There is no question that the global economy is facing a significant downturn. With recessions looming for many Western nations and inflation rampant, it has never been more important to safeguard your software start-up from a recession.
It must be said at this point that you can never fully insulate a business from external market forces. In fact, every business (no matter how large or small) is at the behest of customers. If they have less money in their pockets, then they are less likely to buy from you.
Despite this, there are certain approaches you can implement that will help your start-up ride the waves of recession and emerge on the other side stronger than ever.
In fact, there are opportunities to be had during hard economic times. When many other, larger competitors are struggling to downsize to cope with decreasing demand, you can adjust far more quickly to changing market trends.
What’s more, if you can offer your customers a vital service, they will still be willing to pay for it, even during a recession.
Here are some top tips for protecting your software start-up from a recession:
Keep your internal team small
One of the best ways to protect your software start-up from a recession is to keep your full-time team as small as possible.
The reason for this is simple. The fewer staff you employ, the lower your overhead costs and the less you must pay at the end of this month.
Lower overheads will be incredibly welcome if your cash flow decreases, leaving you far below your estimated revenue month-on-month.
Another by-product of this is that your start-up will be more flexible to change. If you need to pivot in a new direction, for example, having a smaller team allows you to adapt quickly.
At this point, you’re probably wondering what you can do instead of hiring a full-time team.
The answer is outsourcing.
By outsourcing certain tasks to external experts such as Cedar Bay, you will free up your team to focus only on core jobs.
Focus on maintaining a steady cash flow
Cash flow has already been referenced in this article, and for good reason. It is the lifeblood of any company and ensures you can pay your bills and take a consistent profit.
Without steady cash flow, you can quickly find it difficult to pay your overhead costs (such as loans, employee salaries, and rent), leaving you with no choice but to go into debt or face bankruptcy.
This can take as little as a few days to occur with certain businesses, which is why it is imperative to protect your cash flow during difficult times.
To protect your cash flow, create strict payment contracts with your clients to ensure they pay on time, lower your overhead costs, adjust your pricing structure, or reduce your range of products.
Make sure the problem you are solving is vital
Lastly, you need to make sure that customers actually need your products or services. Luxuries or novelty items are the first casualties of a recession because they are not vital to the health and well-being of the customer.
Therefore, make sure your products or services are as good as they can possibly be and solve a burning problem for the customer.