4 Ways Your Business Can Survive a Recession: A Guide for Startup Founders


4 Ways Your Business Can Survive a Recession: A Guide for Startup Founders

Recessions can be a challenging time for industrialists, entrepreneurs, startup founders, etc. Investopedia states that only Fortune 500 companies can survive during this economic decline. They’ll save money by extracting better terms, using credit, cutting jobs, etc.

However, that won’t be the case for startups because your finances will be vulnerable. If you’re a startup founder, your profits and sales will plummet during an economic downturn without proper planning. 

According to Statista, there’s a 61.47% probability that the American economy will face another recession by 2025. But what is it that you can do? Thankfully, you can save your startup if you ‘recession-proof’ it.

In this blog, we will discuss four ways your startup can survive a recession.

#1. Analyze Business Health

The first thing every startup should do during a recession is analyze their business health. That’s because there’ll be a decline in available capital and consumer spending, leading to budgeting issues. 

Your startup can face all of the following challenges:

  • Lack of capital to pay employees on time, leading to a decline in business functions and operations
  • The temptation to raise product prices and cut costs on product quality to meet operating budgets
  • Frequent layoffs during a recession lead to a decrease in employee morale and productivity

When that happens, you must address these challenges by analyzing your business data and metrics. Based on that, you’ll need to make tough decisions regarding hiring, product pricing, marketing initiatives, and employee benefits. 

#2. Make Changes in Your Organization

After determining the pain points, it’s time for a change. The following changes will help make your startup more resilient:

  • Restructuring the organizational hierarchy 
  • Realigning staff to new requirements or downsizing
  • Focusing on market demands to evaluate services and products
  • Readjusting projected growth targets and your organization’s benchmarks

You’ll also need to prioritize the issues based on how they’re affecting business culture and customer satisfaction. For example, you must determine the inefficiencies in your startup and the kind of talent you can afford. 

With a proper plan, you can now make workforce changes by letting go of poor-performing employees. You can also analyze low-profit margins from your products or services to make changes. 

#3. Focus on Your Business’s Finances

Did you know that companies can fail even after generating millions of dollars? A healthcare startup, Olive AI, raised a whopping USD 852 million. Similarly, WeWork, a private company, raised USD 11 billion. However, both of these companies soon filed for bankruptcy and shut down. 

These incidents prove that startups collapse because they cannot manage business finances, especially during a recession. That’s why you must analyze your personal and organizational finances and create a proper plan to save money during an economic downturn. 

Do you want to know how to save during a recession? As an individual, you can reduce your overall expenses by canceling subscriptions, using emergency funds, and focusing on a side hustle. However, as a business owner, you need to do much more than that. 

Along with managing your personal finances, you’ll have to follow these tips for your startup’s success during a recession: 

  • Implement a budgeting system that suits your organization’s finances and plan it according to your startup goals.
  • Focus on current market trends (demand and supply) to offer the best pricing for your products and services.
  • Look for alternative funding options or take out business loans to keep your startup afloat during the downturn.
  • Focus on creating a remote work culture to reduce unnecessary expenses on travel, office spaces, etc.
  • Use automation technology to avoid hiring too many employees during the economic downturn.

#4. Meet Your Employee’s Needs

During a recession, your top employees can help save your business by building a robust plan. For that, you’ll need to reassure and encourage existing staff and leaders. 

According to Forbes, you must help team members boost their productivity by ensuring employee satisfaction. You can also let them know how much you value their dedication and hard work. Meeting their needs and demands is crucial because they are the ones capable of keeping your startup efficient and productive. 

Therefore, remember to consider your employee’s recession-induced stress. They might be suffering from interpersonal strains and financial hurdles as well. 

You should also encourage them to take on extra responsibilities by offering intangible perks. Moreover, the employees you retain should not be fearful or anxious about losing their jobs.

You should advocate for your employees’ mental health during a recession. Try to get everyone involved in decision-making processes and motivate them to work hard.

In conclusion, organizations like Uber and NerdWallet are examples of startup success during an economic downturn. These companies started during the Great Recession but succeeded. 

Therefore, your startup can survive a recession if you properly focus on your business’s finances. That’s because small businesses usually fail when they run out of cash due to a lack of funding. Unfortunately, CNBC reports that startup funding has plummeted due to the fear of an impending recession.

That’s why you need to be prepared. Meet your employees’ needs and implement change to remain unscathed during a downturn. But remember to analyze your company’s business health before that. Doing so will ensure that you’re making the correct changes and budgeting properly.

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