Lower Demands, Economic Uncertainty: COVID-19 Is A Test For Startups
The coronavirus crisis has affected nearly everyone in this world and across all the major fronts- health, economy, and security. For the startups that were all set to soar high, this unprecedented crisis came as a sudden jolt. It has ruined what was thought to be a lucky year for the industry. As a part of our series, How coronavirus changed my life, we spoke to the startup founders such as Ritika Jayaswal, Founder & CEO, Nourish Mantra, and Barkha Bhatnagar Das and Meghna Kishore, Co-Founders, Greendigo Organic Clothing to understand the challenges that they are facing today, and how are they coping with them.
A Test For Small Businesses
The challenges that small businesses and start-ups are facing during the coronavirus lockdown are quite different from big industries and corporates. “The COVID-19 crisis is proving to be a test for small businesses like ours. There are rampant supply chain disruptions, logistical delays and the consumer sentiment has turned jittery. With minimal sales during the lockdown period and order cancellations coming in, we are experiencing a pile-up of inventory. On the supply side, production has come to a standstill and delivery of future collections is uncertain,” says Barkha, adding that retail businesses will have to safeguard themselves.
In these unprecedented times, it is very important to have an open dialogue with employees as rumors tend to spread like wildfire in turbulent times and cause false panic. – Meghna Kishore
Ritika, Founder and CEO, Nourish Mantra, reveals that her business has been very badly affected as well. “We are unable to process and ship domestic e-commerce orders and our export shipment is stuck, so our revenue has taken a direct hit. We had to pause onboarding with some channel partners, the product development calendar had to be pushed further out, all vendor offices are shut so overall the timelines for all open projects have been delayed – the list is long.”
Do You Support Wage Cut?
Speaking on whether she supports wage cuts or not, Ritika says, “On humanitarian grounds, I’d say that there is no debate that companies should pay salaries to their employees. However, I also understand the challenge the companies are facing in supporting the team during these difficult times. A lot of startups have cash crunch and supporting the same costs with paused or delayed revenues can create a deep trench in the business. Moreover, we also know that the businesses will take some time to return back to normal even after the lockdown ends. So I support wage cuts, where absolutely needed for the business, as opposed to laying off people as the first choice.”
Insisting on the fact that she doesn’t support wage cuts, Meghna says, “We are a small team of five, comprising of women. All our staff is working from home, trying to do the best they can. We are paying full salaries to our employees and will continue doing so till the state of normalcy is restored. In these unprecedented times, it is very important to have an open dialogue with employees as rumors tend to spread like wildfire in turbulent times and cause false panic. Keeping employee morale high and pumping up positivity and optimism is an important task for business owners in difficult times. After all, one must realize that our teams are dependent on us for the sense of security and stability.”
Making fiscal and economic changes to push comprehensive consumption will be helpful as only higher consumption can drive more demand and bring the economic wheel back in place. – Ritika Jayaswal
What Steps Should The Government Take?
“We feel that the government is doing the best that it can to keep all of us safe. However, in the wake of this lockdown, businesses which will first face the heat and the danger of collapse are early stage start-ups. With revenues dried up, they face the challenge of bearing overhead costs which remain constant. This situation can run many start-ups into serious trouble. We look forward to measures towards fiscal support as well as those towards easing the compliance burden on start-ups. Government support in the form of soft loans, interest free loans against tax refunds and deferred interest payments on existing loans will give businesses the much needed impetus in these strange times. Moratorium on GST and TDS payments will also be a welcome relief for start-ups,” adds Barkha.
Focus should be on the overall economy, according to Ritika, who further says, “I feel the focus should be on the overall economy and not just startups. Yes, bigger companies have more cushion than startups to sustain during such times, but bigger setups also mean bigger exposure and greater impact. If the focus is on the overall economy, the benefits will also trickle down to startups. I feel making fiscal and economic changes to push comprehensive consumption will be helpful as only higher consumption can drive more demand and bring the economic wheel back in place.”
How Are You Planning To Deal With The Economic Uncertainty Ahead
According to Meghna, with survival becoming the immediate goal and with inventory pileups and negligible sales, small businesses will bleed unless loyal patrons render their support. “As business owners, we feel that customer experience should not be compromised on and we’ll be on the lookout for gaps to fill. Moreover, just like employees, it is important to keep communication open with customers to ensure a long-term relationship with them,” says she.
“This global pandemic has caused a ripple effect from production to sales to distribution. The economy will take many months to recover even if the lockdown ends in the coming weeks. During this financial crisis, firstly, we plan to stay cautious about our costs. Secondly, we also plan to make changes in our marketing plan, like moving budgets from offline activities to online engagements,” adds Ritika.