Slowdown survival guide for start-ups3 min read . Updated: 26 Nov 2008, 09:43 PM IST
Slowdown survival guide for start-ups
Slowdown survival guide for start-ups
Whatever it is, the news is not good for a start-up. Not because growth will slow but because many start-ups are doing innovative stuff where the revenue will come much later and they need external funding till then. Funding that has become harder to get as compared to a few months ago. So as an entrepreneur doing a start-up, what are the things you could do to cope and ride through the situation? There is no one solution that fits all situations—each company is different, each market is different. Having said that, here are five things you could be doing.
Don’t panic: This is the fifth slowdown I am witnessing in my entrepreneurial career. All of them had a stock market correction, drying up of capital and credit, a demand slowdown and softening of business confidence. None lasted more than two or three years. In India a recession means less than 5% growth for a year or two while a slowdown is 6% growth. These are healthy growth figures by global standards. However in an India that has gotten accustomed to 9% growth, this is viewed as a disaster. Remember the Hindu rate of growth—a little above 3%. We were content with that for some 40 years. Sure, things are bad, but we have been there before and come out of it. As my friend Raman Roy puts it—this, too, shall pass.
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Recognize the problem early: Internalize the understanding that times have changed—the party is over. There are many start-ups that will not survive the next three years. What you have to do is to ensure that your company not only survives but also grows and thrives. If you don’t recognize the problem early, you will not be able to solve it. At Naukri, we raised venture capital in April 2000 and the market began to correct almost immediately thereafter. We stepped on the brakes and put all the money into fixed deposits—we did not spend it foolishly on big-budget advertising. The rest of the market was in a state of denial for almost six months saying this was a temporary correction and things would be fine soon. It is because we recognized the problem early we were able to conserve our cash and ride through the meltdown. So assess your situation. Take stock of your cash availability, revenues and expenses. Assume you cannot raise any further capital for the next two-three years and then prepare a plan for survival and growth.
Take colleagues and employees into confidence: Having recognized the problem, discuss the situation openly with employees. Let them participate in suggesting alternative courses of action. It helps to have many heads working at the problem. When we tabled the situation the company was in, in 2001, senior colleagues volunteered a 30% salary deferment without being asked—it helped that we had made promises of generous employee stock options.
Sharpen your value proposition and accelerate the sales programme: This is the single most important thing you can do in a recession. Get the sales in today. Focus on doing stuff that creates immediate, measurable value for customers. And then make sales calls yourself—go out and lead from the front. This will not only give deep customer insights to help improve your offering continuously but will also motivate the sales team. Build out the sales organization as you get sure about the value proposition you offer to clients.
Evaluate every expenditure: When cutting costs, there are no sacred cows. Look at every expenditure. Don’t travel when you can email or phone. Stay in cheap hotels when you do travel. Shift to cheaper offices if that is what you need to do. Do barter deals and alliances, wherever possible. Don’t spend money on advertising that doesn’t result in sales or enquiries. There are probably a hundred areas to save money if you ask yourself a few questions. Do I really need this? Is there a cheaper way to achieve the same objective? Can I do this later? How will this improve sales? What difference will it make if I do not do this right now?
There is an opportunity in every slowdown. This is the time to get quality talent into the team—so raise the bar on hiring. More importantly, if you spend time improving your value proposition and make it more compelling, you will find that sales will happen and you have a good chance of sailing through the meltdown. So don’t quit.
The author is co-founder and chief executive officer, InfoEdge (India) Ltd, which runs the Web portal Naukri.com. He writes a monthly column on careers and enterprise.
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