A Start-up Founder's Guide on Managing Uncertainty in Uncertain Times
Updated: Jan 11
Business leaders prefer to concentrate on our company's internal operations. However, with the times changing, it is essential that leaders look outside the borders more frequently.
Continuous resilience is the only way to keep businesses intact since external factors are impossible to control. Leaders that exhibit this mindset in their day-to-day operations, organizations, leadership, teams, and, most importantly, in themselves, have a higher chance of succeeding.
Start-ups are starting to see the consequences as the economy deals with macroeconomic issues including inflation, the growing cost of capital, and shifting consumer preferences. Start-ups are, however, particularly positioned to take advantage of economic uncertainty because of their very nature. Start-ups have always embraced change: They innovate beyond the status quo; they remain close to customers and re-evaluate as necessary; they tenaciously solve problems by reimagining what is feasible; and they use their small size and nimble workforce to take on big, complex challenges in inventive, new ways.
But, the important question that arises is, with a constantly changing economy and market, How can your company swiftly adjust to an evolving market?
Here are a few suggestions for a better transition to evolving trends in the industry.
1. Train yourself to make tough judgments quickly
Be concentrated and prepare for the worst Remember to include your staff! Do your utmost to strengthen your leadership over the organization since trying times bring out a leader's genuine character.
Utilize the opportunity to re-evaluate every aspect of your organization, from hiring to product development, and prioritize them while also attempting to keep operating costs as low as feasible.
2. Assess your available funds. Capital is king.
Maintaining financial stability and keeping the business afloat is crucial for entrepreneurs.
Cash is the most significant asset on your balance sheet, especially in unpredictable economic conditions and interrupted sales. Evaluate your financial runway using several scenarios. Plan for a base scenario in which the economy will recover in the next three to six months and, in the worst case, up to twelve months.
By examining your working capital, aging balance, and customer cycle, you can make sure that you can manage your receivables and payables. Re-evaluate your company strategy and increase up-front payments if it's not dependent on an upfront payment cycle.
You could implement strategies to have clients pay for a chunk beforehand. In Asia, for instance, customers are used to paying in 30/60/90-day increments. Late payments are often a problem here. Consider providing discounts to your consumers to get them to pay immediately rather than waiting for protracted cycles of payment.
Keep an eye out for chances among the coronavirus doom. Everyone is willing to talk or renegotiate in these trying circumstances. Never think a contract is binding since both organizations and suppliers search continuously for new opportunities and improved cash flow.
Keep up with government incentives and subsidies to stay ahead of the curve. Take advantage of any government chances or flexibility granted to you.
Review your third-party contracts as you search for methods to save costs for your company. Try to reduce your variable expenditures, such as those associated with supply or service providers, to minimize your total operating costs. Examine office spaces as they become more affordable as the number of enterprises that can afford them declines to lower rental rates.
3. Implement austerity measures right away.
I won't sugar-coat it: It is essential that businesses have backup plans to weather the recession before sales decline during this unsettling time. There is no room for waiting. In the worst-case scenario, can your business be small and agile enough to swiftly meet new customer cycles if you lose your key clients or if they delay payments? What backup plan do you have?
Setting up implementation tactics to deal with unexpected losses when they occur is made easy by having a contingency plan and planning for worst-case situations.
4. Concentrate on your main clients and company.
We have a propensity as entrepreneurs to be excessively enthusiastic and overestimate what is possible. Reassessing investments in new markets or goods is necessary right now. Consider delaying investments in fresh goods or untapped markets in favor of the more developed and lucrative ones. Thus, you may concentrate on making wise financial decisions for expansion.
As conditions change, new business models and certain sectors are starting to flourish. Video conferencing, online collaboration tools, and bandwidth needs on international circuits are growing as businesses throughout the globe implement required work-from-home announcements. It may be a good idea to shift part of your operations away from your primary business in order to concentrate on this new window opening and position your product appropriately, depending on what your firm does and if your business permits it.
Another important point is avoiding making general spending cuts in sales and marketing without contemplating its effect on customer relationships and brand value. In these challenging times, it is even more crucial for your business to excel in product delivery and marketing. Of course, your sales and marketing expenses must line with your income stream and maintain consistency with customer acquisition cost (CAC).
Focus on providing the finest service possible to your core clients so they don't leave; Keep in frequent contact with your current clients and assure them that you are there to assist them by giving them the greatest service. This will continue to build the brand loyalty and credibility that your business needs in trying times, as well as foster a good view among current stakeholders and potential clients.
5. Keep making pitches for additional investments and communicating with current stakeholders and investors.
When it comes to external communications, it's crucial to engage and communicate with your stakeholders (VCs, outside investors, etc.), since they may not be aware of everyday business developments. Keep setting up frequent shareholder calls or meetings and sharing your outlook for the next six to nine months. Inform others of the steps you are doing to maintain control of the situation.
The fundraising process for start-ups will be difficult, but now is not the time to halt investor connections and communications. You should improve your interactions with both current and future investors. They would value your efforts to communicate with them and inform them of your plans for handling the matter. You may overcome challenging circumstances and create a solid, trustworthy bond with your shareholder board and prospective investors by maintaining clear and appropriate communications.
Investors are risk-averse in this unstable economy, so be prepared to provide more stock and raise less money each round than you did a few months ago. They'll probably decide to invest in more established start-ups or in businesses that are already making a profit in addition to those run by seasoned businesspeople. Consider additional options like convertible loans or short-term finance, and be flexible and realistic in your value expectations.
When making your presentation, use a realistic tale and prediction rather than just making wild guesses since such won't be accepted. Transparency is essential; be honest with your shareholders since they dislike surprises like last-minute warnings about a limited financial runway or emergency bailouts.
A business may wonder how much time to attempt to add to its next fundraising round; for instance, if scheduled to last for 12 months, should it be extended to 18 or 24? Always prepare for the worst-case scenario; that way, you will have a buffer and a backup plan.
Last but not least, maintain close communication with stakeholders and consumers. Don't forget about your staff, since there will inevitably be worry and anxiety among them. As they are, in fact, the driving force behind any organization, set aside time to make sure their needs are met. Their ability to align with the strategy and perform better internally and externally will increase the sooner you communicate with them about your company's forecast and future objectives.