How to prepare yourself for the crisis?
It’s always hard to predict an economic downturn. Michael Burry, whom you may know from the movie Big Short, is famous for predicting the housing bubble of 2008. Since then, he predicted over 7 market crashes, which didn’t happen. To put it simply - market crashes are inherently unpredictable. It's hard to guess what will happen in the near future.
Does it mean that you shouldn’t care? Of course not. It’s crucial to have a strategy in place and be ready when the risk of a recession is increased. It’s certainly increased now.
In this article, you'll find a few tips on how you can prepare your business for a turbulent period. Guidelines are based on the real story - during the pandemic, a few of our main clients were hit hard, and the company lost 50% of revenue in a single week. Our strategy was to help our clients get out of the crisis. It worked great - all three of them managed to pull through and grew significantly afterward.
In the text below, you can find many takeaways on how you can prepare also for an economic downturn that may come.
Our three main clients were providing tools for restaurants, bars, and beauty salons. When the pandemic hit, all those industries were shut down. Venues were looking for savings and were cutting tools that were not critical for them - including those built by our clients.
For a few weeks, it seemed the investors were not affected, though later, they changed their approach as well. It was a real test. Soon, we also felt the effects of the crisis.
At Vazco, working with multiple clients, we felt the incoming trend a bit earlier. We decided that helping our clients prepare for the situation was the most important thing we could do.
The best way to do it? By supporting our clients in helping their clients adapt to a new situation.
We started with gathering information - from openly available sources, our network, and our clients. We were sharing our knowledge. Our clients were grateful for the heads-up we gave them. They saw that we can be a valuable source of insight. Even when sometimes they obtained the information earlier, they could confirm it with us. Thanks to this, they were later keen to listen to our advice.
Our main motto was to make our clients’ products a part of a solution, rather than a part of a problem. Sure, the crisis hit hard. Still, it changed the needs of industries. Savings became more important than ever before. Other needs arose. Those who adapted first not only survived but also thrived later.
Even in a crisis like the pandemic, when you’d think the whole industries were going to shut down, the goal was to adapt. It translates very well into an economic downturn, as then industries mostly just shrink.
As a software house, we cooperate with many clients. And we’re lucky to cooperate with very smart ones :) Such an entrepreneurs' network gives us valuable insight into the general situation in the market. Since we’re focusing on meeting the clients' business goals and not just providing them with the code, we often participate in active discussions on planning them. This gives us an insight into good ideas, and we know which ones work in practice.
We decided to split our initial actions into:
- Strategic area - our strategic circle was constantly analyzing the situation and preparing general plans and guidelines for all projects of our clients. Our strategic team was also responsible for providing regular updates on the situation.
- Internal area - we were talking with the product owners and tech leads, who were maintaining the projects of our clients. They helped adjust strategies, providing solutions relevant to their projects, based on their knowledge of particular projects, and expertise. This condensed knowledge was ready to be consulted with our clients.
- Brainstorming area - with already refined guidelines, we were cooperating with our clients, with the involvement of whole teams, to make sure we find the best possible solutions.
Our solutions were rarely ready-made. More often, they inspired our clients - who had a deep understanding of their market - and they were refining our ideas or creating ones independently.
Looking back, it’s evident that the main value we brought was in:
- changing the approach of our clients, focusing them on creating solutions
- letting them know what’s possible from the technical point of view
- providing general information on the situation
- bringing practical inspirations from other industries
- and last but not least, in allowing for quick and effective execution of ideas, thanks to the involvement of the whole company
What proved to work out well? The best were the ideas that addressed the needs of industries most effectively. Without going into details, those were:
- Features and business solutions, which allowed the clients of our clients to catch a breath. Just as we had a good overview of what works for our clients and what doesn’t, they had a similar overview of their clients and their industries. Addressing those needs worked great. These were usually the aspects related to lowering expenses. But that wasn’t always the case.
- Effective and creative channels of communication were also critical. We managed to create a few by linking tech and creative approaches with the speed of implementation - which was crucial at that time. An example was an app that gave users full information on pandemic restrictions and allowed them to register for a service in advance.
- Vouchers for services worked great as well, increasing the capital flow for the clients of our clients.
- Adapting to new compliance standards can be crucial, too. It’s important to adapt to such changes before your competition. One of our clients, who was servicing pubs, within two weeks, was able to modify the solution to service the largest open-door events in Germany. It allowed him to grow significantly. You can search for similar opportunities as well.
An idea alone wouldn’t be enough. The important part was execution. Since the whole company was deeply involved in brainstorming and managing the crisis, everyone was on board and knew the goals, as well as their importance. We crunched whenever needed. Even though it required working overtime, people were proud that within a few weeks we were able to create live apps, which were broadly used.
The result was not only the survival of our three main clients but also their significant growth afterward.
You may ask - how does this story relate to the possible economic downturn? I believe there are many parallels. I list them below.
Help the people who fund your business - the clients and investors
Your main goal should be to think about how you can best address the needs and concerns of your clients in the new situation. You most likely know what they need. Observe businesses similar to yours, find out which things they do work well, and implement them. Work fast.
If you’re still on a runway, addressing the concerns of your investors is critical. Investors are also often interested in how you’ll adapt to the situation and reforge your business in a changing environment. Since during a crisis I took part in many talks with the investors of our clients, I know first-hand that it’s doable. Of course, every investor is different. But one of the main things you can't forget is that they need to know that you’re prepared and that you have a plan.
Creating solutions addressing problems caused by the crisis can be your winning strategy. The obvious ones are related to costs and finances. There are usually others as well, though.
Take control of the narration
It’s possible to work efficiently in a crisis. In the story described above, helping the clients adjust their strategy to a continuously changing environment positively impacted their businesses. Why? Because they were able to change the approach of their investors and clients as well - down to the person using the final service. This, in turn, in the end, improved the cash flow.
In order to do this, it’s good to have the ear of your investor and your clients in advance. Show them you’re prepared and that you have a plan. Be honest about the situation and stay reliable. As a result, you'll be listened to once you’ll have useful solutions ready.
Plan for success, not just survival
It’s hard to focus on such things during a crisis. Still, ensure you maintain the ability to grow your business and use the arising opportunities. Otherwise, it may be very hard for you to leave the crisis situation. On the other hand, even a single opportunity can get you out if it’s properly taken advantage of.
It’s important to use them fast.
Extend the runway
If you plan your next financing round soon, e.g. next 6-12 months, you may think about raising funds sooner and over a longer period of time, even if it hits your valuation. This is what we see some of our clients are already doing - examples are Book Salon and MaestroQA. It’s good to be safe and well-positioned for using the arising opportunities.
The ability to use the appearing market opportunities fast, before the competition, is often critical. It’s important to have a team that is prepared to do this flexibly, with a good understanding of what needs to be done, and a high focus on delivering it on time.
A few times, it happened that we were able to extend teams within a matter of days, which significantly helped our clients to use the situation for their own needs. It was possible because we had the key people in place. Had we moved Software Architect and shadow - Product Owner away from the project, it wouldn’t be achievable.
It’s hard to predict economic downturns. It’s even harder to predict their scale and effects. Still, it’s worth being prepared for one.
In my opinion, it’s worth preparing as soon as possible. I believe we’re fairly well-positioned to provide help to our clients if it’s needed. I’d advise you to have a plan in place as well.
It’d be great to hear what’s your approach.
CEO at Vazco