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StartUp recession – 6 Ways to safeguard your company against it

From Flipkart to Snapdeal, from Food Panda to Zomato and from Askme Bazaar to PepperTap, startup watchers are seeing how many established startups are in cost cutting mode, many are firing employees and many others are shutting down. The investments are going down and the global markets in general aren’t doing that great as well. So clearly this is tough time for startups

But the time was tough in the dotcom bust of 2000 and companies that survived it were the likes of Google and Yahoo. So there are companies which manage to ride their ship in the worst of storms and eventually manage to sail through the rough sea to encounter new islands.

Hard times are inevitable. But surrendering on those times is not a good idea. You need to stand tall and fight.    

Below is a game plan you need to follow to keep your company stronger in the toughest of times. 

  • Cost cutting –

    All said and done, this can be a single most important thing that every business as well as person should do. Be smart. Look around where the company is spending more. Ask yourself- Is it required. Many startups in recent times have got huge investments. Most of these companies put this money is unnecessary expenditures like making a fancy office or hiring more than needed or in costly forms of advertising.

    The result- No money left to operate properly. Hence every company needs to focus on cost cutting more than anything else.    

  • Good Book Keeping-

    Yet another issue with most startups is the fact that they do not keep their books clean. Many startups focus only on their work and forget that there are some book keeping to be done ignoring which can put them in trouble. And the trouble is more painful in tough times.             

         It is highly recommended to take the service from a consulting firm which manage books for                your company if the company find to do it by itself.   

  • Managing cash flow-

    Although this might sound similar to the first point of cost cutting there is a fundamental difference. While cost cutting implies saving, cash flow is more about revenue. A company should ensure that the cash flow i.e. the flow of cash between assets and liabilities are well managed. Startups should focus on building assets which have potential to generate returns and not just liabilities which suck the money inside their bank accounts. 

  • Expanding customer base

          It is a general observation that many startups concentrate on a special class of people. For example, people working in IT sector or Oil industry. Moreover some converge on a certain                 demography. Though this may be good in certain times, but the approach may boomerang in               others. A recession in IT industry may shutdown your business if you have only focused on                   software engineers. Oil industry may be booming at this point of time. Or the city where your             startup has focused has been affected by flood, earthquake or a riot. It is advantageous to                     increase the base.    

  • Diversifying

         Don’t keep all your eggs in the same basket is a well known saying.  From stock market portfolio managers to VCs, everybody bets on diversification. A diversified business model is             one of the best models. Most hugely successful businesses which have stayed for centuries are           the ones who are diversified.   

  • Transparency with stakeholders

 

           OK. Financial crisis is coming. That does not mean that startup founders start to ignore VCs, Bankers and other stakeholders. Talk to them and convince that things will be OK soon and you are here to stay not run. This simple rule should not be ignored.

About the author

IndiStart Team

IndiStart.com is your one-stop destination for StartUp and entrepreneurship related news, views, information, tools and resources. Read refreshing and informative articles, interviews, news about the StartUps and business around you. Stay informed, stay motivated.

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