If COVID-19 threw off your business’ game plan this year, you’re not alone! Many entrepreneurs had intended to either start a new business, grow their early-stage startup, or take their established but still young business to the next level. If you fall into one of these categories, you are probably wondering what comes next. We asked three local business experts for their advice on what entrepreneurs in these various stages of starting up should do moving forward. Here’s what they had to say.

David Dunn, Program Manager
Allentown Economic Development Corporation

Pre-stage startup:

According to Dunn, COVID probably won’t have a big impact on the plans of someone who was thinking of starting up a new business but had not yet done so when the virus’ impact first hit at the end of first quarter. “You’re either service oriented or product oriented,” he said. “If the former, then you have relatively low overhead. If the latter, then you need to have capital on-hand to get started.”

For service-oriented businesses, not a lot of cash on-hand is needed. The market demand dictates the business, not the capital. Entrepreneurs in this scenario are usually debating if they stay with the security of their full-time job’s salary and benefits, or move on to running their new business full-time so that they can devote all of their attention to it. Generally, if the business is becoming viable, then it’s time to go all-in on the new business. But in light of COVID, it might be best to stay with the job for now until things start to return to normal.

Product-oriented businesses need to do a thorough analysis of their startup costs. Due to needing a base level of inventory in order to get started, the cost of this type of startup is high. They aren’t yet able to get volume discounts on purchases due to the small size of their business. Even the development of a simple product can require thousands of dollars in advance. Business owners must determine if there is true market demand for their product, and if there is, it’s time to bring investors in to support the business.  Also take a look at your product mix. Having multiple product offerings is the best chance for success to sell to customers. Don’t overestimate or underestimate your market.

There are a few key questions entrepreneurs should know the answers to before getting started:

  • Ask yourself if you really want to start a business in these conditions, and be honest with yourself.
  • Are people willing to pay for what you sell right now?
  • Who is your customer and how are you going to reach them?
  • Can your business adjust if needed in order to match market conditions or changing tastes?

Dunn reminds us that when it comes to starting a new business, entrepreneurs need to expect the unexpected, especially during the challenges of a pandemic.

“It isn’t a straight line. There’s a leap of faith that needs to occur at a certain point in time. No one can predict what the outcome of 2020 will be like regarding the number of new startups. In 2008 during the recession more people started a new business than you think would have done so, in part due to unemployment, and many of them are still operating today.”

Brett Smith, Director
Small Business Development Center at Lehigh University

Early-stage startup:

This business, which has been operating for six months to one year, is generally in a better position than others, according to Smith. Why is that?

“Pivoting is easier for a new, small business because they are not yet stuck in their ways so they are better able to adapt,” he said. “At the same time, there is also less risk for an early-stage startup.”

And while that might sound good on the surface, being so new means it’s also harder to get financing. “Go with smaller loan amounts to get more favorable terms. And be sure to explore all of your financial options. Try a local bank, credit union of CDFI. Loan rates are relatively low right now.” (See below for information on loan programs administered by AEDC.)

It’s also a good idea to reevaluate your business plan. “Everything is up for being reevaluated right now. Look for ways to innovate, to do something different. Ask yourself what worked for the business during shutdown earlier this year. Look for opportunities to tell a story, and use digital marketing to tell them. Try to make a connection with the customer.”

Other advice includes:

  • Reevaluate all aspects of your business – make it as efficient and profitable as possible.
  • Revisit your marketing plan – “Consider writing a short-term plan for the next 3-6 months, to get through the holiday season, into the new year, and through spring.”
  • Have a contingency plan in place – “Ask yourself what your alternative is if you are still in this situation for another 6 or more months?”
  • Evaluate product/service offerings – streamline your product or service offerings to focus on which ones are the most popular and have the best profit margins.
  • Keep points of communication up to date – make sure your company is easily reachable by phone, email and online, and that you are regularly checking for messages.
  • Claim your free Google Business Profile – complete it and update it as the situation evolves.

Daniel Diaz, Business Development Manager
City of Allentown – Department of Community and Economic Development

Established business:

If your startup is only a few years old, it’s probably still getting its feet under it. So the pandemic has likely presented concerns about everything from staffing to product offerings to reducing expenses.

Diaz points out that since March we’ve seen significant changes in consumer habits due to COVID, and that is impacting the products and services many small businesses offer.

“Adapting to the changing business climate has presented some businesses with opportunities to diversify their products and find new revenue streams they didn’t realize could be lucrative,” he explained. “If you can identify shifts in consumer attitudes and mindsets and capitalize on those shifts, you may be able to generate new sales from consumer sectors you otherwise wouldn’t have in the past.”

Increased demand for specific items is taking place across the board. So Diaz encourages business owners to look at their cash flow across all product/services lines and consider if putting all of their eggs in one basket is the best option. “We have seen certain products take advantage of opportunities to provide value in the new consumer environment,” he said.

Businesses should also look at reducing operational expenses. But understanding what the impact will be in the immediate future and down the road is critical before making those decisions. “Downsizing current operation space could be helpful to minimize expenses now but can serve as a detriment should demand bounce back three, six or nine months from when the action takes place.”

And if worse comes to worst, Diaz advises that business owners consider other options before layoffs. “We’ve seen businesses implement cut backs on hours, pay cuts, even a consideration of a four-day workweek in areas where you have excess capacity.  These decisions can reduce staff costs while avoiding layoffs. However you would want to lead by example and participate in the reduction of payroll expenses.”

LOAN PROGRAMS ADMINISTERED BY AEDC

Economic Development Loan Funds

AEDC provides economic development lending assistance through a number of local funds. Companies are eligible to apply for up to $100,000 loans for equipment, real estate purchases/improvements, and in special cases, up to 40% of inventory or working capital. AEDC will competitively finance up to 75% of eligible project costs for terms ranging from one to 10 years. Job creation and retention is an essential component of these loan funds.

  • The Allentown Enterprise Zone Loan Fund is geared toward manufacturing and service-focused businesses located within Allentown’s Enterprise Zone.
  • The City of Allentown Economic Revolving Loan Fund is designed for businesses located anywhere within Allentown city limits.
  • The Allentown Development Corporation Loan Fund was originally established with financial support from regional banks and fills a niche that compliments the other Allentown loan funds, for example, when a borrower has a larger financial need than other programs can accommodate.

Pennsylvania Minority Business Development Authority Loan Fund

Manufacturing and service-focused businesses throughout Lehigh and Northampton Counties who are at least 51% owned by socially or economically disadvantaged minorities are eligible to apply for up to $250,000 in financing through this program. Eligible projects include up to 90% of machinery/equipment costs, land purchases/renovation/new construction/acquisition, and working capital needs. We offer competitive rates and terms ranging from three to 15 years depending upon the use of the funds. Job creation/retention is an essential component of this loan fund.