Now that we’re in the thick of a global crisis and recession, entrepreneurs must grapple with how best to keep their businesses afloat. The challenges are far more numerous than we can enumerate here, but with a strong framework, entrepreneurs can channel those problems into an actionable set of tasks. We’ve compiled this short entrepreneur’s guide as a resource to help you survive and ultimately thrive through this difficult time.
Before we give you our playbook, it’s worth stepping back to reflect on a few things. Of course, some businesses will survive a recession and some won’t, and success will look different for each business. For some, success might be simply surviving the downturn. For others, it might be taking market share away from the competition or consolidating their market through acquisitions.
Regardless of your industry, some organizations will learn how to thrive during a recession. These organizations do a better job of understanding the changing dynamics of their buyers. The quicker you can detect how the market will change and morph, the quicker you can move to fill those needs with your products.
It’s doubtful we’ll continue to go to grocery stores, eat dinner in restaurants, or travel in the same ways we’ve done in the past. Name any industry and it will likely face changes. Whether organizations adapt their business models, products or service offerings, or the ways they package their solutions, new approaches tailored to buyer tastes will have the highest chance of succeeding.
Entrepreneurs should have confidence that people will weather the recession and even succeed. With the right level of focus and attention, it very well could be you. So, with that grounding, let’s dig into our playbook and the four key steps any entrepreneur can take.
4 Steps to Survive a Recession
1. Team First: Foster Trust & Build Relationships
An organization will only survive a recession or other challenge if its team can pull together. Leaders can foster trust and build relationships with their teams through honesty and vulnerability. Share what’s going on with the business, what you’re concerned about and why, and what your strategies are to face challenges. Invite open dialogue and questions. Set aside more time to meet. These steps are critical no matter the economic circumstances, but they’re especially critical if you want to make it through a recession. In a survey of more than 27,000 people, respondents were about 10 times more likely to recommend their company to others if they felt their leaders openly shared challenges.
Since we moved to an all-remote model at JumpCloud®, we hold weekly video meetings to discuss challenges and share kudos — and that shared sense of purpose and understanding helps us work better together.
2. Cash Runway: Assess Revenue & Expenses
Another top priority is to get a handle on your cash situation quickly. You’ll want to run a number of scenarios that account for the variety of potential outcomes, and you’ll want to understand whether you will lose existing customers and at what level. Customers facing economic challenges might not be able to honor the same contracts, while others might be able to expand their contracts with you. You’ll also want to assess what the market looks like for new customers. What quantity of new customers will you generate and at what prices?
Once you’ve sorted through the revenue scenarios, you’ll then want to continue the exercise with your expenses. Establishing a cash flow budget can help you assess your situation, and you might need to make cost adjustments in order to make your future scenarios work. Remember that it’s easy to build financing statements that give you a rosy picture, but when you translate that into cash, you might find a completely different picture
3. Execution: Prioritize Projects
It’s a good idea to prioritize what projects your team must do — projects that are the most critical for organizational success. These “can’t miss execution” projects are make or break and have no margin for error.
- Return on investment
- Fit with company strategy & goals
- Customer retention (and more)
You can also use this prioritization effort to eliminate projects or tasks that aren’t as critical from your plate and increase your focus on the core of your business. Once you select projects, you’ll want to spend more time planning to ensure that they go well.
4. Strategic Investments: Don’t Just Cut Costs
Ultimately, you can’t save your way to success and you can’t stand still on your product or service. For companies that are able, now is the time to make strategic investments. Although most companies will likely need to examine their spend and cut costs, defensive cost cutting on its own is not a marker for success. Strategic investments can help companies survive now and thrive as we move out of the recession.
This might be just one or two small initiatives with minimal investment, or it might be a small team working on a next-generation solution or go-to-market model. Regardless, you’ll want to make sure you continue to think about your future business in addition to survival now.
At JumpCloud, we’re dedicated to helping organizations shift to remote work securely and thrive no matter where their workforces are located. We’ve also compiled IT-specific recession guides — click here to learn more about steps IT leaders can take to stabilize their operations.