Entrepreneurship: Starting a Business in a Pandemic, is it Worth it?


Published: August 23, 2021

Starting a new business – Prestige …

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Starting a new business may be one of the most challenging things one may do in their life. Timothy Carter did an article in Entrepreneur, January 2021, stating the probability of a new business survival five years from startup. Data from the Labor Statistics (DLS) state that approximately 20 percent of new small businesses will likely fail within the first year of business. Thus, by the end of the second year, another 30 percent will have failed, and another half will have collapsed by year five. Occording to DLS, 75% of the original new businesses startups would have failed.

Researchers and scholars equate the business plan as a roadmap for entrepreneurs; without it, there is a slim to none chance that the entrepreneur will reach their goals. Nevertheless, most entrepreneurs do not make a business plan, and these same scholars and researchers equate this to one of the reasons new ventures fail (Haag, 2013). A well-written business will increase the chance of the firm’s survival and have a competitive advantage over one’s competitors in the marketplace.

This well-thought-out plan will demonstrate the immediate competitive advantage of knowing who competitors are, their stance in the market, their business philosophy, the size of their business operations, and their concentration in the market. This information is vital to keep one from going up against a Goliath in a head-to-head competition which would be dire to the new entrepreneur (Becherer, 2009). Haag (2013) argues that some 600,000 new businesses are started each year in the United States, and some 200,000 will make it five years into the future, that is only one third, so why is there a two-thirds failure rate? Haag (2013) suggests that the answer to this question is due to the entrepreneurs lack of a business plan. So, knowing this, why do so many entrepreneurs still not develop a business plan?

Financial Management and Financing the Dream

Entrepreneurs must learn how to watch their money, for this is another reason why businesses fail. The investment in the business never stops; initially, the entrepreneurs start the business with savings and other innovative ways to raise cash for the new enterprise. If there is not enough cash-flowing in the company to take care of the day-to-expences, it will not be long before the enterprise no longer operates because it cannot take care of its creditor in a timely fashion.

In the beginning, the entrepreneur is the sole source of bringing revenue for the business until sales can offset the expenses and make a profit. Entrepreneurs make this equity investment into their business by having jobs outside of the enterprise that pump money into the business. If the entrepreneur is not investing in their dream, why would an investor or a financial institution do so?

Investors are leary in putting their money into a concern where the entrepreneur is not putting enough in the business themselves and wants others to do more than they. Startups are typically funded by savings over the years of entrepreneurs, the same as buying a home; it is not an overnight sensation; it takes years of saving and planning for that day to put down 20 percent downpayment, to show the lender that you will have skin in the game so to speak. Thus, the same diligence is needed when starting a new business; this is the purpose of a business plan that will bring all issues into a workable plan to execute any perceived problems in the future.

How Long For a New Business to be Profitable

Amod Dandge did an article on Linkedin on this very subject, how long does it take for a startup to be profitable. According to Dandge, three to four years in which I agree. Nevertheless, this also depends on the industry in which the entrepreneur is involved. So, for a business to make a profit, the difference between the revenue brought in, minus its expenses, would be its profit or loss.

Each industry has its overhead; manufacturing has a more significant overhead than a restaurant, and restaurant more than a consultant. So, meaning bringing in the same revenue, one industry can show a profit quicker than another; it is all about the overhead of one business to another. One can use three sectors to measure profitability: (1) Ramen Profitable: This is when your business makes enough revenue to support you and covers your basic living expenses.

The other (2) Corporate Profitable: this is where your revenue s enough to pay your debt load, and pay yourself a good salary, and save money, and the last (3) Break-even point: in this scenario, your investment in the business matches the revenue brought in, you have broken even no profit, and no loss, bu have broken-even on your investment. Any income above this point is now profit.

Starting a Business in a Pandemic

For the most seasoned of us entrepreneurs, these last 17-months of dealing with this pandemic have tested us all. With the government posing a shut down to all non-essential workers, this put a damper on the US economy. Starting a business has never been to the faint at heart, but now, even more so, the entrepreneur must have a will of steel to open a new enterprise under this pandemic. Now there is a new variant to earlier covid-19, called the delta variant, infecting more people than its predecessor at a quicker rate and even touching children and young adults. As of August 2021, the stage is set for everyone to wear a mask in indoor crowds, limiting the number of people in a setting.

Thus, it will result in a loss of revenue due to the reduction of people who can patronize an organization. But is that the reality of new entrepreneurs starting their own enterprises amid covid-19? So, why are entrepreneurs still willing to risk all in an already uncertain career as entrepreneurship to start a business in the middle of a pandemic?

The Wall Street Journal had an article by Gwynn Guilford and Charity L. Scott, entitled “Is It  Insane to Start a Business During Coronarirus? Millions of Americans Don’t Think So.” Now 11-months later into August 21, 2021, does this insight still apply? The forcing of hundreds of thousands of businesses to shut down due to the pandemic is still with us, so why do so many entrepreneurs still want to tackle entrepreneurship as a career choice?

In two words, necessity entrepreneurship and seeing an opportunity to fulfill their dreams of owning their own business, being an entrepreneur, calling their shots, creating their respective destiny, and being their own boss. Strangely enough, more companies are being started during the pandemic than in the last decade, according to the government data, after the pandemic shut down businesses and the reshaping of the US  economy. New business startups have surpassed the 2019 total of 2.7 million to 3.2 million in 2020.

John Haltiwanger, an economist at the University of Maryland who studies data, states this upsurge takes us back before the “The Great Recession of 2007-2008.” And the census hods that more than 50% of these new entrepreneurs will fail within their first five years. And what is more important is that small business revenue was down 21% in September 2020. So the question is, are these entrepreneurs taking advantage of a perceived opportunity or these necessary entrepreneurs who are launching out due to layoff?

Conclusion and Final Thoughts

So the beginning question was it worth it to start a business during the pandemic? As an entrepreneur, my answer is that there is never a good or bad time to create one’s new business; it all depends on the opportunity viewed at that particular time. The critical word here is the opportunity that the entrepreneur seeks to exploit. What others may view as a wrong time could be the entrepreneur’s best opted time or opportunity.

Nevertheless, many new businesses have prospered during this pandemic, either through new innovative ideas or from necessity from being laid-off from a job they have done for years, now they have the opportunity to continue as an entrepreneur. Either way, it is their vision and ingenuity that will take this vision to new heights. Thus, with the knowledge of knowing, you can not succeed in anything until you first start.

About the author:

Dr. Donald E. Mitchell holds a doctorate in Entrepreneurship and Business Management works as a Small Business Consultant specializing in alternative financing, digital transformation, digital marketing, e-commerce, website development, and management software. He has offices in Southfield, Michigan, Chicago, Illinois. His primary focus is on small business organizations.

Methodology

 Based on several articles that have been published and cited through this article by the author. The author’s beliefs are personal and reflect his worldview and experience in the issues and practices mentioned. The author used some portions of the business plan were from his doctoral dissertation, Entrepreneurship in the 21st Century the business plan.

 If you are a business owner and need quick access to unsecured operating capital, Click Here to apply. Must be open and operating for at least 12 months with monthly sales of $10,000 or more. Toll-Free (866) 400-3040 email: donaldemitchell1@msn.com

Website: www.donaldemitchell.com

Addresses: 25 E Superior St Suite 2801

Chicago, Il 60611

2000 Town Center 19th Fl. Southfield, MI. 48076

The best way to communicate with Dr. Mitchell is through e-mail; donaldemitchell1@msn.com

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