Startup Lessons
4 mins

Startups in an Economic Downturn

Tips for keeping your startup working in an Economic Downturn

Economic uncertainty could make running your startup much more difficult over the next couple of years than you have been used to. The funding landscape has changed so it's not going to be as easy to get funding to support your business . Your clients will also be impacted, which will affect their buying decisions

We've put together some tips for setting your startup up for growth during a challenging time.

1. Adjust your burn rate to increase your runway. To do this you will need almost certainly need to reduce your spending - possibly by as much as 20-30%. You could do this by slowing down your hiring or even letting people go or you may need to focus on your customers' priorities and cut features from your products. For the last few years 24 months of runway has been fine but now ideally you should be looking at 36-48 months as you aren't going to be able to count on raising additional funding.

2. Invest in your customers. Customers are likely to have two concerns - the price they have to pay and whether you are going to survive.

• Price. This is going to be increasingly important to your customers - probably more than the number of features you are offering so consider narrowing your focus. Review your price packaging to make it easier for people to buy from you and recognise that you will probably have to acquire them at lower profitability. By giving up on short term revenue this loyalty should be paid off with retention and upgrades down the road.

• Trust. It will be up to you to counter concerns as to whether you are going to survive by sharing not just how you will survive, but how you will thrive so they will trust you. Continue to grow your brand and your customer base through a couple of good marketing channels that share help and advice - so that you have strong customer loyalty when the upturn comes.

3. Maintain Transparency - keep your investors and board members involved and up to date and don't spring surprises on them

4. Pay off your debt - and reduce your repayments.

Finally bear in mind the aphorism - don't waste a good crisis and use it to really look at your business.

June 1, 2022

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