The Key to Becoming a Recession-Resilient Startup
Is the recession a bad time to start a business? It sure might seem like it. The competition to succeed is fierce in the startup world, as is, and when a new entrepreneur pairs that notion with anxiety-laden economic news reports concerning the latest round of Big Tech layoffs and shakeups, it’s bound to ruffle even the calmest entrepreneur’s feathers.
What is not often talked about, though, is that recessions are often the times most ripe for opportunity. Industries are reflecting on what’s working well, and what needs to change. And the business models that flounder often leave in their wake seismic market gaps just waiting to be closed. Recessions call for manifesting innovation. There are ways startups and small-business owners can aim to drive growth through strategic thinking and action.
Take Time to Reassess
When a business owner is looking to address market gaps, it’s important to consider what the customer is likely experiencing as a result of market changes. It can be easy to want to cut back—both financial investment and on human resources—when grappling with a recession, and even more for a startup that is already navigating multiple challenges related to starting a business.
Startups often rely on outside investors to fund their ventures until they become profitable. Needing to answer to investors or even needing to justify business decisions is often a breeding ground for stress. Some entrepreneurs immediately look for ways to cut back to save as they attempt to scale. That’s the wrong move. Here is what should be done: Invest in people, operations, and sustainable technology.
Take the time to identify which leads are generating the best ROIs in order to effectively allocate time and money—in a way that sees the most significant payoffs. Translate the benefits of the business into a language that CFOs will understand by having a measurable customer service ROI model. This also helps customers visualize partnership, which is key to retaining and nurturing a business’ existing relationships.
While it can seem counterintuitive to make these investments during times of economic downturn, it’s imperative to not cut corners. Instead, companies should look for smarter ways to innovate by building an ecosystem of resources that can help a business owner solve problems and anticipate and prepare for challenges before they even arise. That’s the path to profitability.
Reward Loyalty—It Pays Off
Reevaluating how the company drives loyalty through personalized customer journeys is another area that is considered during a recession. This starts by understanding the customer by researching and building on the findings. What motivates the target consumer? What are their purchasing behaviors? What are their pain points, and how can this particular business service or solution help them to address them?
One of the most important questions is how. How will customer sentiment shift as they respond to the throes of a recession and the personal anxieties that come along with economic uncertainty? A personalized customer journey needs to ring of authenticity. The best way to do that is to humanize the experience by remembering customers are people too. They likely are stressed as well but on a different scale. Appeal to that as it will forge strong and lasting connections. It will help organically grow the customer base because people will be inclined to share how good they felt, which leads to more customers, which leads to growing profits.
Don’t Be Afraid to Course-Correct
Being in business during a recession can be stressful for any company but more so for a startup that has investors. After all, when startups fail, investors likely lose most, if not all, of their principal. Considering a shift in a company’s focus can help prevent that from happening.
For startups to retain their existing customer base and grow, it’s important to remember the business’s unique selling points (USPs) that lead to starting the company. Promoting USPs are key to attracting and keeping both customers and investors. For example, creatively tout how the company is able to increase customers’ revenue while decreasing their costs, increase speed to market, and decrease risk and privacy concerns.
Be strategic about opportunities to promote the company and its achievements. While this might attract some judgment and scrutiny, the benefits of attracting new customers make it worth the effort. If the company needs to pivot to another area, keep in mind the environment can change and allow for a return to a particular area.
Businesses should keep in mind that the path to success is rarely linear; but authenticity always wins the day.
Chessy West is the CFO of Kevel, an advertising API software company used by brands to build and launch their custom ad platforms. Prior to Kevel, West was a founding member of United Income, a fintech investment management startup that sold to Capital One. Before that, she was at HelloWallet, a SaaS fintech startup that sold to Morningstar.