on during a time like this, so we must button down the hatches and make sure we’re still standing when the shutdown is inevitably lifted.”

Here are key things that small business owners can do during this time, according to Toefy.

Reduce Costs

It is time to cut all discretionary spend.

“The one advantage that small businesses do have, is that we have most likely built our business up from the bootstraps, and we know how to make do with less.  As our businesses have grown, we start adding “luxuries” like offices, business travel, staff, entertainment, insurance, a bigger car, and countless smaller things to make our lives more comfortable.  It is time to cut all discretionary spend.”

He says that small businesses have a civil duty to try and cut as few jobs as possible during this time, so cutting everything else needs to take priority before staff are affected.

Negotiating with banks and suppliers for payment holidays, rebates, interest cuts and any help they can give should be top priority.  “This economic shutdown is not regional, it is global, [and] so everyone is affected.  Your banks and suppliers need you to survive this, as they too will be struggling, but they will struggle more if they lose you as a client.  Now is the time to negotiate.”

The Department of Small Business Development has also offered assistance to small qualifying businesses.  You can apply from 24th March 2020 at www.smmesa.gov.za

Continue to operate

Toefy stresses that “this is not a holiday, and this is not a time for a pity party.  It is a time to do what entrepreneurs do, and that is hustle.  Be creative and find a way to continue operating.”  If you can, set up staff at their homes with laptops and WIFI and use some of these tools that can assist with remote working:

“If your business is more production based, find a way of maintaining some level of service, even if it is far reduced, and adheres to social distancing.  If you have a factory that normally employs 150 people, then rather reduce your output by putting two shifts of 75 people, and space them out.  This way you are at least still delivering something and keeping your staff employed.”

Co-opetition

Co-opetition is when you cooperate with your competition.  He says that now is not the time to try and beat one’s competition, but to reach out and see if one could share workloads, share knowledge and work together to try and survive this.  “Rising tides lift all ships, and never before have we needed ships to be lifted as much as now.”

Communication

Your staff will be anxious, so help them through this time by being as open and honest with them as you can. It is ok to be vulnerable; you may be surprised by how much support you receive

As with all crises, increased communication reduces anxiety.  Toefy suggests that increasing communication with staff, suppliers and clients is paramount.

“Remind your clients that you are still operational, offer help and support.  Your staff will be anxious, so help them through this time by being as open and honest with them as you can.  It is ok to be vulnerable; you may be surprised by how much support you receive.  There have been several cases of companies where staff are choosing reduced hours and pay instead of laying people off at this time.”

Strategise

There will most likely be a distinctive difference between before Covid-19 and after covid-19. Be prepared to be better, after.

Small businesses often don’t have the time to strategise due to work load however the slow-down of the economy does not mean that one must slow down.  Toefy says that business owners should use this time to think of ways of how they will do things better when the shutdown is lifted.

“Being agile is not a strategy, it is an ability.  It is an ability that is best used within the framework of a strategy.  The Business Model Canvas is a good framework to ensure that all elements of your business are being looked at during this time. There will most likely be a distinctive difference between before Covid-19 and after covid-19.  Be prepared to be better, after. “

Read and study

As an entrepreneur, your single biggest asset is you.  Use this time to work on yourself.  Read books or study online.  There are several short courses that one could do while in isolation.

Strive don’t just survive

Quoting Rahm Emanuel who said, “Don’t waste a good crisis”, Toefy says that we are all thinking about ways to survive this crisis, but what if we implemented some of these tips and came out of isolation even stronger.  “Perseverance, tenacity, creativity, determination and passion are traits synonymous with entrepreneurs.  Now is the time to call on all of them and not just survive, but strive.”

 

Seraj Toefy
Custodian of Entrepreneurship at USB and Head of Africa at Centuro Global

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