Sometimes, circumstances force you to completely change your life and career — whether you wanted to or not.
This past year has been a life-changer for so many American workers and entrepreneurs alike, as the COVID-19 pandemic altered consumer habits drastically and shuttered the doors of countless businesses. Nobody knows how many of these businesses will remain closed for good, but unfortunately, many businesses, large and small, have already decided they had no choice but to close their doors indefinitely.
While the COVID recession surely won’t last forever, the major economic disruptions and lifestyle changes to the small business landscape may be forever changed. Take, for example, the food industry. Many consumers will likely still prefer the convenience of ordering groceries and takeout online, even once all the stay-at-home orders are lifted. And I don’t know about you, but it’s hard for me to picture eating at a buffet anytime in the near future.
The devastating effects of this recession cannot be overstated. However, many successful businesses have formed during recessions. For example, innovative tech companies like Uber, Venmo, and Slack were all started during the Great Recession that took place from 2007-2009. And indeed, many forward-thinking entrepreneurs are already discovering new niches during the COVID economy and founding businesses to meet those needs. According to Census Bureau statistics, business applications for the second quarter of 2020 were 4.8 percent higher compared to the first quarter of 2020. Nearly 900,000 new businesses formed this past spring — during the height of the shut-down.
Keep reading to learn how to successfully start a business during these unprecedented times, and how to ensure it continues to thrive post-pandemic.
New Markets, New Opportunities
First things first: In case you’re not sure you should start a business right now, I’m here to tell you that this is actually the perfect time to start a business — especially a home-based business. But first, you have to identify your niche.
New markets are opening up and others are expanding due to coronavirus. An obvious example of an existing market that has expanded during the pandemic is the food delivery market. But it doesn’t stop there. Think about other types of businesses that people need right now:
- Online tutoring businesses
- Virtual meetings
- Medical supplies
The so-called “COVID economy” is still evolving, but other sectors could grow or crop up as a result of the pandemic. Consider all the time people are spending at home and the new stresses and challenges the current situation presents. New products and services are stepping in to meet those needs, and there’s no reason you can’t be a part of the economic recovery that’s already taking place. You just have to find your niche.
Managing Startup Costs During COVID-19
The cost of wholesale goods has plummeted during the current recession. Sales for many types of items have dropped, as anxious customers hold on tightly to their money, and demand for some goods has evaporated almost entirely — think party supplies, audio-visual equipment, wedding-related products, etc. While falling prices are not good for the economy at large, low prices can be a boon for businesses that purchase wholesale goods. You may be able to secure an excellent deal on a certain product you need to start your business, especially if you purchase in bulk.
Some other types of startup business costs that may be lower-than-usual during coronavirus could include business equipment and business property. If your business is home-based, those costs likely won’t apply to you, but it’s definitely worth considering, especially if you plan to expand your business out of your home eventually.
It’s also important to note that while some business costs have plunged, other costs have increased during the pandemic; food costs and shipping costs are a couple examples.
Securing Financing During COVID-19
Depending on your financial situation and startup costs, you may need to take out a loan to start your business. Like many other business costs, financing costs are also lower due to COVID-19. The federal prime rate — the interest rate banks use to extend loans to their most creditworthy customers — has been at only 3.25 percent for most of 2020, after the Federal Reserve slashed interest rates in March in response to the pandemic. For comparison, the prime rate was 5.50 in July 2019. What does this mean for you? Business loans are cheaper than ever, and you’ll pay much less in interest than you would just a year ago, though it can be harder to get a loan. While interest rates are low, banks have tightened their borrower qualifications, making it more difficult to get approved for a loan.
So where should you look for financing? Generally, businesses can find the best deal on a loan from the Small Business Administration, or from their local bank or credit union. But with brand-new startups, it can be difficult to get a bank loan, especially during COVID-19. You will probably have more luck obtaining from an online business lender or even an online personal loan, such as Lending Club or Upstart. There are also various crowdfunding programs for businesses, like Fundable and Kiva.
Writing a Business Plan
Every business, large or small, needs a business plan. Don’t be intimidated, because you really don’t need to be a great writer or master strategist; many businesses can get by with a one-page business plan. Even if you aren’t applying for financing (which will require you to submit a business plan), writing a simple business plan will help you get organized, focused, and prepared to launch your business. Here’s the basic structure your business plan should follow:
- Business Overview
- Target Market
- Financial Summary
- Marketing Strategy
To start out, write a few sentences or bullet points under each header. You can expand on each topic later on as you develop more ideas for your business or when you have more time to put together a comprehensive plan.
Registering Your Business
Registering a business during a pandemic sounds like it would be a pain, as many government offices are operating at reduced capacity. Fortunately, you should be able to complete most or all of the registration steps online.
Registering Your Business Name
Most small businesses are sole proprietorships. As a sole proprietor, you can do business under your legal name, in which case you won’t be required to register your business name. Or, you can register a company name as a DBA or “doing business as.” If you want to register your company’s name — a good idea if you have a unique name you don’t want anyone else to take — you’ll have to do this with your state or county clerk’s office. Check first and make sure no other business is already using this name.
Applying for a Sales Tax Permit
If you sell tangible goods, you will likely be required to file for a state sales tax permit, even if you only sell online. These rules vary from state to state.
Applying for a Local Business License
You may also be required to register for a local business license and pay local business taxes in your city or county. This also varies from region to region.
Optional: Trademarking Your Name and Logo
Optionally, if you want to trademark your business’s name or logo on a national level, you’ll need to apply with the US Patent and Trademark Office.
Other Types of Registration
Depending on your industry, you may also need to apply with other industry-specific business licenses. And if you plan to have employees, you will also need to register with the IRS to get an Employer Identification Number (EIN). While this won’t be necessary for most home-based startups (you can just use your SSN to file your business taxes) having an EIN is still beneficial and adds credibility to your business.
Establishing an Online Presence
Having a strong online business presence is essential — especially during COVID-19. Rather than buying in-person or visiting a storefront, customers are looking to buy online while they stay safe at home. Social media is one quick and easy way to put your business online, but you’ll also need a capable website through which you can sell and establish your authority to customers as a legitimate brand.
Registering Your Domain
You can register for your own web domain through any web hosting provider. Having a domain name that’s the same as your business’s legal name adds to the legitimacy of your business and helps with brand recognition. It’s even a good idea to check the availability of your business’s domain name before choosing your business name.
Build Your Website
If you don’t have web design experience or the budget to hire a designer, there are a lot of web builder software programs that make it easy to create your own business website, whether you need an eCommerce site you can use to sell online or a simple informational page to tell the public about your business, your hours, contact information, and other key things.
Some examples of programs you can use to create a professional website include: Shopify, Wix, Weebly, and Magento. You can register a domain through any of these services, or you can use a domain you already own.
Optional: Use Your POS Website
Another option, if you use a point of sale (POS) system like Square that lets you take in-person payments, is to use the website your POS system sets you up with. In the case of Square, they will set you up with a basic mobile-friendly website that could work just fine if you just want to get a basic website up and running fast.
Buying Business Insurance
You will likely need to buy business insurance even if your business is home-based. The type of insurance you need depends on your industry. For example, a home-based travel agent will need to buy professional liability insurance to protect herself if a client claims the agent’s professional services caused him damages. If you sell products, you may need product liability insurance to protect your business against a claim of damages caused by a defective product.
Do you own a home? Your homeowner’s insurance policy should cover at least some of your business equipment, but only when the equipment is physically at your home. Renter’s insurance doesn’t cover business property at all, though.
To obtain a business insurance policy, you can shop around online, or contact your current insurance provider to see if you can get an add-on policy that will provide the type or types of business insurance you need.
Choosing Cloud Software
Most of today’s business software is cloud-based, meaning your data is stored online and you pay to use the software on a monthly, or sometimes annual, basis. For many businesses, you can access all the software you need to run your business on just a laptop or even an iPad. I mentioned a couple types of cloud software you might use as a new business owner — web-builder software and point of sale software — but it doesn’t stop there. Some other types of cloud software you might use include:
- Accounting software
- Invoicing software
- Scheduling software
- Email marketing software
- Shipping software
- Inventory software
- Project management software
You probably won’t need software from every one of those categories, but the very least, most businesses will need website builder software to create a professional website, and accounting software to organize your finances.
One of the benefits of cloud software is that being web-based, there is usually a free trial of the software you can test out before committing. If a software product you’re considering offers a free trial or demo, make sure you take advantage of the trial period prior to purchasing.
Typically, businesses need a couple of things to start accepting payments: A business bank account and a merchant account. Both of these are relatively easy to procure and you’ll want to shop around a bit for the best rates and terms. Alternatively, you can start small and use your personal bank account to accept payments. You also have the option to forgo a traditional merchant account and instead use a third-party payment processor such as PayPal or Stripe to accept payments online.
However you accept payments, make sure you keep good documentation and keep your business and personal expenses separate. Keep in mind also that even if you don’t do so immediately, you should eventually open a business bank account.
Marketing Your Business Online
Your target customers are spending lots of time online these days, and technology makes it easier than ever to market your new business to them. Online marketing is a vast topic that isn’t really possible to cover adequately in a single article, but broadly speaking, you should consider using the following strategies:
- Branding: Create an eye-catching logo which customers will associate with your business. You can use this logo on your signage as well as your website.
- Social media: Build a following on Facebook and Instagram and use these platforms to advertise promotions, new products, and more. You can also use eCommerce software to sell directly from Facebook or Insta.
- SEO: Write search engine-optimized content for your website and use content marketing to blog about topics that will bring traffic to your website.
- PPC: Buying pay-per-click ads on Google can ensure that potential customers searching certain keywords will see your website on the first page of search engine results.
- Business directory websites: Maintain a presence on websites like Yelp and Google My Business so local customers can easily find your business and find out what hours you are open. This is especially important if you have a physical business or standard hours in which you operate.
- Email and text marketing: Send existing customers messages about promotions, discounts, and more using email and text to keep your business on your customers’ minds.
Depending on your level of marketing expertise, you might hire a marketing or branding expert to help you advertise your business. However, some things are really easy to do yourself, such as setting up and updating your social media pages, and maintaining a presence on Yelp. You can also use inexpensive email marketing software such as Mailchimp, and your website builder program probably has digital marketing tools which you can choose to purchase as an add-on.
5 Tips for Doing Business During a Pandemic
- Be on the lookout for good deals: You may be able to secure certain products you need for your business at a discount, especially as other businesses are closing or manufacturers need to unload products they haven’t been able to sell due to reduced demand from their usual customers.
- Stay on top of trends: Trends are evolving fast during COVID-19. There’s houseplants, Tik Tok dances, Zoom, banana bread, fashion masks, staycations, and you can probably think of a lot more. Even if these trends aren’t directly related to your business, you might be able to incorporate them into your marketing.
- Be community-minded: Community is more important than ever, as many people are feeling isolated and may be hurting financially as well. Make sure to express to your customers that you are there for them during these challenging times, and make sure you walk the walk, too. That could mean donating a percentage of profits to a charity, offering a generous policy that lets customers pay in installments, or even giving away some items for free.
- Go live: Livestreaming on social media is a free and easy way to reach out to customers and showcase your products or services. You might also consider using video conferencing software to host free webinars. With so many people bored at home, you have a captive audience … literally.
- Have a contingency plan: What will you do if changing circumstances force your business to change course? A backup plan is essential — as is having a diversified business model that doesn’t rely on a single sales channel. The rainy day we’ve all been told to prepare for finally came in 2020, and in a big way. Even once the virus is in our rear-view mirror, we should never forget the lesson we learned this year about how fast everything can change.
Future-Proofing Your Business
It’s difficult to think about the future right now, when everything seems uncertain. Will the coronavirus and social distancing stick around for a few more months and then be vanquished by a vaccine? Or should we be thinking more long-term? We just don’t know. But what we do know is actually a lot. We know that the internet is here to stay and that customers will continue to search for business products and services online. We know that people will continue to need essential services, like food, education, and childcare, as well as fun extras like retail therapy and other entertainment. And we also know that disaster events like the current pandemic can close brick-and-mortar businesses literally overnight.
To adequately prepare for a somewhat uncertain future, most successful businesses will have built-in social distancing and maintain the ability to operate remotely in the case of extended closures. Preparing means having a scalable business model, making sure your business has sufficient insurance, and building a cash reserve can also help you prepare for future events — pandemic-related or otherwise.
All in all, home-based startups are in a strong position to thrive and grow despite the current crisis. Who knows, you might just start the next Uber!