Warren Buffett has dished out plenty of investment advice, but this quote stands out: “be fearful when others are greedy, and be greedy when others are fearful.” It’s a maxim that has been applied outside of its original context many times. Entrepreneurs, in particular, can follow their principles and shape their business strategy accordingly.
The current pandemic-stricken economy can inject an extra dose of risk into the equation. The spending habits of consumers tend to change in a downturn. As trusted models of operation fail, it can be even more fear-inducing to try and start a business amid this uncertain climate.
But if you pass up on an opportunity, you might not be able to capitalize on a narrow window for action. In this scenario, what are some of the factors you can evaluate, and how can you make a more informed decision overall?
Pay extra attention to trends
The pandemic has shut down some businesses, but it also creates new openings. Demand for certain supplies, for instance, has risen. You could make steady profits from selling toilet paper, especially in the early months of 2020. But even as people began to stock up on pandemic-related supplies, more companies stepped into this arena. In many cases, the ratio of supply to demand began to regress to the mean.
Disinfectant wipes, on the other hand, remain in high demand. Though both toilet paper and disinfectant wipes are perceived as essential supplies, there is no raw material shortage for pulp. Meanwhile, polyester materials used in making wipes face competition from manufacturers of PPE. This leads to a shortage.
The first lesson here is that while trends are important, you need to pay attention to every aspect. Supply chain factors can make or break your startup in this climate. Both toilet paper and disinfectant wipes experienced high initial demand. They even serve similar purposes in terms of personal hygiene. But for the former, shelf supply levels are back to normal, while the latter may not stabilize until sometime next year. If you don’t know all the trends, you might want to avoid going all-in on a venture.
Find new ways to address gaps
This doesn’t mean that you can’t capitalize on a perceived opportunity in some other way. Consumer behaviors may change, but they will still have needs. Their spending priorities merely shift in response to the new conditions. If your first business idea doesn’t seem feasible, it could be a simple matter of changing tack.
Suppose you perceived that local demand for face masks was high, but another supplier has already beat you to the market. Yet you know from doing the research that wearing face masks is most likely going to be part of our daily routines in the future. You also know that people love to express themselves through fashion.
The change in approach could involve buying a heat press machine from a company like Insta Graphic Systems and offering customers the chance to personalize their masks with printed graphic designs. Or, you might anticipate masks becoming the new company uniform and cater to organizations who’d like to issue branded PPE to their employees.
There will be a lot of entrepreneurs competing in this turbulent new world. But just as nobody can predict exactly how the future will unfold, it’s impossible for one business to completely address everybody’s needs. Continue to explore different angles. You might just be able to breathe back life into a concept that others would’ve left for dead.
Master how to pivot
Even with all the research and creativity you can muster, sometimes rapid change can simply pull the rug from under your feet. The good news is that startups are inherently agile and well-suited to a chaotic environment.
For this to happen, though, you need to master how to pivot. Entrepreneurs can apply the ‘OODA loop’ (Observe, Orient, Decide, Act) in small, frequent cycles. This will quickly raise the alert when something isn’t working out. It prompts the evaluation of whether or not a business model is going to lead to repeatable, scalable success. And once that’s been assessed, it enables decisive action.
If you consistently practice this method of operation and embody it as a founder, you’ll be able to correct the course as needed. Even when conditions on the ground no longer line up with your initial plans, you can keep going. You don’t have to pull the plug on a risky idea because you know you can pivot in a direction that works. That can give you the confidence you need to overcome fear and take advantage.