Top 5 Tips For Startups On Surviving The Recession

By raheem

Several great companies were born during recessions. HP began at the tail-end of the great depression, SAP and Microsoft were started in the mid 70s recession. And most recently Wikipedia and Google grew out of the recession of the early 2000s. Recessions are a great time to implement turnarounds and prepare for the next upturn. This is the time to implement what I call a recession workout – tactics that can make your startup stronger, faster, better.

Get the Big Picture – your finances, your strengths and the competition
Get a pulse of your startup’s financial health. Are you spending more dollars than you bring in? Can you slow down the burn rate? How many months of cash do you have left? What are your strengths and weaknesses? How are your competitors reacting to the recession? These things can be done on a notepad or thru a week long strategy session. Armed with the relevant data you can now begin to plug the holes and develop a strategy. 

Give your startup an internal overhaul – reduce weakness and build on strengths
Axe unprofitable marketing initiatives. Prioritize product improvements and get your engineering team focused the core strengths. Move your sales team to a more performance based compensation. Reduce the deadweight. If your cash flow situation is dire, take a sobering look at mergers and strategic partnerships. When Steve Jobs returned to Apple, he streamlined the product line and sought help form long time rival Microsoft – accepting a $150 million cash infusion. At the same time, Jobs invested heavily on software and used Apple’s design skills to create an early win with iMac.

Communicate & motivate – turn your assets into catalysts
Communicate your plan of action to your staff. Recessions are a great booster of productivity. But maintain morale and motivate your staff. Do frequent one-on-ones and be honest with your team. If you need to implement pay cuts – make them temporary and show them what it will take to return to profitability. An entertainment company in LA recently asked its employees to take one unpaid day-off for the rest of summer so that the company could maintain its credit lines. A tough situation was made better when the CEO promised to pay for these unpaid days as soon as business picks up. 

Grow – Find new users and protect existing ones
For every company that goes thru a recession workout, there are many more that remain in denial. This presents an opportunity to gain new market share from your competition. Use tools such as social media for marketing. Equally important is to ensure the satisfaction of your current users. Nurture your user community to reduce your own customer services costs. 

Build your warchest – Find new investors
Approach new investors. Show them the discipline you have implemented and how it is allowing you to remain strong and a better bet for the eventual upturn. They will either invest with you now or keep you in their radar for future investments. 

Note: The above post was written and submitted to Silicon Alley Insider’s free ticket give away for Startup ‘09. No dice. I ended up winning two tickets