Last year has taught lessons the hard way to a lot of businesses. Before starting a new business, one needs to consider the recent recessions and how they affected startups. All your dreams may go to the drain when financial markets seize and economic turmoil becomes the norm. Many new enterprises have collapsed in the downturns in 2001, 2008, and now – 2020 due to a “flight to quality.”
Unfortunately, registration of a private limited company makes you powerful yet vulnerable to business uncertainties. This is because economic downturns are a part of life. But now, you can take action to ready your business for a storm and be even stronger.
#1. Know your offerings well
Get hold of your current model that raises the sales by plummeting costs to unlock efficiency, as is one this is observed in most recession-based startups. 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. Fool proofing business activities
The current, pandemic-driven recession proved that it is not easy to forecast these circumstances. This is why it is essential 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 that rise due to a weaker dollar. The recent work from home scenario should also make you think about the minimal resource requirements and dealing with remote workers effectively.
#3. Increasing user-base in niche market
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 you have to face fate and deal with the loss when the day comes.
Instead, when the times are correct, grow your customer base and expand your businesses. Make sure your team remains efficient and gives the work that client demands on time.
#4. Pivoting financial resources
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. 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 established 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.
Ultimately, the innovations pays off as successful businesses offer new products and services and are prone to adopt new technology quickly. Another thing that makes your business a recession-proof one is networking. You can hire consultants and even set up an advisory board to get 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.