If one considers the recent past and recessions it brought, startups will be drowned when financial markets seize, and economic turmoil becomes the norm. Many new enterprises have collapsed in the downturns in 2001, 2008 and now – 2020 as a result of a “flight to quality.” Sadly, when you register LLP in India or a private limited company, you are making yourself as powerful or as vulnerablewherein the economic downturns are a part of life. But now you can take action to ready your business for a storm and be even stronger.
Entrepreneurs also realise that they should be prepared for difficult times, but do not often take the steps they need to. The effect of Covid-19 on Indian startups is evident with many Indian unicorns, laying off their permanent and contracting workers since the onset of Pandemic. If you want to ensure that your business stays robust with times to come, here are some of the actionable information to make it count.
1. Get the knack of your hack
A hack of the current model that raises sales, decreases costs and unlocks virality is one of the items that most recession-based startups have. For instance, Google changed the indexing of search results (automated rather than curated) and how advertisers paid for their presence (pay by click). You make your startup a recession-free startup by often using a new way of thinking about a developed market to change how it works. Make sure you craft a hack that’s more elegant, lasting and durable for the business.
2. Grow your customer base
It is difficult to stress the importance of having a range and number of customers for your business. Even if you lose out on one customer out of 6, you will have to face the hard times when facing the economic slowdown. When things are fine and normal, businesses have no time to beef up the project or expect to lose the client, But when the day comes, you have to face the fate and deal with the loss. Instead, when the times are right, grow your customer base and expand businesses. Make sure your team remains efficient and gives the work that client demands on time.
3. Remove Entry Barriers
One of the features of most company cycles is that, as the economy changes, workers use their price and marketing forces to increase entry barriers for new companies. This is often done by raising fixed costs for starting a business, making it difficult for under-funded competitors to enter.
Before Google, ads cost small businesses a lot. They needed creatives to recruit, create content, purchase ads, and hope for the best. Sergey and Larry have made it possible for you to start a $20 marketing campaign, which has significantly changed the entire advertising business. Could you do that with certain groups, inspiring smaller competitors?
4. Focus on your finances
Reliable financial management is essential to ensure that your company is prepared for the economic downfall. Companies need early warning systems to inform them when problems brew and locate finances accordingly.
Entrepreneurs should plan the cash flow properly. You may need bookkeeping and accounting services that can form a base to char the projected revenues and expenses for at least a quarter with weekly updates. With this, you can successfully handle the customer payments and vendor payments by striking the right balance between both. That’s how you can plan for tight cash flow periods necessary to plan your future projects and adjust your financial requirements accordingly.
5. Stress-test your business
The current, pandemic-driven recession proved that it is not easy to forecast these circumstances. This is why it is important to go through many scenarios now, like coping with a sudden decline in revenue. Look at various disasters and emergencies and bring contingency measures into motion to fix them.
For instance, if you are dependent on vendors, then analyze the change in input prices rise due to a weaker dollar. Also, the recent work from home scenario should make you think about the minimal resource requirements and dealing with remote workers effectively.
6. Keeping it Lean
Having a lean startup is robust, even in flush times. But as capital falls and investors are ever more hesitant to finance inexperienced innovations, you must prove fitting with limited capital at an early stage in the product market. Be sure that the project can be launched and proved initially by saving money rather than raising a multi million-dollar seed.
Similarly, revenue models are expected to prove much earlier in the cycle. Although investors do not care much about sales at flush times, as bursaries expand, this issue may become more urgent. Prepare to check your income model early and assess the feasibility of your company from the start.
Key Takeaways
Your innovations will pay off as most successful businesses that offer new products and services are prone to quickly adopt new technology. Another thing that makes your business a recession-proof one is networking. You can hire consultants and even set up and advisory board to get the external advice in dire times. Make sure to develop a strategic plan for the future to protect your business from any economic turmoil and safeguard it. As a new age entrepreneur, having faced a pandemic is a big deal in itself. If your company can survive this COVID-19 for a year or two, there’s hardly anything that can shake your business later.
