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The last few years have looked like a bad TV romance between the US market and the Federal Reserve. There has been so much talk about “will they, won't they”. reduction of interest rates and trying to read the tea leaves that can drive a person crazy.
This has created a lot of uncertainty and instability. Some companies, especially startups, are caught sitting on their hands instead of turning to the reality of the new market.
Fortunately, the US has avoided a recession so far. However, some economic volatility and investor uncertainty have made life challenging for entrepreneurs dependent on new financing to grow their businesses.
WHEREAS Studies show a rebound in startup funding During the first half of 2024, this funding has been spread across concentrated industries – such as AI – and even fewer companies, creating an even more competitive environment than usual.
While entrepreneurs don't need additional investment challenges, I outline three critical steps to adopt a spirit elasticity and navigate this market more effectively.
Related: You no longer need venture capital – Here are 4 funding alternatives
1. Double your financial health
Give your company priority financial health and efficiency regardless of market conditions, which is especially important when experiencing volatility.
Your first step is to consider how you are investing in your business. How are you distributing money between your different departments? You'd be shocked at the number of organizations that don't realize the importance of this concept until it's too late. Whether it's you as the founder or a partner or trusted financial advisor, make sure you know exactly how much goes in and out, where and how low it can go until you reach critical mass.
With that in hand, determine the most effective places to cut costs while still spending money in the right places. Sometimes, the best way to cut costs is to spend money on a good one accounting firm or building your finance function. It costs money, but it will save a ton of money in the future. This is always one of our first recommendations for investment companies – do this sooner rather than later.
As part of this exercise, you should determine what KPIs or metrics investors care about and focus on keeping them higher than your peers. If net retention is a key metric, focus on what you can do to improve customer retention.
2. Don't lose focus on who matters most
If you are feeling the tip of a volatile marketit's likely your customer base is too.
This usually means that their spending habits will tighten and they will have to be more selective about how and where they spend their money, not wasting precious income on unnecessary things. How will you ensure that your product or services are listed?
Let's say you're a B2C brand whose core consumer audience is shifting to lower-cost options due to tighter budgets. Unless your business is completely commoditized, you often don't have to compete on price alone. So how do you get customers back?
Ideally, your first step would be collect relevant data about your customers' spending trends, how they use the product and what they value most. If your data suggests that your customers value reliability, perhaps an extended warranty is an option to consider.
Understanding your customers' situations and offering an alternative that meets their current needs builds a level of loyalty that is impossible to replicate. By tweaking your product and messaging, you're showing customers you care while ensuring a steady stream of revenue amid challenging economic factors.
3. Stay flexible and agile
When the market is confusing and unpredictable, giving priority strategic agility it will help you adapt quickly to changing market conditions.
Market volatility often creates opportunities for those who are flexible and opportunistic. However, this means that you need to have a good foundation for your business. Focusing on growth in difficult markets will be challenging if you are always on the back foot.
How can you rethink your business model to make it more scalable?
Flexible infrastructure can keep your business lean and adaptable. You can expand quickly as opportunities arise or shrink if conditions deteriorate. This strategy makes your business more resilient, enabling it to thrive despite external economic pressures.
Finally, don't forget investing in innovation. Even with limited resources, this can help you maintain a competitive edge. Focus on “smart innovations”. These small and impactful changes can differentiate your business without spending a fortune.
Maybe you're refining existing products to increase efficiency or adapting features based on customer feedback. Even if it's not a large-scale R&D project, strategic innovation demonstrates a commitment to progress and helps your startup stand out by fostering long-term customer loyalty.
Even a series of small innovations can compound into more significant competitive advantages in the long run.
Related: Venture capitalists are pickier about what they invest in – here's how it actually benefits startups
Survival of economic uncertainty
The smartest economists don't have a magic crystal ball—even if they act like one.
No one can speak for sure about what is to come or what the market will be like in the next few months or even the next few years.
International Monetary Fund predicts further market volatility in 2025including a possible slowdown in economic growth in the United States. Escalating global conflicts and a significant change in the structure of US political power muddy the waters even further.
The point is, these things are out of your control. You can't change the weather, but you can grab an umbrella. Just because you can't influence the market, you can still prop up your company to weather any financial storm that may come.