Imagine you have just started a business, and not one of those tried and tested safe ones, but a new, up and coming startup. Life is hard enough for you as it is. Now imagine you are a startup in Pakistan, which is notoriously inhospitable to most things, including entrepreneurial endeavours.
Being a startup in Pakistan can feel like the whole world is against you at times. Approvals are slow, business takes time to get up and running, and there are more unexpected hurdles than you can ever anticipate. Dealing with all that and more, imagine your startup also has to deal with a global pandemic that cripples the international economy.
That is the scale of the problem that a number of startups have had to face this year, when the coronavirus struck Pakistan in March. It is also why the Global Entrepreneurship Monitor (GEM), the London-based research project dedicated to understanding the relationship between entrepreneurship and national economic development, will examine entrepreneurship in the context of the appalling Covid-19 pandemic in their report this year.
So when GEM decided to nominate one entrepreneur from Pakistan that stands out from others for how it survived the pandemic in its annual impact report for 2020, choosing Faizan Aslam might have been a simple decision. The CEO of online ticketing startup Bookme.pk, Faizan is the only entrepreneur from Pakistan, for the second time in a row, to feature in the GEM Impact Report. And to fit the kind of year we have had, Faizan and Bookme.pk’s journeys have been of hardship, and entrepreneurial resilience during turbulent times.
As a young startup, Bookme air-dropped straight into the middle of the fray. An unwelcoming socio-economic environment and hostile competition were the first enemies. Then, just as they seemed to be taking off, an office fire struck, setting Bookme back. As soon as they picked themselves up from that blow, the coronavirus pandemic broke the back of the global economy. This was a trainwreck inside a dumpster fire. But Bookme.pk survived.
Along with them, there have been a slate of other startups that have shown character and have held their nerve to navigate the choppy waters of a global pandemic in Pakistan. Profit profiles three such startups that have survived in different ways despite the odds, and are now looking to strike back.
Bookme.pk: employees first
When the global pandemic first hit, there were many that expected it would not last more than a few weeks. If that were the case, losses could be easily papered over by most in business. But with almost a year having passed and no signs of the virus slowing down for at least as much time, everyone and everything has had to adapt accordingly.
In Pakistan, it has left hordes unemployed. The immediate reaction from businesses across the board was to lay workers off to make ends meet. According to Gallup Pakistan and Dun & Bradstreet (D&B) Pakistan, more than 54% of Pakistanis have either been laid off by their employers or are working with mandatory salary reduction as a result of the Covid-19 pandemic.
In the startup sector of the economy, the numbers were even more startling. Nearly 70% of surveyed startups were experiencing reduced demand, half had halted operations, and 42% were seeing a reduced valuation. At least 35% had reduced employee salaries, 21% startups had shut down, and a fifth of those surveyed laid-off employees
A lot of these indicators point towards the extreme measures most companies took to “survive.” With the accelerating rise in Covid-19 cases and ensuing economic shutdowns, these were uncharted waters. There were some startups that thrived during this time, those in the grocery delivery business for example, but one like Bookme.pk came to a grinding halt. Bookme.pk falls in the transportation ticketing category, one of the industries most badly affected by the pandemic. These were unprecedented times for everyone, and like others, Bookme’s team was faced with an uncertain future.
“A meeting was called where we discussed the uncertainty regarding the future of the company and how we can keep it running,” Faizan Aslam tells us. “I, as the CEO, announced that I will take a voluntary pay cut to help the company minimise expenses and get through these turbulent times.”
What followed was an extraordinary movie moment. Bookme.pk had not fired anyone, and did not announce a pay cut either. But taking their lead from Faizan, almost the entire team volunteered a salary cut. For those that could not afford salary cuts, others offered to take cuts on their behalf. The gesture went so far that it extended the company’s runway by 40%.
“When we asked the team members their reasons, they attributed it to the family-like bond that they had with each other, and their immense sense of ownership,” says Faizan.
When businesses get hit, employees are the first line of sacrifice and suffer the most. They are cannon-fodder. No matter how passionate you may be about your work and put your heart into it, unforeseen circumstances might mean you find yourself unemployed, and not by any fault or inability of your own. That means one cannot help but feel immensely disposable.
“Bookme, however, was able to weather the storm due to two reasons. One being our unique culture that promotes real ownership, and second was keeping a close eye on our cash burn from day one. With a minimum cash burn of roughly $150,000 over 14 months, we were able to derive a 23% growth month-on-month. This allowed us to preserve cash while operating with a minimal expense mindset,” Faizan tells Profit.
This was good planning on Bookme.pk’s part. We often hear news of incredible investments ranging from $1 million to even $20 million, but a smart company will continue to chase systematic growth rather than volatile exponential growth. We are fortunate to have many local case studies to help us understand that a blind chase for exponential growth will often lead to an unreasonable and detrimental cash burn.
However, even with the cash reserves, the pandemic had reduced Bookme’s revenues to zero. From thriving, the company was reduced to barely surviving. But while the company had to survive, it also had to ensure that no one in the company left, particularly because of how precarious the times were.
“There was no pressure on anyone to volunteer a pay cut and no one was judged on how much they contributed. The salary cuts were kept anonymous and the company managed to survive the worst of the pandemic. The team had vowed to get out of this together, without a single lay off. And now, as things are looking brighter with the transportation sector slowly opening again, we are back in business,” said an optimistic Faizan.
But to hear Faizan speak of it, the staff taking voluntary pay cuts did not just help keep the company afloat, it also taught Bookme.pk and himself an important lesson and reinforced their business ethos. “We must practice what we preach, almost every company talks about being exceptional and empathetic towards team members, however, with the recent unemployment surge, we now know, not all companies follow through with that promise.”
“We all know how hard it is to find talented individuals who build your company, therefore it is imperative to ensure that your company is able to retain this talent by extending care and empathy in your management style. True ownership is only built when you feel at home at work. Let your teammates do what they are truly passionate about, extend your trust in them, nurture their growth, and watch them do wonders for your company.”
This is a positive attitude to have. At the end of the day, a company is what employees make it, which implies that startups should always have policies and cash reserves in place dedicated to help nurture, groom, and retain employees. That can help any company weather any storm; when employees feel that they have ownership of the company.
“Hearing from others that went jobless during the pandemic, we realised that when exceptional talent is laid off without justification, companies end up breaking a chain of loyalty.”
This dedication to loyalty, according to Faizan, is a trait built between an employer and an employee over years of dedication and reciprocal behaviour. When this chain is broken, it hampers the team members’ trust in not just the current organisation, but also the ones they will move on to, weakening the entire industry in the process. “There is a psychological element that comes into play; the feeling of sudden dissociation and discredit makes it extremely difficult for these individuals to trust other companies. Layoffs not only impact the team members that leave, it also hampers the growth and trust of the team that survives the decision”.
“As a developing country, we must learn how to retain and harness talent. Go an extra mile, put the individual first, and watch your company survive even the worst of storms,” says Faizan.
Convo: the lean startup
Bookme.pk was hit the hardest because it was operating in a sector that was perhaps the most affected by the pandemic. Convo, on the other hand, was less affected. A startup that provides a team communication app, the nature of its business meant that while it was affected, they also had an opportunity to mould themselves and try to take advantage of the situation.
If you are a C-suite in a company with 17-years of experience in the banking industry, what do you tell the employees awaiting uncertainty about their futures? You tell them about the 2007 subprime mortgage crisis in the United States and how the world survived that, albeit bruised.
That is exactly what Noshad Minhas, the Chief Product Officer at Convo told employees at the company in a meeting called in the wake of the pandemic.
“We have seen the subprime mortgage crisis, we have also seen 9/11. We have seen businesses getting wrecked. And we know that those businesses get wrecked that do not make themselves lean and do not think about the future,” Noshad said.
“People who survived these incidents grew later but those that could not survive were gone forever. So what do you do when you are required to survive? You take a hit as part of ownership. Ownership is what happens when things are done across the board. If there is a pay cut, it is from the top management to the bottom staff,” he said during the meeting.
There is a little background to the conversation. Convo’s customers in the United States were laying off employees because the pandemic had started a little earlier in the US. And because they were laying off employees, Convo’s customers would soon not be able to make payments.
“We designed their payment packages to ensure not to inflict financial strain on the clients during times when the revenues were dropping for them. Convo restructured quarterly payments for clients that were on the verge of cancelling their contracts. We realised that this time shall pass but we might be able to get these clients back,” Noshad says.
It was obvious that costs at the company office were going to go down because of the lockdowns that reduced rentals, utilities, food for employees and janitorial services, which, Noshad says, would be Rs1.8 million per month. For five months, that comes to Rs9 million that the company saved in lieu of expenses under these heads.
“In the beginning, staff salaries were cut down and other than C-suite, original salaries were reverted gradually in only two months with the promise that salaries would have an incremental increase once things would get normal. That paid back in terms that the employees’ loyalty towards the company increased manifold, and they decided to support the company in these difficult times,” he adds.
“So we survived as a team. In fact, our engineering team, our sales staff and product staff worked more than usual to make the core of the company so strong that it keeps us from breaking in the future,” Noshad added.
The strategy was to reduce salaries and then formulate a strategy with incremental growth, decreasing customers’ bills by holding their payments for a certain duration and collecting it back when there would be sunshine and closure of the office were different measures that the company adopted during Covid-19.
Noshad says that though the circumstances were dire, no role in the company was redundant and there were no layoffs. This is the sign of a company without any ugly belly fat. A lean machine that had, even before the crisis, streamlined their operations to only keep essential people around that are good at their jobs.
Another interesting thing that happened was that the company received an opportunity in disguise to politely make the low performers realise that they were lagging. And on the basis of meritocracy, the employees were told that whoever was not performing well was given an opportunity for a voluntary layoff or opt for no salary for a certain time duration.
“One-on-one meetings were held with the non-performers and they were actually asked to make a decision based on their performance and keeping in mind the pandemic. People in those circumstances started taking initiative on their own. The layoffs never happened. The company willingly accepted the choices of the employees,” he added.
The company experimented with this for a month and, within a month, salaries were reverted back for these and other employees. “All that focused on building a strong foundation for the company, building the core that would determine what the company would look like in the future,” Noshad explains.
“According to our company culture, even the lower pyramid of workers are evaluated on performance. We have promoted our peon to front desk attendant. From that peon to the top, we have KPIs based on which we have given them performance-based shares for each year. Because of the performance-based shareholding, employees feel ownership of the company and that kept us from taking a hit internally.”
As things have started getting back to a new normal, Convo has decided to have an open culture where everyone is allowed to work from anywhere, be it at the office or from home.
On this note, Noshad also left valuable advice: companies that follow legacy systems and cannot be lean as startups are unable to build a strong core – a system that has an employees’ loyalty that helps survive such pandemics. That these companies should try to be lean as startups are.
PriceOye – Don’t fire, hire
Some startups stopped dead in their tracks because of the pandemic like Bookme.pk. For others, like Convo, there was a moderate amount of distress that they used to fix any chinks in their mechanisms that were made apparent because of the pandemic. Then, there were the startups that saw an increase in demand because of the pandemic, and were not ready to handle it. These were the e-commerce startups that suddenly became more relevant with the quarantine. It is a crisis when a startup’s revenues drop to zero overnight, but it is also a crisis when a startup sees an abnormal increase in demand that it is not prepared for. Though some might argue that the latter is easier to manage, it can still be make-or-break for the company, if not handled properly. One such startup was PriceOye, an e-commerce startup that features electronics on the website for online ordering and delivery.
For PriceOye, since there were lockdowns in place, the business witnessed a huge surge in orders. “For the first month of lockdown, we witnessed a 100% growth in sales, second month was 95% and the third month was 105% increase in sales,” says Adnan Shaffi, co-founder and CEO at PriceOye.
Increased orders meant that the company had to increase its capacity to meet those targets, and that too when you had to ensure that no-one in your company catches Covid-19.
“We had a good 2,000 square feet office. We had an open plan office space with no partition between tables so that anyone could interact with anyone to bolster creativity. Things got a little challenging because we had to ensure that there was no outbreak at the office,” Adnan says.
To contain the spread of virus, the company, instead of a large single office, leased two small offices with separate tables to ensure limited interaction but that increased the cost for the business. And because the company had faced a demand surge, it had to increase the team size as well to fulfil those orders, which was challenging in times of pandemic.
Adnan says they had to increase the workforce by more than 50%. And because hiring was not going to be easy during Covid, we outsourced a few functions that were not related to our core business, for instance the call center, to other companies to focus on the growing orders and scaling.
“Another cost that increased during the pandemic was of courier services. When the lockdowns started, courier companies were operating at their full capacity. Order delivery was getting costlier so we had to build our own small fleet to deliver directly to consumers so that consumer experience does not deteriorate. We made an investment in that which increased our cost but the results that came from that investment were phenomenal,” Adnan adds.
Our number of orders increased that increased our return on investment. As an e-commerce company, Covid was an advantage. Our expected growth target was achieved before time.