It can certainly be said that businesses have had to face a very significant level of economic turmoil in recent years. The Covid-19 pandemic along with its long-enforced lockdowns was an enormous challenge for all industries, but this was only compounded by further problems such as the Russian invasion of Ukraine and an unsteady political atmosphere.
So small businesses just starting out on their journey already had their work cut out for them. However, these challenges have gone on to create something of a further global issue – and that is economic downtown. With rising inflation, spiralling petrol prices and customers facing cost-of-living challenges, perhaps it is not surprising that startups have struggled.
However, running a small business is never easy, so trying to operate in turbulent economic times makes things especially hard. In this article, we’ll take a look at the things that every startup needs to do if it wants to survive the economic downturn.
Understand what your business needs
It is important to look at your startup purely as a business and assess it for needs for survival rather than simply the things you want. You might assume that what is being advocated here is getting rid of anything that is an expense for the company – but that isn’t necessarily the case.
For example, when many startups plan for an economic downturn, they cut budgets for services such as marketing and advertising. This seems to make sense on the surface; the business continues to operate normally and if those doing the marketing have done a reasonable job, leads will continue to arrive in the short term.
However, it is the medium-term consequences that can be disastrous here. When you cut essential services 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.
Have a business plan in place (and stick to it)
“It is surprising just how many business owners try to get started without a proper business plan,” says Oliver Spevack, Partner at Hamlyns Chartered Accountants. “It is like trying to plan a journey without a map. The fact is that business advice for startups is easily accessible and available at prices even small businesses can afford.”
It is certainly the case that many entrepreneurs have a big idea for what they want their business to become, but don’t always have the plan thought through. A good business plan should understand key information like how many clients or customers are needed to make a profit and look at deeper specifics of how success will be achieved.
Also, remember that a business plan is designed to be in place over a period of time, after which it can be reviewed.
Place value on your existing customers
When an economic downturn hits, businesses can make the mistake of focusing much of their attention on getting new customers. Of course, customer acquisition is always an important part of running a small business – but if you have just seen numbers of clients dwindle, due to more difficult economic circumstances, it can feel especially important to build those numbers back up.
However, in this scenario, such a push for new clients can come at the expense of prioritising holding on to existing customers. You might not be aware that acquiring a new customer can cost five times as much as retaining an existing customer. This goes to show that putting too much budget into new customer acquisition can be an expense, and not really worth it.
What is even better still is the fact that repeat customers actually spend more money with you than new customers. According to market research, the figure is 67% more.
Keep ahead of tech trends
One area where startups and small businesses can have an advantage over their larger competitors is that they have the flexibility to move their systems as new technology becomes available. Larger companies need to make decisions long in advance regarding infrastructure and technology, while it is easier for startups to change things as soon as something is available that could make a difference.
This could involve transferring to new pieces of software, or taking advantage of fintech products.
Have multiple scenarios for growth
It is also important to look at the economic downturn as a chance to make your business as lean and effective as possible. This doesn’t mean that you need to immediately cut everything that you currently do, but it is a good time to reflect on what works and what doesn’t work, and make decisions on that basis.
In fact, it is a good idea to have multiple different scenarios that you can work towards for growth. See what elements of your business work during the downturn and which need rethinking. It is only then that you can start to make decisions about what to get rid of and what to keep.