Is it too high risk to start a business during a year of uncertainty? Or would launching a start-up in a world with COVID be the perfect time for an innovative idea?
REDnews spoke to two experts to assess starting a business during lockdown.
What should people know if they’re thinking of starting a business right now?
Toss Grumley, business advisor at Wolf & Fox, recommends first asking yourself if you’re an expert at what you do and whether you have the passion to start a business.
“Consumers are buying off brands and businesses they trust, which have good social proof in the market,” he says.
“If you’re starting something new, ensure you have a good reputation in the market as an operator already, with lots of industry experience.
“Or, you need a very clear pitch, proposition and gap in the market that you are filling,” Grumley says.
Westpac NZ’s Simon Lowe, SME (Small to Medium Enterprise) Lead, says it can take longer to set up a business account and go through compliance protocols for Anti Money Laundering (AML) given the possibility of continued lockdowns, but that shouldn’t stop anyone who wants to start a business.
“Now, more than ever, online sales are important, so make sure you plan to have an online channel and are set up for online business,” Lowe says.
“Make sure you have a robust business plan.
“Cash is king, but even more so now than ever. So, make sure you have cash reserves – there will always be unexpected costs and you might need to adapt your business model. A war chest never hurts,” he says.
Is it a bad time to start a business in a world with COVID?
“It's different, but if your business plan is sound, why not?” Lowe says.
“If the fundamentals are there and you know your market and your customer value proposition then it can still work,” he says.
For expert advice, speak to your accountant, solicitor and banker, Lowe says.
How do low interest rates impact businesses and start-ups?
“Right now, there are low financing costs, so if you have a clear vision of a business that you believe in, wherever you are in the market, why wait?” Lowe says.
“Especially if you’ve got a great product for a COVID-world,” he says.
“Money is cheap to borrow because of low interest rates and banks remain well funded and are keen to support solid businesses,” he says.
What kind of SME clients have you seen doing well during 2020?
“People who had an effective online channel have done well,” Lowe says.
“Companies selling health products and fitness products outside of gyms have also done well because people became more interested in staying healthy during lockdowns.
“Businesses which have been able to adapt to an online channel have survived, so even some restaurants have done better than expected because they could very quickly do delivery and picks ups to maintain customers.
“And wholesalers who turned to online retail also have done well,” he said.
How do you know if you have a good idea for a start-up?
Business Advisor Toss Grumley says that all comes down to the business model and if the owner has the skill set to drive it to success.
“Many businesses start prematurely, without having run their numbers.
“If you haven't worked out if it can actually make money, you're off to a bad start.
“You need to ascertain whether you have the expertise to ensure the business can succeed or have the right people in your network with the right skills to tap into.
“Once you decide the business model can work, it comes down to having a good strategy and then putting in the hard work,” Grumley says.
Have you seen many SMEs closing down since COVID?
“I haven’t seen a lot, but those who relied on international tourists obviously have, and some cafes didn’t have the balance sheet to survive,” Simon Lowe says.
How do I set up my business?
Speaking to your solicitor, accountant and banker are integral steps to take, as well as filing the appropriate documents with Inland Revenue.
Follow the IRD’s steps, which cover everything from getting started, to basic tax responsibilities and bookkeeping here:
The IRD defines running a business as:
- You start charging others for the goods and services you produce.
- You supply these goods and services on a regular basis.
- You intend to make a profit from these goods and services.
It is also now compulsory for all business premises to display a COVID Tracer QR Code poster on each main entrance in a prominent position.
This has been made mandatory to work alongside the NZ COVID Tracer app for contact tracing.