Tough economic times bring a lot of misery for businesses. Revenue takes a hit, while expenses may remain the same or even increase. This can lead to a financial crunch and that can pinch your business really hard, especially if it’s a startup.
In fact, according to Statista, ever since the COVID-19 pandemic started, the revenue of startups has dried up, with travel and tourism startups losing up to 70% of their revenue.
In such a situation, you need to have certain measures in place that can help tide you over during the crisis. Be it some backup funding or managing your inventory better, having a rock-solid plan to deal with a crisis is crucial.
To help you plan for such situations and overcome them, here are some of the tried-and-tested strategies you can implement.
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Methods to Overcome Tough Economic Times
Here are the best ways through which you can ensure that your startup remains afloat during times of economic distress.
1. Prevent Legal Issues
Legal issues can drain the resources of a company of any size, especially a startup. You may have to shell out hundreds of thousands of dollars in legal and other fees if you do get entangled in some issues. During an economic crisis, this is the last thing that you’d want.
That’s why it’s critical to take care of these issues when you’re starting your company. It helps to create legal agreements such as:
- Employer agreement
- Independent contractor agreement
- Non-disclosure agreement
- Corporate bylaws
However, the process for creating these documents can be quite lengthy and without sufficient experience, you could end up making mistakes too.
That’s why it’s recommended that you engage a professional agency like GovDocFiling to get the work done for you. They can take care of your company formation so that you can plan how to start establishing and growing your business.
2. Maintain Your Cash Flow
One of the most important things that you need to do to ensure that your startup stays afloat is that of maintaining your cash flow.
While the ideal scenario would be to ensure that your income is more than the expenses, it can be tough to achieve that during times of economic distress.
In such situations, you should try your best to reduce your expenses and look for different income streams to keep the cash flowing.
3. Raise Capital
When your revenue takes a hit, you’ll have to dip into your capital reserves to keep your business running. However, these resources can also run out quickly.
That’s why it’s critical that you raise new capital to prevent your startup’s capital reserves from running out.
However, angel investors and VCs become wary of investing in startups during an economic crisis. In fact, as per the Statista report mentioned above, VC funding fell 20% in the first 3 months of 2020 when the COVID-19 pandemic started.
In such difficult times, it always helps to have some trusted sources from where you can raise capital to keep your business going.
4. Don’t Stop Marketing
When your revenue falls, you’ll have to cut down on your expenses to reduce losses. In such cases, it’d be a big mistake to stop marketing.
Consumers might be cutting back on spending too. If you don’t market your products and services well, your competitors may end up getting the few sales that do come up.
So, make sure that you try to continue marketing your products and services, and even step them up, if you can.
You can then employ these tactics to reduce your marketing expenses:
- Cut down on paid promotions.
- Target keywords driving the highest conversion rates.
- Try to build your organic reach.
- Take a strategic approach and only leverage those channels that are driving more conversions.
- Focus on retaining clients.
5. Improve Your Customer Service
During times of economic distress, it’s extremely important to ensure that you hold on to your current customers. If you end up losing them, it could spell disaster for your startup.
You must use this time to deliver the best of customer service to them and solve all their issues promptly. The idea is to keep these customers satisfied so that you can retain them.
Some of the ways in which you can do this are:
- Provide real-time customer support.
- Address their concerns and ensure that they’re satisfied with the service.
- Give them incentives to retain them.
- Be available 24/7.
6. Reach Out to Older Customers
While you may not be able to get many new customers during tough economic times, the chances of getting older customers to buy from you are higher.
You should utilize this crisis to reach out to these customers to inquire if they’d like to buy from you again. Along with your pitch, you could send out information about your latest products or services and their pricing info.
7. Engage Your Employees
You can’t get through tough economic times without the support of your team. During these challenging times, you should be transparent with them and share all the challenges that your startup is facing.
The idea is to include them in the decision-making process and give them a sense of ownership in the startup. Having honest conversations with your employees can not only help you win their trust but also helps you keep them motivated.
Additionally, when you engage with your team, you’ll also get exposure to numerous different perspectives on how to solve your challenges.
8. Focus on Competitors
During tough economic times, it helps to focus on your competitors as well. You should carefully look at their offerings and strategies to figure out how you can get their customers.
By analyzing your competitors, you can strategize and offer better solutions and services to their customers in a bid to lure them to your startup. Doing this well can help you maintain your revenue flow.
Tough economic times like the COVID-19 pandemic can wreak havoc for your business and upset your finances. To overcome this, you need to maintain your cash flow and raise capital to sustain your business. Also, it’s critical that you get legal agreements made while starting your business to avoid legal hassles during an economic crisis.
Also, you shouldn’t cut down on your marketing efforts and must improve your customer service. It also helps to reach out to older customers to get them to buy from you as they may be more likely to do so than new ones.
Finally, focus on your competitors to get their customers and be transparent about the challenges with your employees to earn their trust. It can also help motivate them to work harder during this time.
Do you have any questions about the ways through which you can help your startup during tough economic times? Ask them in the comments.