09
Mar
Five ways to survive a downturn
There’s a presentation I’ve given a number of times titled “Why Startups Fail”, it has 3 slides:
- Do what ever it takes
- Focus
- Remember the Exit
I was describing recently to a friend of mine and it occurred to me that some of the lessons I have learned over years working with startups might apply in downturns. So here they are, 5 ways to survive downturns:
1. Do whatever it takes
It seems simple and trite to say “do whatever it takes”, but I am constantly amazed that people won’t do whatever it takes. Whatever it takes means literally whatever it takes, and it is hard to do. During Olliance’s early days, I was alternately working several part-time jobs or taking no salary in order to insure the survival of the company. Yes, it sucked, but it was doing whatever it took to get the company going.
2. Focus
Even in good times, lack of focus will kill a company. Several years ago, I was having lunch with the VP of Product Development for a global 100 tech company, discussing how lack of focus was killing some startups. His reaction was that the very same problem was endemic in his organization. Focus is absolutely critical to making anything deliver value within a reasonable timeframe.
3. Question every assumption
This is the flipside of doing whatever it takes. People make many assumptions about how companies are run and built, quite a few of which cost a lot of money. When I was VP of Engineering at a previous startup, we spent $15,000 on a PBX system. I always wondered whether that was a worthwhile expense. I’ve also encouraged companies to avoid having the overhead of office space, something which is less and less needed with modern communication systems.
4. Look for the opportunities
There is a silver lining in every storm cloud. It’s cliche, but it’s also true. A friend of mine is a VP at NetFlix and NetFlix is booming. It must be in his blood to choose counter-cyclical industries as his father owns a direct-mail business, which is also booming. And it’s not just in the US. I was talking to the CEO of Linagora, a French open source systems integrator, and his business has never been better.
5. Remember that there is no place to hide
In most downturns, there are geographies or industries that continue to do well. Not so in the current downturn. It’s an exercise in futility to look for them. The only solution is to face the downturn and do whatever it takes. Hunkering down is ok, but accepting that you will take a loss and moving forward is better. Figuring out how this mess makes your competitors weaker and taking advantage of that is even better.
Fundamentally, the current downturn is a result of a lot of things coming to a head simultaneously. Bunker mentality and fear, which I am seeing a lot of, are not rational or productive reactions. Instead, they are corrosive and destructive in every single way. The appropriate reaction is to accept the difficult situation and invest for the future recovery. In this economy, that is what the future winners are doing.