Push, Pause or Pivot - Tips on Business Strategy When your Market is Impacted
Creating and running a startup can be challenging in itself, but it can be made harder when the market is impacted. Dana Baki, Co-Founder & COO – LUNCH:ON joins Noor Salama of MAGNiTT, to discuss how and when to push, pause or pivot your business. They explore creating new opportunities, survival strategies, contingency planning and more.
Noor and Dana explored several topics, including:
How COVID-19 has affected all industries in some form and how to think about pivoting your business when the market changes
Dana talks about the importance of understanding what your business is built on. Market dynamics and user behaviour may change, but you need to go back to the basics and understand: what is it that I’m offering? What are the assets that I have? What tools I can work with to understand what role I now play in this new landscape? She highlights how Lunch:On focused on their mission. They wanted to relieve people’s burdens so that they wouldn’t have to worry about sourcing lunch or affording it. Although a lot has changed, we can still do these things, but differently.
How to have difficult strategy discussions
Dana shares that there are a lot of different ways to contingency plan, from simple plans to complex. She opens up about going back to the basics and that she would break this down on the contingency for 1. revenue and 2. cost.
To talk about sustainable businesses, we need to think what’s happening with revenue right now. She asks if we can create any right now, or if it has dipped or increased? And what the scenarios that will come out of if are. If we see people working from home more, what will this mean for revenue? Will it decrease?
What we then need to do in terms of continuing to serve people and generate revenue boils down to what your product is offering. How may you need to shift your offering to meet the current need? Dana uses the example of Lunch:On and how they used to serve individuals, but now people are ordering for families, which is a different proposition. You always need to think about what the product is offering.
In terms of cost, the structure needs to match revenue. She discusses her company being built for more orders than they are doing today and that her team is the most important asset, asking how do we utilise them better to get more revenue? If we cant generate more revenue, what does that mean for the team? Dana opens up about her team being the biggest cost, but they had to cut back on their marketing by 80%. You have to look at everything you do with costing and decide what can be cut easily and what can we contingency plan.
The role and importance of fundraising
Noor says that from sources, we could see fewer transactions, a drop in deals, more risk averse investors and dips in valuation. She asks, if pre COVID-19, people had planned to fundraise, what advice would you give them now?
Dana says that the fundraising landscape has changed. Investors will be thinking about different metrics now. A few months ago, investors may have been asking about growth, but now they will be more focused on if you have a solid contingency plan from a revenue standpoint.
If you were planning on launching an app for working from home, as an investor you may ask, what if people go back to the office? What will happen then? Therefore, your revenue model needs to be airtight. So if something does happen, this is what we’ll do, this is how we’ll monetise - to show you have a strong business. This is where investors will poke holes.
Profitability is another part of it. Investors will look at how much you are spending and how are you thinking about your unit economics, so you need to have the numbers.
If investor perspectives are shifting from a “growth at all costs” model, to a focus on profitability and unit economics, and if this is a sustainable change
Dana discusses how investors are going to want to invest in solid entrepreneurs that have solid businesses. How they define this and what will change, is that unit economics and profitability will become more significant.
When do you know that it’s time to pull the plug on your venture?
Dana says that there needs to be a product market fit. You need to answer, do I have a product that people want? You should be able to “pivot and test” and hopefully find something that people need and want. If you have pivoted many times and run out of money, at that point, you need to reassess and ask - am I really solving a problem? You need to be realistic, if you’re not solving a problem, is there a different problem you can be solving? If you don’t have money to sustain your business and are unable to convince someone else that you have a product that can be invested in, then you will need to reassess.
“I would never say, if something you try fails, you should pull the plug” Dana highlights, but instead of continuing to try different things, you should test and learn. You should not build something until its 100% and then decide to test, but test as quickly as you can with as little cost. This will allow you to understand if you are heading in the right direction or not.
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Other topics included what areas we are seeing an increased consumer demand in and if they’re sustainable, how to not make short-term decisions that cause long-term problems, under what circumstances you would let someone go, how to prepare if there was a full lockdown (with no deliveries) and more.
To check out the full discussion, watch the Webinar below now.
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