Imagine yourself running up a hill when there is an avalanche, falling straight down at you. As it carves down the mountain, you find yourself now on a higher peak, whilst a pile of debris can be seen from the height you’ve reached. This is what scaling and growing in the current, bearish market looks like.
It’s oxymoronic to believe that during a decline, there can be growth. But I often relate business to human beings. For a human to grow muscle, they first have to lose additional unwanted fat, in order to convert the good mass into muscle. Hence, bringing us to one of the three key ways of growing ventures in an ecosystem that has seen brighter days.
Trim the excess weight – This is important for any business but we don’t feel the additional baggage our businesses carry until we have to hold it for longer than anticipated. I’ve noticed food ventures shift their manufacturing to third party manufacturers, simply because they realized that certain products only constituted 3-5% of their revenues and hence, only at a time when they felt the product will not sell as well as their other SKU’s (stock keeping unit) will it make sense to release some of these non-essential SKU’s to others. During adversity like this, in order to trim unwanted weight in any industry, the method to do this is simply calculating which stakeholders, which can include customers, products, services, and innovations, generate income that surpasses breakeven for the venture. At a time when there is more certainty of the percentage of decline than how fast the markets will get back on its feet, it’s better to work towards becoming cash-rich rather than increasing your valuation.
Businesses can often be related to poor decisions. In fact, several businesses are poor decisions, and here’s one that’ll lead to the second growth hack during a crashing market. There was once a race driver who bought a car with an incredible power-packed engine. With his additional cash reserves, instead of modifying the performance of his race car, he instead optimized the stereo, with bass that could be heard across any race track, to plush seats, neon lights, and the works! However, what he didn’t realize is, he spent on what was a cost and not the ‘fuel’ to his chances of winning. He lost by a mile. The bear markets command we prioritize.
Cost centre vs revenue generator – Check your cash flows, speak to your customers, call your distributors, your procurement team, marketing staff, and look at your data across all these points. You’ll clearly see two data sets. One is a business function that makes revenue, while the other takes revenue. There is no promise of the latter returning it, let alone making you earn interest on it, yet we hold onto, making ourselves believe they are needed for our business to run functionally. Covid-19, however, has made ventures come together in one strong huddle. There are ventures that used to develop both software and hardware, but swapped their roles with another venture that did the same as them, and have chosen to collaborate with one another. They might be competition but for one of them, the software was a cost to develop that didn’t’ return value, whereas, for the other, the hardware was a cost not worth incurring. Not only did they trade their capabilities, but they also chose to trim their egos to identify an ally in a competitor. This is a time to work with your competition, because if they don’t survive post this decline, then it’s no fun being in a race for one.
This brings us to the last point but one of the most famous stories, of the rabbit and the tortoise. The rabbit slept off simply because it thought the tortoise will never make it in time and we all know how that ended. Hence, this is a period to slow down but it is in no way a time to stop.
There is more than what meets the eye – Every industry is going through a shift. There is either emphasis on some, from intent focussed and healthy foods to preventive healthcare products, or hiring towards the gig economy. While there are pivotal disruptions in store for the hospitality ecosystem, real estate, and retail industries, to name a few. Yet what we know is that none of these industries will erode. To think they will is as naïve as being the rabbit who thought the tortoise will never make it. Hence, think of yourself as the rabbit and the tortoise the evolution of your industry; it is bound to reach the finish line and change one way or the other. If you find yourself in the sectors that are boldly emphasized during this time, then assess your strongest points once you’ve trimmed your business, and penetrate the market only with your trimmed offerings. If you’re in an industry that is going to be disrupted, then be the disruption by gauging your revenue centre and collaborating with those whose revenue centres are your cost, as they too will match this ideology of collaboration. Like two perfect puzzles, your offerings will help you innovate at a time when innovations are the easiest to explore because in a post-COVID-19 world, either you have a customer or you don’t. I don’t see a room, patience, or appetite of prospective customers (b2c or b2b) to sit, and wait to make decisions.
As the metaphorical and real gates open across geographies and sectors in a post-COVID Earth, the world will move at a rapid speed. But those who will lead the race consistently will be ones who have tied their laces, pulled their socks up, with a game plan that has ensured they have not hurt their fingers holding onto parts that never let them grow. In order to be the bull, in a bearish market, letting go of the unwanted is the moat to success.
Contributed by Sanil Sachar, Founding Partner, Huddle Incubator