Have you recently launched your start-up? Maybe you’re just about to. Usually this would be an exciting time with many opportunities to pursue. However, there’s perhaps one thing that’s spoiling the party. Yes, you guessed it, Brexit. And no doubt you have plenty of questions. Do I still go through with launching a new business in the current climate? What implications will Brexit have for my start-up? What can I do about it?
Be in no doubt things are going to change. But it’s difficult to know the impact on the business opportunities you spotted during your research. Will they be as tempting, post-Brexit? Who Knows?
Questions abound: Should I really leave my safe-ish 9-5 job? How will the currency be affected? Will I still be able to cheaply employ software developers and animators from eastern Europe? Maybe Brexit will cause UK-based animators to lower their prices to match the fees I pay to Estonia. Or will it all just be a race to the bottom?
So many questions and so few answers. That said, here’s the views from the Sanrixa team on what we think may happen. No guarantees though!
#1 What if my customers do one?
Most business people create products or services that people, or businesses need. So, if your customer exists and is looking for your product or service, there will always be money to be made. A political or economic change in the status of the UK, however significant is unlikely to drive away all customers?
That’s not to say things won’t slow down and it may indeed affect enough of your prospective customers on whom your survival as a start-up depends. What’s the saying? ‘When the going gets tough…’ So yes, be prepared to fight for every client. Think about ways to outfox your competition and be creative in how you sell your products and services and to whom.
There is sort of good news too. Assuming the pound remains weaker against the Dollar and Euro, this will work to the advantage of some businesses in the medium term as your products and services in global markets will be cheaper.
In adversity there’s opportunity so be prepared to pounce!
#2 Headline: Cowardly Bankers Leave Town!
Alas, some companies will close shop because of Brexit. It will mean lost jobs, and an increase in unemployment. As bad as that is, there could be a silver lining. If the government offers cash incentives for people to start small businesses that could be very good for the economy in the long-term.
Unfortunately, the corporate exodus has already begun. Estimates from the OBR talk of a £30 billion hit to the UK but no one really fully knows the extent to which he UK economy will be affected by Brexit.
However, what we can reliably predict there will be a shock to the UK economy. The Institute for Fiscal Studies and others have over the last couple of years published quite a body of literature predicting many different versions of this impact.
The well-prepared CEO would be wise to keep this in mind. Assuming there will be less money floating about in the economy, even if this ‘drought’ is only short-term, fiscal discipline and bootstrapping will be necessary to get through. So, plan well!
And let’s not forget Brexiteers have been telling us that the situation may open lots of new opportunities not previously seen. It could well be true. If you sell a premium quality product that becomes cheaper because of a weaker pound – you may find yourself servicing more customers within the UK and getting more enquiries from the whole world.
Who knows, we may all look back on Brexit and smile!
#3 What About The Cost Of Avocados And Beard Oil?
Post-Brexit, the cost of everyday goods could soar, and some things may not be available for a while. Coffee, cheese, shoes, medicine, energy, beard oil, you name it. Even booze prices could inflate, severely reducing our ability to drown our sorrows. Post Brexit may be the time to save money.
Why not take up cycling to save on the cost of commuting. You could cut down on the number of Frappuccino’s you buy each week and just have home-brewed coffee. You’ll just have to sneak it into your favourite coffee shop when you use their WiFi? Or maybe just get rid of the Sky subscription to save a few quid?
My point here is that it’s common for start-ups to be squeezed for cash. So, ditch your addiction to Apple Pay, and consider every penny before it’s spent on anything other than the absolute necessities your start-up needs, Brexit or no Brexit!
Of course, it doesn’t mean that people should stop having fun, but wanton expense on avocado on toast and beard oil may have to come to an end this Halloween.
#4 My Angel Investor Has Taken Flight
What a mare. You need cash to fund product development, and to pay staff, and for cash flow until launch. But your VC ain’t dropping no more paper, yet.
To add insult to injury the Angel Investor, the person who doggedly believed in you when you were little more than an idea, has fled. The champion who bravely let you loose on the start-up scene with their hard-earned cash with what was essentially a gentleman’s agreement is off to southern Spain and wants out.
So, you now need cash to pay them back all their money, and a bit more. Then you must find cash from another source who may not be as chizz as the Angel Investor. And you still need to look like world-beater to the circling VCs. Maybe you shouldn’t have spent 15 grand on that 3D printer!
Do you have a handy contingency fund?
Have you planned for what you’ll do if old alliances start to creak? Does your investment contract (if it exists) stipulate what should be done in such circumstances?
#5 Will The ‘Special Relationship’ Help Us?
Post-Brexit VC funding from the US will continue to flow. Listen to Donald Trump and a ginormous trade deal is in the bag. US companies can’t wait to get into the UK. Talent and technology cooperation between Brits and Americans will grow.
It may be a little dearer to go to tech conferences and attend trade shows in the US and maybe you will have to use the “Non-EU” queue at their airports, but it will feel pretty much the same. More importantly, you will still be able to sell even more stuff to Americans – easier and cheaper! How great is that?
Will that depend on how long Bojo lasts as the UK’s Prime Minister? How will Trump react to a socialist or liberal government? What about this recent talk of impeachment? No one knows but no matter who’s in power post-Brexit we’re almost certainly going to get a lot closer to the US.
There’s the rub. There has been some more-than-casual interest by US figures in the NHS. Is that a sacred deer too far? Politicians in Westminster have categorically said the NHS is not on the table for trade discussions. But will that position change if Boris Johnson were to win the next election? Would a juicy US trade deal cushion some of the negative effects of Brexit?
Also, what of the pushback by the British press on the idea of “chlorinated chickens” Are food standards also going to fall post-Brexit?
If the US is to do a trade deal with the UK post-Brexit, you’d expect that there will be some compromises and they may well include the NHS and Domestos poultry. Whether the House of Commons or the government of the day will be willing to agree to such compromises is something that we’ll have to see.
The discriminating entrepreneur ought to take note of all the above and use their skills to position themselves advantageously in this shifting economic situation. This may mean diversification, or an earlier than planned product launch.
It may also mean forming uncomfortable alliances much like attending events and listening out for opportunities from people who you normally wouldn’t cross paths with. Ultimately though, most start-ups should try to remain neutral as they supply or assist customers who are on both sides of the Brexit debate.
However, an acknowledgement that the business environment will change, and actively planning for such an adjustment would be a very wise thing indeed. A lot of food for thought – make mine an avocado on sourdough!
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