Startups, despite the many odds stacked against them, continue to hold steady as the backbone of the United States economy. Startups survive economic downturns. In an April 2022 Small Business Job Creation report from the SBA, key findings reveal small businesses account for two out of every three jobs added in the past 25 years.
Over the past 25 years, startups have dealt with blows ranging from multiple recessions to a global pandemic. In an economic downturn, startups have shown they can not only survive. They can thrive. Here’s what enables startups in surviving economic downturns and how your small business can work to make itself recession-proof.
Be Ready to Pivot a Startup in Economic Downturns
At the height of the COVID-19 pandemic, successful businesses made nimble moves. They were quick to pivot their offerings. Clothing companies, for example, started making masks while sit-down restaurants offered curbside delivery and takeout options to customers. These offerings not only met the needs of customers sheltering in place but allowed small businesses to keep their doors open.
Startups which survived the COVID-19 pandemic now have a better understanding of what it means to pivot their offerings to customers. In an economic downturn, savvy businesses will resume agile thinking and understand how to pivot business models according to consumer needs.
Hire Great Talent
One of the biggest hallmarks of an economic downturn is rising unemployment. Fortunately, this is where startups, and small businesses, have the upper hand.
According to the SBA Small Business Job Creation report, small businesses create the majority of employment growth. Those who lose their jobs, whether it’s because of layoffs or quiet firing, may be able to find work at startups. This is talent startups want to scoop up and secure for their own teams as these new hires will help them to grow and expand their businesses.
Build An Emergency Fund
Business owners worried about a potential recession would be wise to build, and maintain, an emergency fund.
An emergency fund is three to six months’ worth of business expenses. Hence, this money is set aside specifically in the event of an emergency. Having an emergency fund means having the ability to cover an unexpected expense without taking out a loan or using a credit card.
If you withdraw a certain amount from your emergency fund, remember to pay it back. Ideally, do this as quickly as possible. So, it’s a good idea to add additional funds to an emergency fund regularly.
Treat an emergency fund as you would a retirement fund. Strategize with the help of a financial advisor as to what this fund’s maximum contributions might look like on a yearly basis. Then, add to the fund accordingly. Too often emergency funds are looked at as a “set it and forget it” mentality. Business owners should keep this fund in a safe space like a high-yield savings account and continue contributing funds to it over time.
Pay Attention To Your Industry
Read the newspaper or any online subscriptions you have to media outlets. Listen to podcasts on the economy and watch the news. Further, speak with mentors and other entrepreneurs in and out of your space.
The more you keep up with the latest news and trends, the more you’ll be able to stay ahead of the curve in the event something unforeseen, like an economic downturn or recession, does come to light. And being ahead of the curve will ultimately ensure you’ll be ready to take the next appropriate steps in surviving — and thriving — as a startup.
Continue to Keep Your Business In Good Standing
It can be difficult to focus on filing annual reports on time if you’re dwelling on the potential impacts of a recession on your small business. You may feel nervous. Above all, do not let this feeling overpower you to the point you’re unable to remain in compliance.
So, keep your small business in compliance with its state of incorporation. Remember to follow these compliance requirements in a timely manner for your startup.
- Update operating agreements/corporate bylaws
- File an annual report
- File articles of amendment
- Pay necessary fees
- Renew business licenses and/or permits
Need help staying in compliance? Let MyCorporation assist you! Visit mycorporation.com. Our team of professionals will help you with all your small business needs.