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Is the Iron of Starting Up Hot to Hit? An Insider's Perspective

25 September 2020

The COVID-19 has had a devastating impact on the world. As per Google's COVID tracker, on October 04, 2020, around 35.3M have been infected, and about 1.04M persons have succumbed to this disease. Countries across the world have gone through prolonged periods of lockdown. Dun & Bradstreet is projecting that India will have negative GDP growth of 4.5 %, while the US economy will decline by 5.3 % and Japan by 5.6 % in FY 20-21. Companies are shutting down; unemployment is rising at unprecedented rates.

In this scenario, the question is that is it a suitable time for a startup? If one is contemplating a startup, is the iron hot to hit?

It is always more cost-effective to start during a slowdown. Expenses like rent, manpower generally are cheaper. By the time the business is established, the economy is heading towards a boom again.

The factors which act in favor are cheap rental costs, labor cost, and borrowing costs, among others.

According to The Reserve Bank of India's official site, on May 23, 2020, Finance Ministry and RBI have announced a stimulus package for encouraging small industries. According to CNBC, on April 12, 2020, the US Fed has also cut interest rates and introduced stimulus packages aimed at supporting businesses. These business-friendly initiatives make it a suitable time for a startup.

However, before one embarks on the entrepreneurial journey of a startup, it is worthwhile to ask the question "Has this pandemic changed the dynamics of the market for startups?" Insiders' wisdom says that Startups founded during the dot com bust didn't go through, but startups incubated during the 2008-09 financial meltdown have done exceedingly well. 

So what is the key to success? It is worthwhile to make a Porter's Five Forces Analysis, a powerful tool to assess the competitiveness of your business environment, to understand the new opportunities that have been thrown up and the increased risks to start a venture. It includes the following -

  1. Competition in the Market
  2. The potential of new players in the industry
  3. The power of the suppliers
  4. The strength of your customers
  5. The threat of a substitute product

Studying all of these will help in developing a strategy for profitable growth and sustainable operations.

To ensure success, one should use systematic new product development steps to launch their startup. Study customer behavior and combine it with the domain expertise to come up with opportunity identification.  Develop the concept into a minimum viable product. Test market the product and use the feedback to remove any issues or lacking in the product. Launch the product thereafter.

What is the cost of procrastination?  How much do we stand to lose by inaction? The impact of the missed opportunity can be found out by using the Impact of Delaying SIP Calculator below. Or consult your financial advisor for assistance.


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