Foreword by Jake Moelter, Vice President of Finance at SupportNinja
“Let’s talk about the economy. It’s been a rough quarter in the tech sector. We’ve seen what seems to be daily announcements of layoffs across a number of verticals in the industry. Although many companies enjoyed pandemic-related surges, they are now facing a correction due to a number of factors, including rising inflation, economic concerns, war, and shifting consumer behaviors.
In a recent article, Y Combinator, a major Silicon Valley VC, advised its portfolio founders to “plan for the worst” as startups across the globe scramble to navigate a sharp reversal after a 13-year bull run. Sequoia, another major VC investor, laid out the case for a long and drawn-out recession, and instructed founders to “do a cut exercise” immediately if they haven’t already done so by examining ways to conserve cash through eliminating or scaling back projects, R&D, marketing, and other expenses.”
It’s uncertain how bad it will get or how long it will last. Coupled with the Great Resignation, it is clear that we are in a pivotal moment.
If your startup is feeling the effects of the economic downturn, here are a few things you can do to weather the storm:
Assess Your Burn Rate And Develop A Plan To Reduce It
If you haven’t already done so, take a close look at your burn rate and develop a plan to reduce it. Your burn rate is a significant key factor in determining your company’s sustainability, especially if you are a startup in a high-growth industry. The rate at which you spend your initial capital needs to be drastically reduced, considering capital may be more difficult to acquire as investors pursue investments that pose less risk during a recession. This may require you to cut back on discretionary expenses, slow down hiring initiatives, or reduce or eliminate marketing spend.
Businesses need to be realistic about their financial situation and the uncertain economic landscape that lies ahead. To reflect the current reality of the marketplace, you need to update your financial projections and fundraising plans. To better understand your current financial situation, you need to analyze your profit and loss and balance sheet to further assess your financial standing and make plans to move forward. This will demonstrate that you are proactive and capable of adapting your business strategy to successfully guide your business through a downturn. Of course, planning for potential future disruptions to the economy is a vital part of your financial planning. Keep in mind, it is just as important to remain calm and strategic in your decision-making. This is not the time to make rash decisions; rather, it’s a time to seek out sound advice from experts you trust. By keeping a level head and following a plan, you can emerge stronger on the other side.
Rethink Your Go-To-Market Strategy
No matter what your product is, the key to success is understanding your customer’s needs. If you’re selling to businesses, now is the time to focus on cost-savings and efficiency. Businesses are looking for ways to cut back on costs, so your ability to show them how your product or service will help them save money, both now and in the long run, places you in a great position to make the sale and build customer loyalty.
Selling to consumers on the other hand, requires you to shift your focus on needs that are less likely to be impacted by an economic downturn. In general, during difficult times, people are more likely to cut back on discretionary spending, so it is that much more important that your adjusted strategy addresses consumer needs that are essential, not a luxury.
As consumer behavior continues to change since the onset of COVID-19, spending expectations also continue to shift. EY Americans Marketing Practice Leader, Janet Balis, highlights four customer-strategy areas deemed to create lasting impact and value. These include customer engagement, growth drivers, customer experience, and the physical and digital divide.
In every crisis, there are opportunities for growth and learning. Rethinking your market strategy and making the necessary accommodations to prioritize the needs and interests of your customer base will ensure you are ahead of the curve, rather than falling behind.
Revise Your Plans For Growth
Remember when you built solutions and protocols for hypothetical worst-case scenarios in your early days of developing a business plan? Now is the time where that forethought and preparation pays off. If you had plans to grow quickly, now is the time to revisit those plans. Rapid growth can be difficult and expensive, and it may not be the best strategy in an uncertain economic climate. Rather than focusing on growth, focus on strengthening your business instead. Consider the following:
1. Prioritize your current customers
Are you providing quality customer service? Companies who provide quality customer service are more likely to not only retain existing customers, they also have a higher likelihood of growing their customer base. Based on a Khoros study, about 86% of customers who have a good customer service experience turn from one-time clients into long-term brand champions . On the other hand, 65% of customers who had a poor experience with a brand moved their business to another brand. In the end, when the focus is on providing current customers a great experience, your business reaps the monetary benefits it comes with. Additionally, consider implementing incentive programs, adapting your services to meet customers current needs, or diversifying your business can prevent significant loss from customer turnover.
2. Assess your unique selling proposition (USP)
Does your USP make you stand out from your competitors? If not, take time to evaluate your marketing strategies. Rather than sinking money into growing your marketing campaigns, assess what is and isn’t working and let go of what no longer serves you best. Take advantage of free marketing tools and elicit feedback from your customer base to stay informed on what they need from you in a volatile market. This will give you a competitive advantage.
3. Boost staff morale
Staff morale is an essential component of running a successful business, especially during difficult times. Maintaining open and honest communication, leading with empathy, prioritizing engagement, providing autonomy, and offering quality feedback are some of the most effective ways to focus your attention on the well being of your staff. Without these in place, workplace morale will suffer, which will in turn negatively affect productivity.
4. Continue networking
Networking is an invaluable tool for growth and success, especially during an economic downturn. Networking is all about interacting with others and learning from one another. Now more than ever, it is important to form alliances, share resources, offer support, and unite through shared interests as we all learn how to cope and navigate through uncertain times.
As businesses make the necessary preparations to face a looming recession, don’t forget to consider alternatives. If you’re relying on traditional financing sources, now is the time to explore alternative options. Government loans, private equity, and venture capital are all possible sources of funding.
At this point, some businesses turn to staff layoffs for a quick, yet drastic, approach to cut costs. Thankfully, there are other money-saving options available to you aside from layoffs that help you mitigate further losses, such as reducing work hours or implementing furloughs. As an alternative to layoffs, encouraging shorter hours or furloughs may provide vulnerable companies the chance to hold onto their valuable employees as they navigate uncertain economic times. In addition, this option allows the company to have more discretion over which workers are affected. The opposite option, company-wide pay cuts or hiring freezes, has significantly more room for damaging effects to morale and productivity. It is also important to note the value of employee retention. Your company's organizational growth is a significant factor in your overall success. Facing high turnover can be expensive, stressful, and time consuming. By incorporating DEI strategies as a tool to reinforce a positive, healthy, and inclusive work environment, your chances of achieving high employee retention and low turnover will increase.
All this said, outsourcing is a time-tested solution that can provide many benefits, including, but not limited to improved efficiencies and productivity, enhanced CSAT scores and reduced employee burnout. In turn, you can rest assured that business matters are streamlined and running smoothly, allowing you to focus on serving your customer base when they need you the most.
That’s where BPO solutions can help — they enable businesses to provide 24/7 access to workers across multiple channels, delivering exceptional customer service so you can thrive today and into the future.