By Damian Hanson, Co-Founder & Director of CircleLoop
The recent news agenda is filled with discussion about the cost of living crisis and financial struggles of the country. The state of the economy continues to be questioned with the most recent announcement that the Bank of England raised interest rates to 3% from 2.25%, marking the biggest single increase since 1989.
The news agenda is also filled with talk of the recession we now face. Startup businesses in particular are facing challenging times ahead. So how can investing in cloud-based tech help businesses prepare for what’s to come?
What to expect?
The data shows that small enterprises have had a good year. Venture capital has been investing money into technological companies, and startups are now valued more than ever. Unfortunately, when a recession hits new enterprises, startup funding and valuations suffer the most as less money will be available for investment, making it more difficult and expensive to raise the capital needed to launch a business.
For businesses that are less reliant on fundraising, the challenges are different. It’s less about getting started and more about maintaining what they have long enough to get through a recession. SMEs will need to accept that growth is near impossible and do their best to weather the storm.
Sales may see a decline while your sales team might have to work twice as hard to hit targets with lower success rates and on top of this, potential delays in the supply chain could also slow things down as money issues spread through your chain.
Making sure your tech stack is recession-proof
This may all seem a little bit gloomy. However, your businesses can stand a better chance of being recession-proof with a little early planning and innovative thinking.
A good place to start is reviewing your IT stack. Your company’s use of technology has a big impact on how much it costs to operate on a daily basis. Inefficient hardware or too many overlapping platforms may not seem like a huge deal in normal circumstances, but during a recession, these problems can quickly become a drain on money, time, and resources that SMEs simply don’t have.
While it’s vital to invest in the right tech support for your company’s needs, during a recession it’s also vital to reassess those needs. Are there technologies that your business isn’t using often enough to warrant the expense? Or perhaps there are ones that are vital but create more work because they don’t do everything you need and a better solution is required?
Finding these issues enables you to look for better, possibly more affordable solutions. When times are tight, streamlining your operations and removing unused software subscriptions or replacing three tools with one multitasking tool will help you cut costs. Cloud technology is well-suited to assist with this.
Advancements in cloud computing for business now enable easy integration of common tools. For example, a cloud-based business phone system used by your sales team can be connected to your CRM app, Office 365 and your email provider on one platform that’s easy for them to use and gain insights from, increasing their productivity and chances of success when it matters most.
Maintaining marketing activities throughout the crisis is another recession-proof strategy to consider. Many businesses changed their plans for scaling up and drastically reduced their marketing expenses during the 2008 recession. Yet, according to a recent study, companies who kept their marketing plan and spending did better than average during the financial crisis, surpassing others by more than 30%.
A final but important note for SMEs and startups facing uncertain times ahead is to be prepared to adapt. Stay flexible.
As the recession turns the market upside down, what worked for your business in non-recession times may no longer be effective. Refusing to acknowledge the rapid changes happening to your customers, your employees and your supply chain is the equivalent of sticking your head in the sand. Making significant changes to your business model or pivoting your offering in the middle of economic uncertainty may seem high-risk but it could also be the difference between survival and failure.
Knowing if your industry is at a higher risk will help you with important decisions ahead. Our Recession-proof Index identified the most recession-proof regions and industries for startups.
The Health industry has the lowest rate of failure after 2 years at an average of 20%. This was closely followed by Information and Communication at 21%. Startups in Business Administration & Support Services saw failures increase by 8%, meaning two in every five (40%) new businesses in this industry did not survive the recession.
Although we can’t predict the future, this could be a valuable resource to help you have the flexibility to prepare and make informed decisions about plans moving forward.
Keep a watchful eye on what’s happening in and around your business so you can act quickly as and when necessary. Cloud-based or remote-enabled business tools are becoming more important for creating a modern and future-proof organisation. During a recession, businesses can’t afford to ignore the additional benefit of agility and flexibility afforded by these technologies.
Making it through a recession as a small business is certainly not impossible. Those that made it through the last recession came out the other side leaner, more efficient, more flexible and more aware of how they measure success than they had been previously. Adopting this mentality will serve you far better than over or underreacting to what lies ahead.