The Pros and Cons of Starting a Business During a Pandemic

A pandemic refers to an epidemic of an infectious disease that has spread across a large region, multiple continents, or worldwide. The most recent example is the COVID-19 pandemic caused by the SARS-CoV-2 virus, which emerged in late 2019 and was declared a pandemic by the World Health Organization on March 11, 2020. This rapidly spreading outbreak has caused major disruptions to daily life, the economy, and businesses around the globe.

During such uncertain times, the prospect of starting a new business may seem daunting. Some aspiring entrepreneurs may wonder if it is better to put their plans on hold until the pandemic passes. However, history shows that new businesses and industries can also emerge and even thrive during pandemic conditions.

This article examines the key pros and cons of embarking on a new business venture during the COVID-19 pandemic. It analyzes the risks and opportunities, and also provides tips and strategies for maximizing the chances of success.

Pros of Starting a Business During a Pandemic

While the challenges are formidable, there are also advantages to starting a business during the pandemic, including:

Increased Demand for Certain Products and Services

The sudden changes triggered by a pandemic create surges in demand for certain goods and services. Entrepreneurs who can identify and provide these can tap into lucrative markets.

For example, the COVID-19 pandemic led to spikes in demand for items like hand sanitizers, face masks and cleaning products. Companies that could quickly pivot to producing these, like distilleries making hand sanitizers, met urgent consumer needs.

Demand also expanded for services like grocery and meal delivery, telehealth, online fitness classes, video conferencing tools and educational software. Entrepreneurs developed new businesses or adapted existing ones to capture this demand.

Availability of Resources and Support for Entrepreneurs

Governments, nonprofit organizations and philanthropic initiatives often provide targeted funding, support and resources to help small businesses during an economic crisis.

For instance, the US government introduced the Paycheck Protection Program and Economic Injury Disaster Loan program to support small businesses during the COVID-19 pandemic. Many other jurisdictions created similar measures.

Aspiring entrepreneurs can tap into these programs to access capital and assistance for launching a venture during uncertain times. Nonprofits may also offer support through small business grants, training and mentorships.

Lower Costs and Greater Flexibility

The disruptions caused by a pandemic can lead to reductions in certain costs for new businesses. For example, office rental rates and equipment costs may decline due to lower demand. Recruiting staff may also be easier and cheaper amidst higher unemployment.

Starting a business during a pandemic also offers greater flexibility. Entrepreneurs can more readily take advantage of opportunities for remote work, pop-up or mobile business models, and shifting to online platforms.

Cons of Starting a Business During a Pandemic

However, aspiring entrepreneurs also need to weigh some distinct challenges and risks:

Economic Uncertainty and Market Volatility

Pandemics lead to unpredictable and sudden changes in the economy. Lockdowns, shifts in consumer demand and broken supply chains cause market volatility.

This economic uncertainty makes it harder to project customer demand, raise capital, set prices and make accurate forecasts. New businesses may burn through capital faster than expected due to pandemic-related disruptions.

Plunging stock markets also impact investors and small business lending. Entrepreneurs may need to be prepared to operate on lean financing and tight cash flow for a prolonged period.

Operational Challenges and Restrictions

Social distancing measures, lockdowns, gathering limits and closures can affect day-to-day business operations. Product development and service delivery may be hampered.

For example, restaurants had to rapidly switch to takeout and delivery models during COVID-19 shutdowns. Such operational pivots increase costs and complexity. New businesses have less of a buffer to manage such disruptions.

Travel restrictions also curtail in-person meetings, events and conferences. Entrepreneurs need contingency plans for remote work arrangements, supply chain delays and changing regulations.

Health and Safety Concerns

The spread of disease directly impacts the workforce. Employees may get sick or need to care for others, leading to absenteeism. Safety concerns due to viral transmission can also lower motivation and productivity.

New businesses need to implement pandemic preparedness plans to protect staff and customers. This includes enhanced cleaning protocols, symptom screening, contact tracing, staggered shifts, workplace physical distancing and protective equipment supplies.

Entrepreneurs also face added stress from managing business survival and growth alongside potential risks to the health of themselves and their loved ones.

Case Studies

Some real-world examples illustrate both the successes and challenges of launching a business during a pandemic:

Successful Pandemic-Era Business Pivots

• Uncle Matt’s Organic – This Florida-based juice company shifted to producing hand sanitizer when demand spiked, enabling them to keep staff employed and even hire more people.
• Verbios – Canadian startup Verbios adapted their fermentation tech to manufacture sanitizer by working with regulators to fast-track approval. They partnered with a distillery for increased production.
• Onda Beauty – This small business rapidly shifted to sewing face masks and offering free online skincare consultations, pivoting to meet customer needs during lockdowns.

Pandemic-Driven Business Struggles

• Happy Cow – The COVID-19 related collapse in travel demand severely impacted this service for locating vegan restaurants around the world. They had to dramatically cut costs to survive.
• Squeaky Bean – This UK cleaning business had to let go of all staff as corporate office cleaning demand plummeted during lockdowns. The owner pivoted to ecommerce selling cleaning products to consumers.
• Otso – This Finnish electric bike startup declared bankruptcy as the pandemic disrupted fundraising efforts and manufacturing in Asia. The sudden loss of capital forced them to cease operations.

Strategies for Success

The case studies highlight how businesses that adapted quickly and leveraged digital alternatives were better positioned to navigate the pandemic’s uncertainty. Here are some top tips for improving the chances of successfully starting and running a business during a pandemic:

Adapt Products or Services to Align with Changing Demands

• Track shifts in consumer needs and market forces to identify gaps you can fill. Be willing to rapidly modify your offerings accordingly.
• Target sectors with increased activity like healthcare, ecommerce and IT infrastructure. Offer solutions to challenges in these areas.
• Provide value through socio-emotional connections and experiences, not just products or transactions.

Leverage Digital Technologies and Online Platforms

• Migrate as much of your business operations online as possible, including sales, service delivery, payments and internal processes.
• Adopt digital and contactless solutions to minimize virus transmission risks.
• Use tools like video conferencing, cloud computing, social media marketing and ecommerce channels.

Implement Contingency Plans and Managing Risks

• Plan for an extended period of disruption rather than a short, temporary crisis. Develop contingency plans for changing restrictions, staff illnesses and supply/demand volatility.
• Stress test your business model using different pandemic scenario assumptions. Identify weak points and create mitigation strategies.
• Focus on building business resilience through adaptability, creativity and lean operations. Maintain adequate emergency reserves.
• Review insurance coverage and seek expert legal and HR advice to manage liabilities and risks.

Government Support and Initiatives

Governments play a crucial role in helping new businesses navigate the pandemic through:

Financial Assistance Programs

• The US Paycheck Protection Program provided over $500 billion in loans and grants to small businesses during COVID-19. Similar initiatives emerged globally.
• Disaster assistance loans from the US Small Business Administration gave working capital to businesses impacted by the pandemic.
• Tax breaks, payment deferrals and filing extensions helped ease cash flow constraints on startups.

Advisory Services and Resources

• The US Small Business Development Centers offered free consulting and training to help small businesses adapt during COVID-19, including assistance applying for relief funds.
• Local government agencies provided support services like mentorships, skills training and help with digital transition.
• Nonprofits and business associations also expanded small business advisory services during the pandemic.

Business-Friendly Policy Changes

• Relaxed regulations on remote work, paid leave, delivery operations, licensing and financing access enabled businesses to operate more flexibly.
• Intellectual property protections were expedited for COVID-19 related innovations, like vaccines and medical equipment.
• Investment incentives like R&D tax credits were expanded to encourage entrepreneurship and economic recovery.

However, uptake of government support was uneven, with underserved communities struggling more with access and awareness. Targeted outreach is vital for an inclusive pandemic recovery.

Future Outlook

The pandemic will have longstanding ripple effects on the nature of entrepreneurship and small business operations:

Lasting Impact of Digital Transformation

E-commerce, remote work, virtual services and automated processes became widely normalized during COVID-19. These digital shifts will benefit future startups looking for lean and flexible models.

However, uneven internet access and tech literacy may exclude certain demographics from these opportunities. Community support is needed to prevent a “digital divide”.

Changed Risk Calculations and Contingency Planning

Future entrepreneurs will need to account for pandemic risks in their business plans. Strengthening supply chains, diversifying revenue and implementing continuity protocols will be crucial.

But excessive risk aversion could also limit innovation. Striking the right balance will be important for long-term resilience.

Greater Focus on Societal Needs

Pent-up demand for travel, dining and events post-pandemic may benefit new entrants in these sectors. But purpose-driven businesses solving problems like healthcare access, education gaps, and environmental sustainability may attract more interest from conscious consumers and investors.

Conclusion

The COVID-19 pandemic created a uniquely challenging time for entrepreneurs and small businesses. However, history shows that new ventures can also thrive in times of crisis by adapting to evolving needs.

Those who take the leap can capitalize on opportunities like lower costs, government support programs, and rising demand for certain products or services. But managing risks around unpredictable markets, operational disruptions, staff safety and unstable supply chains will also be critical.

With careful preparation, contingency planning and creativity, it is possible for determined entrepreneurs to successfully start and grow a business, even during a pandemic. The current challenges can catalyze innovations and problem-solving capabilities that will serve society far into the post-pandemic future.