Five Ways to Pivot Your Startup Out of a Recession
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” – Charles Darwin
Just as the world was recovering from the Covid-19 pandemic, major stock indexes plunged into bear market territory earlier in 2022 as investors waited for the highest hike in Fed interest rates since 1998. The S&P was down by 23% at the start of the year, and the economy shrank for the second consecutive quarter. Further third-quarter recovery is also not expected, primarily due to projected housing data.
Even as stock indexes entered the bear market, cascading red graphs across crypto exchanges have resulted in investor frenzy. The crypto market hit the lowest market capitalization and Bitcoin is trading at its lowest rate since December 2020. Most analysts consider global inflation as the primary cause of the crash in the cryptocurrency market.
Questions to ask yourself before Pivoting
It’s easy to say that “we will pivot” our way out of the crash – but pulling it off can be challenging. Asking a few questions will start the process.
- How will your business succeed in the changed world?
- Which levers should you pull first?
- How to ensure you can raise capital when required or keep your venture fundable?
Based on our observations, successful pivots usually happen in one of the following ways:
- Modifying a product’s feature into a new product
- Using new technology for product development
- Focusing on a new target customer segment
- Changing a platform from a web app to an app or vice versa
- Onboarding valuable talent from around the globe
When to Actually Pivot
Most entrepreneurs today believe that pivoting is the best success formula; however, the fact is pivoting should be considered only when you have exhausted all your other choices. Some factors that can help you to know when to pivot include:
- Your venture is constantly failing to surpass competitors
- Your business expectation and objective have changed
- Your product offerings are not taking off
Five ways to pivot your business during a recession
- Embrace a growth mindset
Embracing a growth mindset is a journey, and the most difficult part is to retain it. But remember that nothing worthwhile is available easily and getting a little uncomfortable is important if you want to grow.
Once you become comfortable with what you are doing, you may not push the boundaries enough.
Another important aspect of a growth mindset is speed and thoughtful prioritization.
Having a grasp on the most important things that will benefit your business is critical. When you do these things first, you will be more efficient and productive and, more importantly, focused on work that is important.
Take the time to build stronger customer relationships and find new growth opportunities. Consider improving marketing plans, optimizing the website, evaluating operations, simplifying the back-end processes, and finding new offerings. The primary objective of embracing a growth mindset is to ensure your business is ready when a difficult situation passes.
- The only constant is change
An entrepreneur’s strongest asset is their ability to act quickly. Admitting that change is inevitable and chaos is constant ensures you are always on your toes. Today, economic changes are more unpredictable than the pandemic, and during the time of a recession, accepting that things will change will allow you to be prepared when it occurs.
Some entrepreneurs make the mistake of staying away until the crisis passes. But when you stay put during such hard times, your business will emerge stronger with enhanced goodwill and a higher customer base. Take the efforts to show your customers that you care and find ways to help them fight any challenges they may be facing.
- Be transparent and over-communicate
During economic uncertainty and recession, your entire organization looks up to you for guidance as their business leader. The best way to guide your people is by being transparent. While putting up a fake façade showing that everything is fine is tempting, transparency instills confidence that you are in charge of the situation and capable of leading through the necessary changes. Being transparent also encourages your people to help find ways to get through difficult times.
Developing a well-defined communication roadmap to ensure complete transparency to all your stakeholders is important. Some key points to include in the communication plan include:
- Talk about the bigger picture and vision – At the start of your venture, you may focus on one product or resolve a particular issue to gain investor confidence and raise funds. However, while pivoting your business, it is important to talk about the larger purpose to ensure all the stakeholders gain confidence in the change in the course of action.
- Compelling storyline – A clear and compelling storyline detailing the problem and the solution can be an excellent thing while pivoting.
- Allow the leaders to lead the story – The founders are often the face of the business, and the company should leverage the same while sending across the message. Having in-person meetings with the investors, town hall meetings with the employees, and detailed discussions with key partners are beneficial to bring transparency and build confidence.
- HR and Resource management
“If you want to go fast, go alone. If you want to go far, go together.” – African proverb
Ensure you have the best team – Having the right people during a pivot can help businesses succeed in their efforts. While looking for the best team, you must consider internal and external personnel.
Look at the current costs – An important aspect of pivoting is improving efficiency while keeping costs within acceptable levels. Take a closer look at the current costs and identify areas where these can be reduced. Consider hiring external experts for certain functions like a software development team, which may be a more cost-efficient option.
Scout globally to find good talent – The pandemic has shown the world that people do not necessarily have to physically attend the office to be productive. This has opened several options, where companies can scout for good talent in any part of the world. This not only improves productivity and efficiency but can also be beneficial in reducing costs. Several countries in Asia and other parts of the world have lower wages, which means companies can hire the best talent without spending a bomb on hiring them.
- Look for the bigger opportunity
According to the Financial Times, a strategic pivot is “the tortured path that most start-ups go through to find the right customer, value proposition, or positioning”. But, it is an important step between giving up and failure.
Every crisis is an opportunity. The fall of the Berlin Wall, stock market crashes, and the latest COVID-19 pandemic show us that long-term plans get thrown out and you need to adapt quickly.
Although there may be tough times during this period, several businesses have found new opportunities and new ventures have emerged, and new ways to work are being easily adopted.
Quick and strategic thinking can turn a crisis into an opportunity. Being flexible and nimble and taking advantage of every opportunity that presents itself can open new doors for your business. Accept that challenges make you stronger and apply the learning in the future.
Everything may not work out, and that is okay. You should expect to fail but focus on moving forward.
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