Start-ups and the Economic Recession
Case Study: Nigerian Start-up (Stutern)
Editors note: This article was previously titled — “Startups and the Buharist Economy”…but for the sake of an international audience, it has been better modified to reflect the context.
“Recession is just a word” — if you’ve heard this phrase before now, then you might be in the right place.
I feel drawn to go into the details of what recession is, causes and effect etc, but unfortunately, that is not the center of this post. Not to worry, I gatch you!
Here, is one of the best links on the internet about the word recession, so feel free to come back to it at the end of this post.
Simply put in the Nigerian way, Recession is the hallmark of the “Buharist Economy” (where the price of a bag of rice has gone up by 100% — #20,000).
I recently rounded off an internship at a Start-up called Stutern (Nigeria’s foremost platform for Internship listing, peep the website here) and everyone on the team had access to the financials. To be honest, I wasn’t feeling the recession maybe cause I had my salaries paid…oh wait, price of my favourite meal went up by 50% (I won’t even say the name of the meal so you don’t judge me :( . So yeah, maybe I had my own fair share of the recession.
Stutern as a case study
We run an online platform that is hosted in a foreign country, which implies that we pay in dollars (ask abokifx.com for the exchange rate and you’d weep for us). Secondly, being an internet company we are subscribed to a couple of services that require us paying monthly fees for them, 90% of which are in dollars. Our revenue streams were about the same range but then, our expenses went up. And if those are not curtailed, we might just be on the streets looking for jobs.
How we are attacking the situation.
We had a truth-telling meeting (arrgh, we have this a lot, red eyes, no smiles arms folded, you get the picture) where we talked about our balance sheet. We came up with some ideas (some of which materialized into policies) which can be shared for other entrepreneurs to benefit from. Here:
- Get all the money in: Being stringent on already existing policies or formulating new ones is a good way to ensure that the purchasing power of your naira is kept intact; because we know that a dollar today is going to be different from a dollar tomorrow (sorry, *swap* dollar for Naira)
- Elevate your mindset and that of the team: Think more like, there is money outside, we just need to goan collect our share. This brings people (Spirit, Soul and Body) to work. They are able to think insightful and innovative ideas to get money in (being a service company, ideas around making consumers lives easier, offering services to the market are always welcomed). Never join them in saying there is no money, because there actually is money, you might just be the one not seeing it. Oh well, Rich dad posits that 90% of the wealth in an economy is in the hands of 10% of the population…if you can’t make the 10% cut, strive for the 15th, 16th, 17th percent of the population. Last last, you would fall within Vilfredo Paretos 80–20 principle.
- Reduce turnaround times: For instance, if you run a media Start-up that is probably focused on producing content (write-ups, visuals etc) for your audience to consume, then make sure you are doing that faster, in order for you to be able to do more. Learn the unit economics of your business and then increase the quantity produced in a reduced time period.
- Put in place structures that would run with or without you: As a Start-Up Founder, most times you like the much coveted spot of a CEO; which many have interpreted to mean Chief-EVERYTHING-Officer. Well, this should only apply when you are just starting out and can’t afford to get people to manage all other aspects of the business. Allow other members of the team to do what they’ve been hired for (mainly operational tasks). Don’t create a structure that requires them to always get approval from you. Also, don’t micromanage. This way, you’d be able to focus on strategic plans for the company. Thereby, doing more.
- Start by tracking expenses not reducing them: TBH, the bulk of expenses can’t be reduced, so I wonder why a lot of “business coaches” tell start-ups to reduce their expenses. How do you reduce something you don’t measure? Hence the advise, track expenses and then start directing them to more productive ventures. Leverage OPRs (other people’s resources), not everytime you pay with cash. A simple plea or call to a friend (preferably, one that owes you one) might save you some bucks in this recessive period.
- Test everything: You are not sure if something would work or not. TEST it! You are not sure if the new product you are introducing would catch on or not. TEST it!
What is an MVP? If you are start-up guy then you have probably heard the word — MVP, more than you’ve heard your name. But the misunderstanding comes when you think MVP means remaining at the bottom of the Supply chain Pyramid. Wrong, it means, doing a bit of everything all the way up and then if it works, you scale horizontally. *I wish you can get a graphical representation of what I am trying to pass across* *Look I found something!*
In summary, the Recession is real but with a lot more work, we would overcome.
Are you also a Start-up person? kindly share with us in the comment section, the strategies your start-up is using to glide in this turbulence of recession.