As inflation soars, consumer confidence dips to a near-record low and the Federal Reserve continues to push the interest rates at the fastest pace in decades, the top concern facing many startups right now is how to weather a recession that is on the horizon.
Even with dire economic forecasts, startups that are able to weather an economic downturn can come out the other side stronger, and more financially secure. We put together four tips specific to startups to guide founders in preparing and staying afloat during a recession.
Ways Your Startup Can Weather an Economic Turndown
1. Listen to your customer, again.
Whether you’re a seasoned startup, or just getting started, it is always a plus to connect (and re-connect) with your customers to learn why they chose your product/service above all others, what they use your product/service for, and what about it they consider the most valuable.
Listen with an open mind to understand what it is that makes what your company's offering worthwhile to them and what will keep it indispensable to them when they need to start making hard choices about what to spend money on.
By always taking the time to understand the customer’s needs you can make sure to prioritize the features and services that are most valuable to them.
2. Control Your Cash Burn.
This tip becomes critical during economic slow-downs. While it is never pleasant to have to cut back, or cut down on spending, the goal of any startup should always be to stay afloat.
It is important to re-assess existing financial projections and update your models based on conservative numbers. Similarly, it is important to look at current investments, in regard to staffing, time, and finances, to make sure that resources are put toward what is making money for the business.
While growth is always important to a business, it can’t come at the expense of eroding the existing income streams, especially in a rocky economy.
3. Consider a cheaper and/or easier alternative to a current product or service.
When times get tough, businesses often start looking for ways to cut spending. While it’s not always ideal to offer lower prices on products, think about ways you could create a scaled-down version of your product to offer consumers at a lower price point.
Having a smaller price tag might make the difference for a customer in choosing your product over a competitor. It might also be the case that you can attract a whole new tier of customers at a lower price point that previously hadn’t considered your product or service. Yay, new ROI!
4. Retain Key Employees as Much as Possible.
For many startup founders surviving a recession means adjusting hiring plans and rationalizing staffing. The old adage that it costs more to train new employees, rather than retaining seasoned employees, becomes especially important during downturns.
Make sure to invest in keeping employees happy and feeling secure during a time of increased financial unpredictability. In today’s market, things like increased flexibility, time off, and the ability to work remotely are all high on employees' lists of valued benefits. Of course, salary boosts are always encouraged when you have the means and offer an added layer of trust and stabilization.
Stay Ahead of the Game
While there is no guarantee that a recession will occur in the near future, even though many analysts believe that we have passed several indicators that point to us - already being in a recession. You have helpful tips to guide you and your team. Stay true to your startup's mission, block and tackle various potential outcomes, and care for your employees. Embrace the advice shared to lead your company in tough times and share what you've learned with your fellow founders and startup community network. We can pull through what is/might/or might not happen together and even end up for the better on the flip side.
Author: Shaw Lathrop, Creative Communications Director, Established
Photo: D koi on Unsplash