There’s a Silver Lining for Entrepreneurs in a Downturn…Actually, There Are Four
You’ve probably heard that a new crisis brings new opportunities. How is this possible? Well, it turns out companies go through business cycles with ups and downs just as the economy does. When times are good, entrepreneurs are quick to seize the moment but bad at optimizing costs and productivity. After all, why should they be? We were taught to be first movers and spend what it takes. But in a downturn, founders need to take a different tack and optimize what they have already built to emerge stronger when the economy does come back. So what exactly needs to be done?
- Review Your Entire Team
Review your entire team from executives to individual contributors and ask yourself who is bringing the most to your business. Decide who needs to be put on an improvement plan or leave the company. Then, do the unthinkable: hire talented people to replace them. In my experience, when the economy cycles down that means talent is available and willing to come on board. At the end of the day, your team is your main competitive advantage, especially when times are tough – so when talent is out there, you should seize the opportunity.
- Improve Process
Improve the process and productivity of your key tasks. When the environment is great, your natural inclination is to do whatever it takes to accomplish your goal. But in a downturn, it should be the opposite. You want to find the most efficient and fine-tuned path possible. Why? Well, as revenues and market opportunities grow, so do your operating costs. So, if you can optimize costs when revenue is slower, you create an advantage for yourself as your business takes off down the line. This means you need to identify your key processes, especially those that cost the most. You also want to talk to as many customers as possible to understand their pain points. Then streamline and automate using software or basic process improvements everywhere you can. Trust me, the investment is well worth it.
- Acquire Competitors
Take a look at your competitors and identify those who weren’t prepared for the downturn. Would acquiring them help you augment your services, get new customers, or reach another goal? Competitors who are nearly out of cash will almost certainly welcome your call. They’ll want to move fast too because, after all, something is better than nothing. One key caveat, though, is to make sure your values and those of the company you want to buy are not at odds with each other. Bad acquisitions will drag you down, so be careful. But when it’s a no-brainer, don’t hesitate to move forward.
- Raise More Capital
Wait – how can you raise more capital in a downturn? Well, one great way is to raise directly from your customers, community, friends, and family. For instance, when financing became harder in the aftermath of the pandemic, many companies turned to equity crowdfunding and successfully raised millions of dollars. In fact, this source of capital can be even more viable in a downturn. At the end of the day, it’s often easier for many people to write small checks than it is for a single VC to write one large check. With equity crowdfunding, you also have the advantage that your newfound investors tend to become your most loyal customers. In effect, what you get is an army of word-of-mouth promoters. In hard times especially, that’s much cheaper than advertising.
Don’t miss the opportunity that’s in front of you today. The market always comes back, oftentimes bigger than before – and these are the four key steps you want to take to make sure you’re ready for it.