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Entrepreneurship is a daily act of faith. In times of economic uncertainty, that jump can feel like diving off a cliff. We are in one of those times. It will likely take months to fully readapt to the forces that have hit the global economy, and for entrepreneurs, months can feel like years.
With the right playbook, entrepreneurs can survive and thrive in any economic scenario. Here are five things you can do to propel your business forward now and through tough economic cycles for years to come.
1. Learning from tougher times
A tough economy presents a unique opportunity to make tough business plan decisions. Everything is open to reconsideration. How has the market changed? Do your customers face challenges that create new opportunities for your solutions? How do new conditions change your assumptions and what actions should you take in response?
Critically evaluate your product roadmap. Is it time to pivot or become more aggressive with your current plans? Prioritize the highest margin features achievable within the next twelve months. Push back projects that are not on this list and reallocate resources accordingly. Reassess prices. Even though inflation is tiptoeing back after reaching its highest level in forty years, the costs of raw materials and transport remain on the rise. What will affect your customers if you adjust prices or add extras to offset these costs, at least temporarily?
The year was difficult for hiring. Many companies took what talent they could get. If there are employees or construction workers who would do better in another job, now is the time to let them go. Make rigorous corrections that will pay off overall – corrections that might be avoidable in less difficult times.
Related: How to Turn Inflation and Recession into Your Biggest Business Opportunity
2. Tighten your grip on money
Venture capitalists are backing off. In the third quarter, Crunchbase reported that startup funding in the US and Canada fell 50% year-over-year. Valuations are down across the board. If you’re lucky enough to be a late-stage startup that benefited from VC largesse in 2021, make your latest raise last longer than expected.
Keep your dry powder dry and put it back in another round until the markets balance out. Re-emphasize the basics for start-ups with less market validation and greater distance between now and a potential exit. Delay all capital expenditures. Leverage the hybrid working model if possible to reduce rent and other office expenses. Continue with Zoom or Google Meet. Now is not the time to rack up travel expenses. Renegotiate fees and terms with service providers. Research credit terms from major providers, in a nutshell, prime.
3. Talk to customers, in person. Now.
How have the business needs of your customers, both paid and beta, changed over the past 18 months? Are there any benefits to your solution that have more recognized value now? Almost all companies, for example, from enterprises to startups, have been forced to relearn the lessons of supply chain management. Startups that can help their customers make better business decisions based on artificial intelligence (AI), reduce costs by improving inventory management, or protect against out-of-stock scenarios by identifying and building relationships with new, more local sources of supply will have an advantage .
Related: Find validation in customer service
4. Non-dilutive capital
According to PitchBook, venture capitalists are showing greater interest in portfolio companies “whose satellites, robotics and software tools can duplicate” in the military and commercial markets. International conflicts are one reason, of course.
Another is that the defense and military security industries are generally considered recession proof. Our firm regularly encourages portfolio companies to consider non-dilutive funding from the Small Business Administration – grants to support advanced technologies range from $150,000 to over $1 million.
Navigating the application process is not for the faint of heart. A startup needs to be realistic about the job at hand, but in many states there are resources to help you. In addition to funding, tough responses to agency RFPs are reviewed and evaluated by technologists. At a minimum, it can be great feedback and a great source of industry contacts.
5. Top-notch cultures attract top-notch talent
Company culture can be an asset or a liability. An inclusive and rich culture helps key recruits say yes. Finding stakeholders who believe in what you believe and who are aligned with your team’s values greatly improves the chances of them sticking with you through good times or bad.
After months of “big quit” fever, the overheated demand for talent may be cooling. Maybe the deals aren’t as fast or as grand as they were a year ago. Maybe Twitter won’t be the only tech company letting people go. Anyway, the search for great talent is not a tap that a young company turns on and off. A startup can modulate the timing or number of hires, but be prepared to recruit and screen to fit the culture.
Related: 3 ways to stay competitive in the talent war
With the right mindset and an intentional approach, an entrepreneur can make 2023 a year to strive and thrive. As Yogi Berra, my favorite baseball player of all time, said, “Swing at the strikes.” In business, like baseball, the right swing can turn even the toughest pitch into a hit.