How your startup can survive world economic downturn

Rather than panic, rethink the strategy for your startup.

When you read the news tomorrow, chances are that the biggest news headlines will be about the current economic crisis. Today is the day that Lehman Bank declared bankruptcy and the stock markets around the world are taking a beating. Time to panic? Time for startup entrepreneurs to give up on their ventures and get a normal 9-5 job?

There is an old Chinese saying that says that every big crisis offers an even bigger opportunity. What is the real opportunity here? What will this global restructuring mean for us all and what opportunities will arrive? While the answers may not be readily apparent, it is certainly worth taking the time to ask yourself this question and to let your brain figure out some good answers.

Here are some simple and practical tips on How your startup can survive world economic downturn:

1. Take a close look at your expenses. Jettison what is not absolutely necessary. In good times we have lots of extra spending money. In bad times, we have to tighten the belt. Simply spending an hour or so looking through all the expenses your company currently has will certainly uncover some areas where you can save money. The entrepreneur that ignores this task and lives on in denial is most likely to end up in big trouble. Money management is an essential and critical skill for all successful entrepreneurs. Take the time to carefully re-evaluate all your expenses. Remember that a delay is not a denial.
   
2. Rethink your revenues and path to market. Can you change your approach in order to get to a cash flow quicker? Most entrepreneurs have big plans for their startup and for their product development. Grandiose and lofty dreams are what make entrepreneurs fun people to work with, but sometimes they fail to see that the path to revenues must be as short and direct as possible. Especially in tough economic times, you must do whatever it takes to get some revenue streams flowing. In most cases it is better to have some income coming in than to be at the complete mercy of investor contributions. For example, instead of using the next 7 months to complete the development of your product, what about offering some consulting services to your prospective customers? My experience with the venture community is that they place high value on an entrepreneurs ability to generate revenues. Any and all activities that can contribute income will be proof that you are not only a brilliant entrepreneur, but also an astute businessman.
   
3. Narrow your focus (specialize and deliver). You have certainly heard of the 80/20 rule where 80% of your revenues come from 20% of your clients. In tough economic situations, it is more important than ever that you focus most of your attention on the 20%. This doesn't mean that you should ignore the 80%, but it does mean that you need to put 95% of your effort into keeping the 20% happy and reordering your products and services. Narrow your focus by analyzing your market and picking the customers that are most likely to purchase from you. This means the ones that have the biggest problems - the biggest challenges. Focus on them. The more specialized your niche description is, the greater will be your ability to communicate effectively and powerfully to this niche. In tough economic times, your ability to communicate will be an even greater competitive advantage for you.
4. Fewer, not more customers. The idea here is that is much easier to sell to an existing and satisfied customer than it is to go out and find an entirely new customer. Many businesses make this mistake and end up using much unecessary effort rather than getting the full potential out of the customers they already have. If you have already delivered a quality product or service to your customer, then they already know you. They have experienced your company. What can you go back and offer them? What kind of additional products and services (your own or those of others) could you offer them? In all the businesses I have worked with over the past 15 years, I have never encountered one where the full potential of the customer relationship had been fully realized. Think hard about this. You will be surprised what you will discover.
   
5. Think Global, not just Local. If you understood step 3 and if you have truly defined a very specific, highly defined and small niche, then chances are that there are not too many of these "perfectly ideal prospects" in your local market. If the members of your niche are selected on the grounds that they have exactly the kind of problem that you (and only you) can easily solve, then it is likely your market is global, not just local. The more specific the offer, the bigger the geography you will have to search. The best part of this is that different geographies are affected differently by the current economic problems. In Scandinavia, the effects will be different than in Italy and Greece. The diversity of a truly global niche market will give you a certain amount of resilience and a hedge against local economic downturns. Everyone is affected by a global problem, but fortunately, we will all be affected differently. Think Global and create a small, specific niche for your products.
   
6. Talk with your bank. This simple little piece of advice is something that many startup entrepreneurs fail to heed. Today, we had a meeting with our bank. Not for any other reason than to check-in, let them know how we are doing and to ask their advice for the coming months. Bankers (and your investors) are there to give you advice. They like this role. Too many entrepreneurs never take the time to ask. OK, no one (including your bankers) expects you to follow all the advice you get, but just the process of asking helps further your case and demonstrates to your banker that you are willing to listen. Who knows, maybe they will also give you some good advice. Mine did.
   

If everyone is looking to the left, what would you see if you looked to the right for just a moment?

Remember that during this crisis, you may just discover something new and vitally important to the success of your business. Keep an open mind, don't panic and rethink your strategy.

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