Lockdown has forced many of us to rethink our professional lives and how they fit with our families and ultimately our career goals. The former CEO of Intel once said, “Bad companies are destroyed by crises. Good companies survive them. Great companies are improved by them.”
The listed SME world has had a great year in so many ways, and many listed SMEs have taken advantage of the environment and seized the opportunities that Covid has presented. According to research from Growth Intelligence, a massive 85,000 businesses launched online during lockdown in the UK.
‘There is no waiting for the new normal’
Management should not sit back and wait for the uncertainty to end, but instead approach investors with a credible story for growth capital. There is no “waiting for the new normal”. If UK entrepreneurs waited for the right time, what with Brexit, elections, as well as government and Covid lockdowns, there would be no start-ups.
Sectors that are doing well
Certain sectors have been out of favour or in favour on the stock markets with respect to share price performance and ease of raising monies, and it is worth thinking through this when setting up a new business.
Winners in sectors such as technology, IT, life sciences, online retail like musical instruments retailer Gear4music have prospered well, along with DIY and home improvement companies.
Losers have been sectors in the leisure, travel, bricks and mortar retail and airlines, to name a few, along with pubs and restaurants; although online businesses like Naked Wines having sold the Majestic Wine retail outlets to focus on its subscription model, are working well.
Thrive and grow
But while the UK-listed companies small cap sentiment remains buoyant, with the AIM market continuing to outpace the main market this year, back in the area of pre-IPO and private companies, now may be a good time to not just simply set up a business but thrive and grow.
There is no question that investors are prepared to back fast-growing UK private businesses, with a plethora of deals announced during 2020.
Recent examples in November included Paddle – whose technology helps software developers sell their digital products – which raised £51m, and Agrivi – which creates software to help manage and monitor farms and vineyards – raising £3.6m.
Ahead of launching we always advise companies that they need to have the right product, correct expertise and team of people, with a scaleable plan to a large and growing market, within due regard to legal and accounting issues and structure.
Management setting up a business must also remain flexible when it comes to fundraising.
However, there are other important considerations in this fast-evolving world along with the ability to pivot more generally. There are other interesting dynamics to emerge from 2020 that business owners and entrepreneurs should embrace and harness rather than shy away from.
Top 5 tips for launching a business in a pandemic
Here are my top 5 tips for launching a business while swathes of Britain are stuck in Tier 3 lockdown:
#1 – Your team are your ambassadors
The year 2020 is a year to think diversity and inclusion. Our business wants to harness the environment currently for hiring the best and not necessarily talent who are local and available on a nearby nine-to-five basis.
It is a fantastic time to have a long hard look at the diversity of people in any business, whether you are just starting up or more established. Think diverse and think further afield than on your doorstep, or traditional working hours. Lockdowns #1 and #2 have surely taught entrepreneurs this lesson – as well as to think hard about how to engage with your employees and team. Accenture found that 45 per cent of employees judged their employers handling of Covid as neutral to very bad.
Set up a business where your employees are your best ambassadors.
For example, the management at Hexarad Radiology, teleradiology to the NHS and others, caught my eye not only for their sound business model, but their holistic approach to their consultant radiologists, with a strong focus on their wellbeing, which included sending them snack boxes and other generous but rewarding gestures.
#2 – Actions speak louder than words
This is also the year to think social responsibility, climate change, and to have a clear corporate communications strategy where actions demonstrate what you promise.
Increasingly we hear the word ESG: Environmental, Social and Corporate Governance. Social responsibility as an organisation can be a key selling point to attract talent, as well as customers, not to mention investors and funding.
ASOS stopped listing Boohoo’s products on its website in July 2020 after an undercover investigation by the Sunday Times discovered that workers at one of the company’s supplier factories in Leicester were receiving as little as £3.50 an hour and that the factory was flouting Covid-19 measures. In August ASOS asked all third-party brands listed on its site to make four new commitments, covering transparency and worker rights, by the end of 2020. Eighteen per cent of UK consumers have changed their buying habits dues to a company’s handling of Covid, according to McKinsey.
#3 – Customer service is key
Think about your customers: many are worried for their futures and juggling caring responsibilities with working, so ease of and experience of purchase becomes critical.
Building a robust distribution channel in challenging times (online not bricks and mortar), and with Brexit upon us, is key, but ethics and community and empathy of experience are critical. Accenture found that 80 per cent of people feel more connected to their communities during lockdown. Quality as well as quantum of revenues is important when embarking on a new business venture. Value investing is still out of favour, growth and momentum strategies have again been the focus in 2020, along with companies with strong recurring revenues. Recurring quality revenues usually means customer satisfaction; the rise of SaaS (software as a service) companies providing customers with low initial costs with unparalleled accessibility and scalability is appealing to customers
#4 – Be flexible when you fundraise
Do stay flexible regarding fundraising. Do plan and have a considered approach, but be prepared to say no, bend on valuation, or pivot. It is important to explore all loans and funds available.
Ensure your new venture is eligible for tax-efficient structures such as SEIS, EIS or VCT. (Prior approval can be given for SEIS and EIS).
Although the government’s Covid Bounce Back Loans have been critical for many more established businesses, some other low-interest rate type loans can be counterproductive, as they do not work together with SEIS, EIS or VCT funding.
It is also important to not be too levered, the future is uncertain for everyone, so a cash generative business, with shorter sales cycles and lowly geared balance sheets are more secure and will attract financing more easily.
#5 – Marketing as David vs. Goliath
How will you get share of voice against larger companies with bigger budgets as part of a David vs. Goliath approach? This is one of the main reason businesses fail or succeed. Right now, amid Lockdown #2, take advantage of the fact that many people are stuck day after day in one place largely and pick up the phone. People are in our experience right now more amenable to a conversation. Is email still effective, given the strong growth in social media over the past decade?
When people want to find a special deal, email is the go-to channel. Forty-four per cent of users check their email for a deal from a company they know, whereas only 4 per cent will go to Facebook. Sixty per cent of consumers say that they have bought as the result of an email marketing message. On the flip side, only 12.5 per cent of them even consider a buy button as a purchase driver on social media. Email reaches about 85 per cent of the people you send it to with an average open rate of almost 23 per cent.
To increase your organic reach on social media, people must engage with your posts, and this can be difficult to accomplish. Marketing must hit key messages which come back to ESG: diversity, empathy, community, environment, great culture. Email marketing and social media marketing are not the same and they should not be treated as replacements for each other. The truth is the best marketers are going to use the two together.
Ahead of launching a new business, especially during challenging times, it’s also good to check the league tables for the UK’s top 10 fastest growing companies of which there are multiple different official league tables.
By combining these five points with the right product, people and business plan, your new business could be the next big market leader which excels in 2021.