I’ve had many conversations recently with founders and venture capitalists about the challenges of operating a start-up in the current economic environment. Many find themselves in the unenviable position of cutting costs while finding ways to grow their businesses in choppy conditions.
In a race to grow and meet investor demands, start-ups can’t afford to tread water while the economy sputters. But they’re also forced to cut costs and preserve capital to ensure they can live to fight another day.
In this scenario, some founders are inclined to re-trench and resurface when economic conditions improve and allow for increased spending. But going dark in times of uncertainty can lead to speculation and concern about the company’s viability. Even if unfounded, the perception that a start-up is in trouble is contagious and sometimes irreversible.
Timely and transparent communication during challenging times builds confidence and reassures customers, investors, and partners that the start-up can weather the storm.
Peter Boritz, a successful entrepreneur who sold his business and now consults directly with CEOs, stated, "Recognizing the unique communication needs of diverse audiences is crucial during an economic downturn. Employees need specifics about the forthcoming changes, while customers yearn for reassurances of a continued commitment to delivering quality service. It's all about speaking directly to each audience’s concerns."
Boritz added, "Encouraging your team to share their ideas is vital to maintaining relevance and asserting thought leadership in any industry, especially during an economic downturn. Inclusion in the process provides them with recognition and experience and fosters an environment where unique ideas may surface - ideas that perhaps no one else had considered. So, it's not just about informing team members about the happenings but inviting them to participate and contribute their insights actively."
So, what are cost-effective ways for start-ups to build their brands and businesses through a downturn?
Unlike larger companies saddled by internal red tape or beholden to the public markets, start-ups can be bold and responsive to their audiences’ needs. The very nature of a start-up allows it to respond nimbly to breaking news and publish bold and provocative insights that generate noteworthy media coverage and influential engagement across social media. By offering contrarian perspectives on issues and challenges driving change within the industry, start-ups can simultaneously raise awareness and build credibility for themselves while competitors retrench and bide their time.
Forging Meaningful Connections
During economic volatility, fostering strong relationships with critical stakeholders becomes paramount. Direct engagement through social media platforms offers a cost-effective way for start-ups to connect with their audience, build relationships and gather feedback. By actively listening to their audience, companies can adapt their strategy, address pain points and involve the customer to ensure their needs are met most effectively.
Start-up CEOs should also facilitate strategic partnerships and collaborations with influential organizations and tap into existing networks by identifying and aligning with complementary brands, expanding their reach, and leveraging shared resources. Such partnerships can be mutually beneficial, allowing start-ups to reach new customers while offering value to their partners' existing audience.
Don’t Waste a Downturn
A downturn is an ideal time to pounce on competitors, gain market share, and build brand trust. But it won’t happen without a plan and resources committed to targeting, engaging, and influencing stakeholders with consistency and purpose. Companies that keep their foot on the gas pedal and invest in strategic communications through turbulent times often emerge stronger when the storm clouds recede.
Ted Birkhahn is co-founder and president of Hot Paper Lantern.