A Recession Doesn’t Mean Your Startup Can’t Grow [Harvard Business Review]
If the economy continues to head south, what does it mean for entrepreneurs ready to scale their business? Should they hold off on growing sales? Should they take a more conservative approach?
My answer is no.
Looking back, the 2008 economic downturn may have helped us more than it hurt us. Here are five reasons why:
High availability of talent. The “war on talent” has been a hot topic over the past few years. Attracting top caliber people into an early stage venture is arguably one of the most important tasks for the founding team. These early hires will figure out the business model, establish the culture, and ultimately recruit the next wave of employees to drive the business forward.
“Must-have” versus “nice-to-have” value propositions. In a strong economy, “nice-to-have” value propositions can survive. Budgets are plump. Spending barriers are relaxed. As a salesperson, it is not overly challenging to “arm-twist” a friend or call in a favor to make a sale.
Unit economics versus unnatural growth. Over the past few years, market valuations, both public and private, have rewarded growth over unit economics. Historically, economic downturns have reversed the situation.
A better work ethic. “Motivating the salesforce” has crept up to be the top concern amongst sales leaders in recent market studies. It can be harder to motivate salespeople in a strong economy. They are constantly distracted with calls from outside recruiters, emails from friends about new high-paying jobs, and stories about products that are “selling themselves.”
Less competition. In a strong economy, venture and angel capital are flowing. Many people argue the supply of early stage capital in strong economies exceeds the volume of good ideas and good startup teams. This outcome is bad for everyone. Investors lose money on bad deals. Customers lose money purchasing bad services. Entrepreneurs attempting to create real value face distractions from bad competition.
The fate of the markets for the remainder of 2016 and beyond is yet to be seen. However, as an entrepreneur entering the growth phase of your business, reconsider whether a market turn is necessarily bad for your business. It could be a blessing in disguise.
Curated from A Recession Doesn’t Mean Your Startup Can’t Grow
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