Published in Forbes
Some of the most iconic brands started during crises. As documented in an Entrepreneur article, the Hyatt hotel franchise launched during the 1957-1958 economic recession. Microsoft was founded during the oil embargo in the mid-1970s, and several prominent tech brands, including Uber and Airbnb, were created during the Great Recession.
For today’s entrepreneurs, the lesson is simple: Don’t let these uniquely disruptive times deter innovation. Many are already embracing this mindset.
According to an analysis by the management consultancy McKinsey & Company, 2021 will see a surge of new businesses. “There is a veritable flood of new small businesses. In the third quarter of 2020 alone, there were more than 1.5 million new-business applications in the United States — almost double the figure for the same period in 2019,” McKinsey reports.
This flurry of activity comes on the heels of a small business landscape devastated by the recent pandemic as more than 100,000 small businesses permanently closed last year.
While small businesses should find some reprieve from pandemic-related economic conditions one year later, launching a new business is incredibly challenging. Notably, in an increasingly digital and decentralized operational environment, entrepreneurs need to account for the risks associated with a digital, distributed workforce. Here’s how.
Cybersecurity is a significant challenge for new companies. Lacking the expansive resources of their corporate counterparts, many don’t employ cybersecurity-specific personnel, and the consequences of failure are catastrophic.
Sixty percent of small businesses close within six months of a cyberattack because the cost of recovery, reputational damage and revenue loss prevent them from achieving profitability.
What’s more, today’s threat landscape is expansive and ever-present. Nearly a third of all data breaches in 2020 involved small businesses, making cybersecurity an operational necessity for most companies. In this environment, leaders can maximize their return on investment by diverting resources toward the most prominent threats. This includes:
- Accidents and errors. It’s estimated that human error plays a central role in nearly 25% of all data breaches.
- Negligence. More than a third of people never change their passwords unless prompted, a practice that leaves accounts, company data and IT infrastructure vulnerable.
- Malice. When considering data security, we often conjure images of anonymous hackers and nation-states. In reality, a trusted insider is more likely (and better positioned) to steal company data.
- Ignorance. Phishing scams and other fraud attempts are an unfortunate part of today’s digital ecosystem. When employees are not trained to identify these things, they threaten your defensive posture.
By defending against the most prominent vulnerabilities, entrepreneurs can reduce the risk of a cybersecurity incident without exhausting their investment capacity.
Before the pandemic, privacy regulations, including Europe’s General Data Protection Regulation (GDPR) and the California Consumer Protection and Privacy Act (CCPA), were top of mind for many organizations. These laws, and their many iterations around the world, place new restrictions on data collection practices, requiring more robust transparency and accountability from companies collecting employee and customer information.
Industry and location-specific privacy regulation requirements need to be built in from the ground up. This is especially true for startups and SMBs launching new digital initiatives. The pandemic may have created fertile ground for new online platforms, but failure to follow compliance mandates can undermine and quickly halt momentum.
As the Harvard Business Review notes, “For every business that shifts operations online, there are potential privacy pitfalls that will prove very damaging if mismanaged, and as new regulations are set to go into force in the United States, the stakes for getting this pivot right are higher than ever before.”
Indeed, successful entrepreneurs will make compliance a core facet of their business, rightly recognizing it as an opportunity or a pitiful to their proliferation.
Overworking is often a built-in part of the startup ethos. Urged on by free snacks, communal expectations and operational necessity, employees labor for long hours while managing sizable workloads.
However, it’s becoming increasingly apparent that startups need to adjust their demands and expectations. A workplace study on startup culture found that 62% of employees suffer from burnout, negatively impacting everything from productivity to retention. In contrast, thriving organizations strike a balance by setting boundaries and disconnecting workday longevity with effectiveness. This might include:
- Understanding employee work habits and reinforcing standards accordingly.
- Measuring and evaluating outcomes rather than activity.
- Aligning expectations and actions.
The startup ecosystem can be harrowing, and entrepreneurs need highly effective teams and no shortage of luck to be successful. That’s why leaders need to make sure that they are going into battle with happy, healthy troops and not a harried and haggard workforce.
Undoubtedly, entrepreneurs will play a pivotal role in pandemic recovery. Their goods and services will create new markets, and their growing companies will help support the struggling workforce. Ultimately, however, these principles don’t guarantee success. Rather, they are a firm foundation that entrepreneurs can build upon to help their companies reach their full potential both now and in the months and years ahead.
Originally published in Forbes and reprinted with permission.