During these troubled times, people in the business world either had to weather the storm or close their businesses. Those with some money on their hands and business ideas in mind probably waited for the right time to start an investment. However, sitting on ideas and capital for too long is usually not a good idea. You may miss a window of opportunity.
Sure, while the pandemic is still ongoing, it is unwise to invest in certain industries. For instance, starting a business in the hospitality industry might be ill-timed. The thing is that this pandemic won’t last forever and just because you can’t launch, this doesn’t mean that you should sit idle. What you should do instead is prepare everything.
A lot of people rush in order to start out, which makes them skip the market research, botch their fundraising project or make other grievous mistakes. In fact, they say that 95% of all startups fail within the first five years. So, in order to avoid this, make sure to spend this period of dormancy preparing for your eventual launch.
With that in mind and without further ado, here are several post-pandemic investment tips that you should take into serious consideration.
1. Is there a temporary solution?
The first thing you need to ask is whether you could start out your business in a bit more modest way until things are resolved. For instance, while you may not be able to start a restaurant, you could, perhaps, specialize in contactless takeout. This way, you’ll be able to start with a smaller operation (without the waiting staff) and focus on the catering and the delivery aspects of your industry. Keep in mind that there are a lot of legitimate businesses that provide this kind of service and it doesn’t have to be just a temporary thing if you don’t want it to.
Moreover, if you already start an enterprise, it will be a lot easier for you to transition into something else at a later date. You see, having a skilled workforce is the hardest thing when running any type of business. So, you could at least get yourself a great kitchen staff (or at least a couple of core employees in your kitchen). That way, you have a solid foundation for the business and something to expand on.
2. Franchise instead of the original business
Those looking for something safe and efficient might want to find a promising franchise for sale instead of starting an original business. In general, franchises are less likely to fail for several reasons. First of all, the problem with business planning lies in the fact that no amount of planning will prepare you for the realities of the business world. When you buy a franchise, what you actually get is a business plan that has already been tested. While this isn’t a guarantee of success, it increases your odds by quite the margin.
There are several other reasons why franchises are less likely to fail. For instance, a franchisee usually receives some sort of support from the franchisor, most commonly in the form of training. At other times, they get connected with the standard franchise suppliers and gain additional leverage since they’re not negotiating from the position of a small, original business. Fundraising is also a lot easier when you’re a franchise, seeing as how investors are also aware of the fact that franchises tend to be more resilient. Overall, there’s quite a bit going on in your favor.
3. Potential advantages of investment
When it comes to choosing an industry, things are really not that simple. Physical storefronts are hit rather badly, while e-commerce is believed to be in a decent position. So, what are some of your best options for investing in the post-pandemic world?
One of the problematic areas is commercial real estate since so many businesses were forced to close down. Now, those planning to start a new business or a franchise might want to use this drop in demand and find the place that they’re looking for while the costs are still relatively low. Also, this is the situation in which tenants have more negotiating power and it’s incredibly important that you use this right.
Another thing worth mentioning here is various hiring opportunities. A lot of people have lost their jobs, which means that the job market is more competitive than ever. This is one additional reason for you to abandon the idea of looking for a new job and start something of your own.
While no one is suggesting that the pandemic was a good thing, the truth is that there are several advantages that you should definitely take advantage of. So far, small businesses were on the receiving and, which is why it is good if you can take something back.
4. Prepare for your cash flow management
When it comes to the way you see money, there are several things you’ll have to change in order to keep your business afloat. First of all, not all profit is made equal. Account receivables are real money but you need to wait in order to collect them (unless you choose to sell your invoices). This means that this is the money that, for the time being, you can’t use to pay salaries to your employees, pay your office lease or even reinvest in your business. All of this needs to be done with cash, which is why you need to learn how to manage it wisely.
The first thing you need to do is learn how to make a cash flow projection. You see, keeping too much cash around is not necessarily the most efficient way to run a business. Instead, you need to come up with a plan that will allow you to predict various bottlenecks. This way, you can resolve the problem just before it was to occur. Waiting for a cash flow problem in order to start resolving it is definitely the least efficient way of handling this issue.
5. Control your own habits
Keep in mind that in the early stages of your own business, your profits will not be so significant that your own lifestyle can’t’ devour them whole. Spending more than you can afford will leave you short on cash and early on, every single dollar counts. Moreover, keep in mind that during these early stages you need to be focused on work, not luxuries. Going on a 10-days-long holiday, merely 3 months after your business has launched is a horrible idea that might cost you dearly. This is not because it’s expensive but because it keeps you away from work.
Other than this, when making calculations, it’s important that you understand that we live in a changed world. In the past, having 3 to 6 months’ worth of cash in your emergency fund was enough. However, is this still the case? It sure doesn’t look that way, seeing as how the epidemic itself lasts for more than a year. People who lost their jobs due to the pandemic and are still unable to find it would argue against this figure. A similar thing is going on for investors and business owners. So, when making an investment, try to increase this figure.
6. Opportunity loss
One of the biggest problems that the majority of first-time investors encounter is the fact that they don’t weigh in all their options ahead of time. If you invest $10,000 in order to make $15,000, this is a successful investment, however, is it the best investment possible. If you could have used this money to make $20,000, then this is the opportunity loss of $5,000. Sure, you can’t always make the best decision possible, especially since you usually have limited information available. Still, you should be taking your time to weigh in all your option instead of just investing as soon as something seems profitable.
Another thing you need to keep in mind is the problem of tying up capital. Overspending, buying more potent equipment long before you need it. Buying twice as many raw materials as you need and similar financial behaviors are classified as tying up your capital. There are several problems with this sort of behavior. First of all, while none of these investments is a bad idea, the majority of these purchases are premature. Second, it is a scenario where you prioritize long-term savings over cash flow, which usually ends up being a horrible idea. Overall, while the long-term health of your enterprise, you still need to take care of your company’s day-by-day operations.
7. Other investment opportunities
Trading on the stock market or investing in crypto can be quite profitable, however, if there’s one thing that’s certain it’s the fact that these sorts of investments are incredibly volatile. This is why investment strategies, stop orders and other mechanisms of protecting your capital are so incredibly important. Apart from this, it’s also essential that you diversify your portfolio. This way, you’ll get to make your investments far more resilient and dependable. Overall, while this hasn’t changed due to the pandemic, keep in mind that certain ratios and cost trends might move differently.
In the end, remember that while this pandemic changed a lot, things will soon go back to normal. If anything, this emergency is there to teach everyone a valuable lesson – things can go very wrong overnight and last longer than anyone expected. Does this mean that all the effort is futile? Of course not. Every crisis is followed by an opportunity and you should use this time to reflect on the future course of action that you should take. This way, you will make the biggest impact with your investments.