There are very few people who would consider an economic downturn to be good news, but tough economic times are particularly difficult for startup business owners. Unlike well-established businesses, startups lack coping mechanisms and support systems; the safety net is much thinner. However, hard times don’t have to prove fatal to your startup business. If you’re able to be agile and adapt to market changes, your startup will emerge victorious on the other side.
Get Clear on Your Current Financial Situation
Burying your head in the sand will only make matters worse. When times get tough, the first thing you need to do is perform a detailed analysis of your finances. You should create a realistic estimate of how long your cash reserve will sustain your business in a worst-case scenario. Then, create a sales forecast and cash flow projection to map out what the coming months are likely to look like. Use this information to create a careful and conservative business budget.
During an economic downturn, it’s more important than ever to stay on top of your finances. You must continually review your budget and monitor your income. It also pays to analyse which practices generate the largest ROI and which you may be able to eliminate in order to streamline your organisation. Finally, keep a close eye on your expenses and consider where you may be able to cut costs.
Focus on Marketing
Many startups cut down on marketing during tough times but this is a huge mistake. It’s crucial to ensure that your organisation remains front of mind and let your customers know that you’re still operating. When times are tough, customer generation becomes more important than ever. Set a budget for marketing and analyse your previous campaigns to see which actions generate the largest return on investment.
When times are hard, it’s wise to appeal to a local audience if possible. The coronavirus pandemic has seen a surge in support for small, local businesses, so make sure you’ve registered in directories and advertise through local newspapers and radio stations.
Meanwhile, customer loyalty programs such as exclusive discounts, rewards points and loyalty cards improve customer retention and encourage spending. Research by Bain & Company found that increasing customer retention by 5% improves profits by 25-95%, so ensure that your customers feel valued and want to keep coming back.
Additionally, social media marketing is a cost-effective way of generating interest in your business. Pay-per-click ad campaigns are an affordable way of appealing to a local audience, and creating valuable and entertaining content encourages potential customers to know, like and trust your company.
Keep an Eye on the Competition
It always pays to watch what your competitors are doing. If you’re operating in a competitive market (and who isn’t these days?) then be sure to understand how your competitors are marketing their products and services. Consider:
- What are they doing differently?
- Which strategies are they using?
- What works well for them?
- What doesn’t work for them?
Once you understand this, you’ll be able to use your competitors as inspiration and adapt their strategies to work for your business. Of course, plagiarism is both morally wrong and terrible for business but spotting trends and putting your own spin on them will help your startup to stay afloat during tough times.
Communicate with Customers
Research by Invesp found that customer acquisition is five times more expensive than customer retention. Not only that, but existing customers are more likely to spend more than new ones. Providing excellent customer service is key to survival during an economic downturn and communicating with your customer base will help you to improve your services.
When times are tough, be sure to maintain contact with your customers and keep them informed about any changes to your business. Make sure that your website is up-to-date and contains clear and helpful information.
Discounts and exclusive offers will make your existing customers feel valued and encourage them to spend more. Go the extra mile and add a personal touch to let them know just how much you appreciate their business.
Talk to Your Team
A decline in staff morale directly impacts productivity so during tough times it’s more important than ever to let your team know just how much you value them. Be honest with your employees about the challenges that your startup is facing and ask for their contributions and ideas on how to proceed. Creative discussions with your team will generate new perspectives, ideas and solutions about how to handle the situation.
Never underestimate the power of networking. During difficult times it’s more important than ever to seek out new opportunities for your business and ensure that you remain front of mind. Starting conversations with industry influencers and experts can also give you valuable insight into how to adapt your business to cope with market changes and even drive growth. Networking generates opportunities for your business so make an extra effort to connect with others in your niche during tough economic times.
Summary: Stay Focused
Unfortunately, all businesses experience periods of difficulty at one point or another. The ones who survive are the ones who adapt and soldier on, rather than giving up at the first sign of trouble. By using the above strategies, you can sustain your startup through difficult times so that you’re still around to grow and flourish when the economy improves.