While any business can suffer during an economic downturn, startups often face unique challenges that can cause them to take a significant hit. These companies are usually not yet profitable and often rely on outside funding, making them especially susceptible to economic changes. However, there are things that startups can do to prepare for these downturns and the uncertainty that often follows these times.
During a recession, it becomes challenging to raise capital. That is why during this time, it is important to look into strategies to survive on the capital you have. What does this mean? Consider spending money only on improving your services or products or trying to drive sales. Do not use these funds for things you may want, on goods that “would be nice to have,” or on new initiatives.
Remember, during a downturn, having cash is critical, so you want to ensure you have enough to get you through the recession and into the eventual expansion.
Change Your Methods
Try to keep a flexible business model and cost structure. Try also to think ahead and come up with a plan for any potential slowing of profits or sales. For instance, you may want to consider doing the following:
- Negotiate better agreements with suppliers or explore outsourcing functions to a vendor that can make the process more efficient.
- Look into strategies to lower risk, such as locking in interest rates.
- Determine which costs and fees you can defer or reduce, allowing you to maintain margins without sacrificing your ongoing growth plans.
- Adjust your pricing, business strategies, or products to help you survive a downturn.
Keep Good Track of Your Finances
Outside of cutting expenses, you want to also keep track of your finances and where your business stands. To do this, you need to keep detailed records of your cash flow, profit margins, monthly sales, and inventory. You may also want to monitor your day-to-day operations to see exactly what is happening and where your money is going.
Work with Professionals That Can Help
While downturns are usually a natural part of a business cycle, it is vital to plan ahead so that they do not end up wracking havoc on your business. That is why another option to consider to get your startup through these rough times is to enlist professionals to help you. For example, working with CPAs or financial planners can help you create solid business plans, figure out your finances, and develop strategies to help your startup when tough times arise.
Contact Ardent Guardian Today and Get the Help You Need
At Ardent Guardian, we understand the challenges that startups can face, especially as they are trying to grow their company when downturns strike. That is why our business is here to help you get through these times by providing you with financial planning services, accounting services, and even legal help.
If you want further information regarding our specific services and how our team can help your startup prepare for possible downturns, contact Ardent Guardian today or call us at 703-592-6774 to schedule a consultation.