What Every Start-up Needs To Do To Survive a Recession

Businesses have unquestionably had to deal with a high degree of economic uncertainty in recent years. All industries (globally) faced a major challenge in the shape of Covid-19 and the long-enforced lockdowns, but this challenge was only exacerbated by additional issues like the Russian invasion of Ukraine and an unstable political climate.

As such, small businesses who were just beginning to make their mark had their work cut out from the start. The economic downturn, however, has surfaced as a result of these difficulties. Perhaps it is not unexpected that start-ups have had difficulties given the rising cost of living, increasing inflation, and skyrocketing gas prices.

Sure enough, managing a small business is far from simple, so trying to do it during a recession is particularly challenging. This post will examine the actions each start-up must take in order to weather the current economic storm.

Understand Your Business Needs

It’s vital to approach your start-up only from the (emotional) standpoint of a business and to consider it’s requirements for existence rather than just your personal gains. You might think that the key to survival is to get rid of anything that costs the business money, but that isn’t always the case.

For instance, many businesses reduce their spending on services like marketing and advertising as they prepare for a recession. On the surface, this makes sense; the business continues to run regularly, and assuming the marketing team did a decent job, leads will continue to come in the near future.

However, it is the medium-term consequences to this thinking that can be disastrous. When you cut essential functions like marketing that are fulfilling a key role for the company (driving new leads and sales) the end result is cutting off your supply of customers.

It is said, that successful businesses continue to market their products and services, whatever the weather, as it is more likely than not, that your competitors will pull the plug first. Don’t forget that. For this reason, any economic downturn presents opportunities for those prepared to go to market.

Have a Business Plan – Live By It

Oliver Spevack, Partner at Hamlyns Chartered Accountants, argues that it is astonishing how many business entrepreneurs attempt to launch their ventures without a sound business strategy. It is comparable to attempting to lay out a trip without a map. The truth is that small businesses can afford business counsel for start-ups since it is widely available and affordable.

Undoubtedly, many business owners have a vision for what they want their company to look like, but they don’t necessarily have a well-thought-out plan. A strong plan should comprehend crucial information, such as the number of clients or consumers required to turn a profit, and examine more intricate details of how success will be attained.

Structure a plan from day one and as best as you can, live by it. Of course, the beauty of being a start-up is your agility and ability to pivot where necessary, but never lose sight of why you started and what you set out to achieve.

Value Your Existing Customers

Businesses often make the mistake of concentrating efforts on acquiring new clients when an economic slump occurs. Customer acquisition is obviously a crucial component of running a small business, but if you have recently seen clientele decline due to more challenging economic conditions, it may seem logical to attempt to increase those numbers.

However, current customers may be sacrificed in your drive for new clients. Have you considered, it can be as much as five times more expensive to acquire a new customer compared to keeping an existing one. This demonstrates that allocating an excessive amount of resource and money to acquiring new customers, can indeed be costly. And in a recession, it shouldn’t be a cost that you are prepared to bargain with.

Keep On Top Of Tech Trends

Start-ups and small firms have the agility to pivot their systems as new technology becomes available, giving them an edge over their more established rivals. It is easier for start-ups to make systematic, technological and structural changes than it is for larger organisations, which ultimately makes decisions about infrastructure and technology years in advance of the competition.

Whether this entails upgrading to new software or utilising fintech solutions, be sure to keep abreast of the latest tech to keep your business nimble and efficient in the face of adverse times.