In today's uncertain economic landscape, getting funded is becoming a challenge. With reduced access to capital, it's crucial to be smart about how you spend your resources. Growth at all costs is replaced by more conservative growth with a clear path to profitability.
Things look bad but always remember that some of the best companies have come up during the recession.
🤔 Strategy During Recessions
This is an excellent picture from Bain that tells you which strategy to employ. I have always thought of Growthschool as a venture-funded company with a bootstrapped mindset. Hence my thoughts come from that bias.
The key is to grow sustainably in such times, and there are levers to achieve that.
- Reduce Costs
- Double down on what is working
- Work on Customer Success
- Long-term plan (invest in organic)
🧐 Reduce Costs
The first step to growing your product during uncertain times is to do a complete audit of your costs. Look at all the tools and technologies you use and see if there are any alternatives or renegotiate agreements to reduce costs. It's essential to be mindful of the ROI for every investment you make during these times.
Next, dive into the engineering server costs - AWS etc. There is always scope to reduce the spending there and conserve more runway. Now, do a comprehensive audit of all your marketing spends. Which are those few product lines where the return on investment is low? Identify those and cut the spending on them. Reduce the brand marketing spend, PR, communications etc. If you have a message to send out, leverage organic channels as much as possible.
Once you have cut all the spends, then check your burn multiple. David sacks has proposed a simple formula for the same:
Burn Multiple = Net Burn Rate / Net Annual Run Rate.
This figure can be interpreted as how many units of money you burn to earn 1 unit of revenue.
🧐 Double down
A standard recession advice is to cut marketing spend as much as possible. But blindly cutting it can be disastrous. If you are working at a startup, most of the time, you are a nascent brand with lots of competition.
Remember that these times also open up great opportunities to excel. So cut down only on ‘excess’ marketing spend. Put a generous budget on the remarketing efforts.
If you have a product the users interact with, look at the data, and understand the ideal customer. Have a laser-sharp customer segment to target and generate leads from that segment.
😇 Customer Success
Work obsessively on customer success. Ensure that you are close to the voice of the customer, irrespective of the role you play. Ultimately, listening to the customer and building what they want is the right strategy in any climate.
Keeping your customers engaged - reach out to them via email marketing, newsletter or a webinar. These channels might not give an immediate ROI, but they will give benefit in the long run.
So, in the end, work on retaining the customers, give them a great customer experience and cross-sell other products too.
Advice for sustainable growth
1. Personal Branding: With democratized platforms like LinkedIn, creating and sharing valuable insights has never been easier. Build your brand by sharing your knowledge and engaging with your customers.
2. Community: Organize community meetups with your potential customers and genuinely try to help them. Understand what your community needs and keep interacting with them. Personally, Growthschool meetups are a way to meet and connect with real people.
3. Organic Channels: Invest in organic channels and try to repurpose content. Write a blog, break the blog into posts that come on LinkedIn and reuse it as a Twitter thread. Focus on one channel - LinkedIn, Instagram, whichever makes sense and keep growing from there.
4. Faster feedback loops: Try multiple things, fail fast and move on. The number of experiments run by a team usually comes down by a lot at such times. But I would argue for the opposite. Run multiple experiments with a limited budget and monetize at all levels even if it is significantly less.
The best companies grew out of an economic downturn. Disney was born during the great depression, Amazon had great growth in the 2008 cycle. We just have to ride these cycles and stay put.
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