Acclaimed entrepreneur James Caan CBE reveals the three questions you should ask yourself before you part with your cash to start a business in the current climate.
The coronavirus pandemic has been incredibly traumatic. People have lost their jobs, their livelihoods and some have even lost loved ones. Yet through difficulty comes strength, and I believe we will emerge from the darkness stronger as a society.
I’ve been inundated with questions about starting a business during the crisis, none more so than from colleagues in Monaco. The question on everyone’s mind at the moment is just how far reaching the consequences of the coronavirus will be for the business community and the wider economy. Should you start a business during this extraordinary time? I can’t directly answer this, but what I can do is give you the ingredients to find the answer you need. Here are three questions you should ask yourself before you part with your cash to start a business in the current climate.
Business idea or hobby?
I’ve constantly had to ask myself this throughout my 30+ years in business. Here in Monaco, we’re surrounded by those with a high level of disposable income, but that often means money is ploughed into a venture that is more like a pastime than a return on an investment. As a wealthy entrepreneur, you cannot have tunnel vision when solving problems.
Monaco is not representative of society as a whole. Not everyone has the tools to shield themselves economically from the pandemic. You may think your idea is revolutionary, but the general public have other priorities during this crisis. Ask yourself if you’re catering to a lockdown hobby or creating a scalable business. In my experience, every new situation creates new opportunities, but it is crucial that your idea caters to clients financially and ethically, not just now but for the post-coronavirus world as well.
Is it viable in the current climate?
Viability carries a completely different meaning now to just a few months ago. More than ever, you need to ensure that the numbers add up. Even if you’re fortunate enough to have the capital to fund your venture, it’s essential to assess how robust your investment is at present.
I tend to look at the following factors: the cost of goods, the cost of time, the cost of opportunity, the cost of acquiring customers, and potential profit. Externally, the current global challenge has raised the stakes of the equation. Internally, the costs have always been high in Monaco, which continues to rank as one of the world’s most expensive places to live.
Hard work is commendable, but if you can’t account for every factor I’ve outlined, the idea is void.
Is it desirable?
If the maths add up, you need to consider the desirability of your product or service at this challenging time. Different to the first consideration, this is not about how many but how much. Be weary, all of our typical assumptions have gone out of the window – you will be required to adapt.
Gauge public opinion with market research. Be frank in your conversations and use the current obstacles as an extra level of assessment.
Next steps
I’ll leave you with my best piece of advice: demonstrate practical examples of how you can execute your plans in the current environment. If your business is robust enough to survive the biggest shock to the economic system since the Second World War, you will be in a great position as the world moves out of the crisis. Tackle the challenges we currently face head on and you can reap the rewards of the recovery.
 
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Interview: James Caan