We stand on the precipice of a difficult time. We have emerged from a second nationwide lockdown and the second wave of COVID-19. As we step into business, we must ensure our survival and a path to prosperity by building a recession-proof business.
For Indian industry, entrepreneurs and startups, building a recession-proof business is a struggle to keep labour, logistics, and capital together, breaking even and clocking profits. We need a dynamic model that works with our current state of flux and maximises productivity within our current constraints. To do this, we are collectively re-examining our ways of working and business models.
As an investor who has mentored many early-stage startups and dynamic businesses, I believe that this dynamic model requires us to restructure ourselves as businesses fundamentally. We need to incorporate an agile mindset with technology-first and local solutions to fulfil their goals. Recession-proof startups also need to ensure that they build an adaptive nature ready for the rapidly evolving world.
Broadly, building a recession-proof business involves the following strategy:
Building an adaptive mindset at the workplace Take this as a lesson from the fractured way of work in 2020 – we need to be ready for everything. Being future-ready involves actively forecasting business challenges and working on ways to address them. For an entrepreneur, this means building an adaptive mindset within the core of your business. Begin here by hiring and retaining talent with such a mindset, and you would overcome any situation. Problem-solving recruitment sessions, brainstorming meets and ensuring fluid workflows, on the other hand, are ways in which we can sustain such an agile mindset. Flat structures where we involve all hands on deck to proactively solve problems can also help you build a path ahead.
Rethinking your business goals and the market needs can fulfil Startups begin and maintain lean business models to focus on the conditions which they can meet. However, in 2020, we saw businesses rework these goals or align to new ones to survive during the pandemic. Direct to Consumer delivery brands gained recognition as many moved into groceries and essentials. Even restaurant delivery chains like Zomato and Swiggy adapted to fulfil the immediate needs of their consumers. Consider your current business goals vis a vis the business needs of the evolving society. Do they still align together? Do you need to tweak one to match the other? Or think on the lines of a new product line, a new branding strategy or an addition to the current set of offerings?
Building alliances across the production cycle for steady supply and demand A recession-proof business can consolidate its entire logistic chain to ensure there are no gaps between supply and demand cycles. If startups wish to achieve this status, they need to rethink these dynamics for their end products. Fintech brands have upsold steady microloan and investment solutions to smaller customers, while logistic firms are partnering with small and medium businesses as delivery fulfilment partners. To tweak the production cycle, begin by identifying and forming solid partnerships with your suppliers and regular vendors. Ensure a payment expectation with these partners in case you may run into a liquidity crisis. On the other end, take the time to build distribution chains for your products, build your visibility on digital-first retail platforms and collaborate with other businesses who can incorporate your product offerings within theirs.
Adapting to a digital-first environment of working Next, let’s think digital at all levels. Lockdowns, social distancing, and the COVID pandemic peaks have done away with the idea of regular, office-based work for most employees. The advantages of remote work, gig-based freelancers and digital solutions have helped most businesses think digital. Taking this thread forward, it’s time for all entrepreneurs to start thinking of digital-first solutions for all of their business needs – from aggregating supply, value addition, marketing, sales and post-sales services. Consider automation, chat-based aid, remote working and digital delivery systems to fulfil your business needs. You may also add digital-based products like content or online consultation to your main products.
Create emergency corpus for Opex & Capex needs The locked economy has taught us the need for a cash reserve, be it in our personal and professional lives. That’s a painful lesson all businesses need to remember, be they big or small. Fewer sales, slower delivery cycles, and public sentiment to save rather than spend have in turn made most businesses worry about their very survival. To ensure that your business remains recession-proof, begin building an emergency corpus fund from your steady revenue and ensure that it’s big enough to handle both your Opex and Capex needs for at least six months. Consider investments for your business in diversified financial products to add to this corpus, alongside a profit from your steady revenue. That’s the way to ensure that you make it through on these rainy days.
Work towards employee retention The uncertainty of a looming recession wrecks employee morale like no other. In such a situation, we recommend that startups and small businesses build confidence within their employees to retain their jobs, not face income cuts and survive with the brand. Build a transparent image of how the business is performing and encourage them to contribute to solutions. In case your business is facing a tough time, work with them to build operational revenue. Overall, a recession environment needs you to step up, the way larger corporates would and build confidence as a source of employment. Letting employees go may seem to be the easiest way to cut costs, but this move causes negative repercussions. It’s the easiest sign that your business is not doing well and that you are worried about its survival. In the end, any business that grounds itself within its customers’ needs and remains willing to adapt to changing circumstances is on the way to become a recession-proof business.