Without a global health crisis, startups are vulnerable enough. Add a pandemic on top of that and the situation becomes disastrous. However, it is important to take today’s lessons and look forward, determining what the future outlook would be like and how to cope with new challenges occasioned by the pandemic.
This article addresses the major legal, financial, and business issues that a post-pandemic world would bring for startups.
One of the immediate impacts of COVID-19 on business contractual agreements was the implementation of force majeure terms. A force majeure on a contract relieves parties to an agreement from any obligation or liability in the case that an extraordinary event or unforeseen circumstances prevent either or both parties from fulfilling their end of the contract.
Because of how much COVID-19 has disrupted business operations around the world, businesses have had to reexamine their contracts to determine if a global pandemic qualifies as a force majeure event. Otherwise, it puts businesses in a tight position when they have to fulfil their obligations regardless of the situation.
Beyond contracts, though, business owners need to pay attention to the very structure of their businesses. Most small businesses today are unregistered or operated as sole proprietorships. Both often involve the mingling of personal and business affairs.
When a crisis hits, such as there is COVID-19 now, both your personal and businesses suffer. On the other hand, establishing your business as a limited liability company offers certain protections since the business exists as a separate entity from its owners. As its name implies, creating an LLC limits your liability.
As the finances of many businesses have taken a huge hit during COVID-19, post-pandemic, many businesses will be looking to implement viable and proactive recovery measures to boost their financial situation.
On the investment side, adaptability would soar higher in investors’ considerations for funding a business. After all, not every business suffered financially from COVID-19. There are companies that have prospered not just during the pandemic but because of the pandemic. The top list includes companies like Amazon, Microsoft, Paypal, Netflix, Shopify, Zoom, etc.
Post-COVID-19, investors would be looking to fund businesses that present a robust operational model.
COVID-19 has forced businesses to innovate quickly and implement changes rapidly. A report from EY confirms these expedited reinventions.
Without a business structure that is inherently adaptable, such new plans could fall apart just as quickly as they are being enforced. It is up to businesses to demonstrate that their operational model allows them to reinvent the wheel and scale-up swiftly but effectively.
Moments of crises have always led to great shifts in the business world. First, in the negative, and later, in the positive, due to restructuring.
The Great Recession of 2008 resulted in the emergence of today’s leading companies such as WhatsApp, Instagram, Uber, Slack, etc. The principal business challenge that companies will face after COVID-19 is how to make sense of the new normal (or what Mckinsey more rightly calls the ‘next normal’) and seize the new sets of opportunities for accelerated development.
Despite the uncertainty of a future beyond COVID-19, anyone can tell that the world would emerge from the pandemic more digitized, more connected. In fact, this is happening already. For instance, most companies have had no choice but to adopt remote working as their primary work model. It is unlikely that this trend would die out once the pandemic passes.
Beyond the pandemic, hybrid workspaces would become fully established. Mind you, broader Industry 4.0 adoption will also extend to recruitment, customer service, supply chain management, and so on. Essentially, companies would have to figure out how to bridge the physical with the digital world seamlessly.
In handling a threat of such global proportions as this, businesses need to be more proactive in their dealings. Particularly startups, which are in a more vulnerable position than established enterprises.
It is impossible to foresee every possible event that may disrupt operations. But establishing a robust business continuity plan can keep the company stable for as long as the crisis lasts.
Ensuring seamless business continuity lies in modelling realistic ‘what if’ scenarios. Projecting your company’s standing against enough possible future scenarios help you determine how resilient your structure/model is on the legal, financial, or business operations side. But such an effort should not be a mere assessment.
It should also involve the assignment of responsibilities to people and stakeholders against a possible crisis. Now, there is no telling that events will happen in the exact way that you have forecasted. But having a pre-assessment is better than leaving everyone clueless when a crisis hits.
Beyond the negative impacts of COVID-19 on individual lives and corporate bodies, this pandemic has been a teachable moment. The last global pandemic comparable to COVID-19 occurred about a century ago.
For virtually everyone alive today, this is a wholly new experience we are grappling with. Therefore, we need all the lessons we can acquire from this period in order to make our businesses more resilient and more sustainable in the future.
Finally, do note that while a reality beyond COVID-19 is foreseeable, the current situation is more real and so deserves heightened attention. Based on current vaccination rates, Bloomberg estimates that life will return to normal in 7 years. Mckinsey gives a far more conservative outlook, predicting that the epidemiological endpoint of the pandemic should be reached by Q2 2021.
Even then, most predictions do not foresee an outright elimination of the virus, but that infection rates would be so low and herd immunity so high that the virus no longer requires the kind of special, global attention that it now attracts.
So, a ‘post-COVID’ world per se does not necessarily mean the virus no longer exists, but that life returns to normalcy enough for individuals and businesses to operate without worry.
What does this mean?
Preparation for life ‘after’ the pandemic must begin now and not later. The startups that will emerge winners in the next normal are those who have learned to adapt their businesses to the changing nature of the world as well as identify and harness critical opportunities for growth.