It happens to every startup at some point: booming business trails off and in the blink of an eye, you go from feast (extreme highs) to famine (extreme lows).
While it can send you into a spiral wondering when the next client or customer will arrive, here are three foolproof actions to take during both periods that will proactively protect you during each phase.
When business is booming and you’re in feast mode
- Build up your cash assets. Many startups keep margins slim so they can continue to grow and keep their investors happy, but end up not being solvent enough when famine hits. Don’t assume you will be able to raise funds at the drop of a hat when famine starts to set in (or that your investors will write you another check). Deposit an amount that feels ambitiously large on a regular basis into your cash reserves. This will become your marketing budget in a time of famine—NOT cash used to cover operating expenses.
- Build visibility. Optimize your website’s SEO, run ads, hire a PR agency (if you can afford it) or growth hack your own PR. Visibility is a long game, and can be expensive, so get a jump start on it now while you have the cash flowing in. Achieving the visibility your startup deserves requires both time and consistency. Challenge yourself to complete at least two activities a day to bring visibility to your startup. These daily activities could include posting on social media, sending out inquiries to a handful of media contacts, submitting an article to relevant industry media sites, FAQ boards or Quora.
- Cultivate relationships with customers. While your startup is still in feast mode, get to know each of your customers on a personal basis. Find out their interests and areas of expertise. Get to know your customers on a personal level, not just a professional one. Find out how your startup has changed their lives.
When business is taking a dive and you’re in famine mode
- Run marketing campaigns. Just as the stock market when you want to buy low, you want to dive into your marketing cash when sales start to drop off. I’m sometimes asked how much money a company should expect to spend on marketing during the lean times. While the answer is somewhat dependent upon that individual company and industry, a good rule of thumb is that you should plan to dedicate at least 20 percent of your revenue on marketing to grow your company. Make a splash and run a bold omni-channel marketing campaign in a hyper-targeted market.
- Leverage relationships with customers. Remember those relationships you built with your customers during feast times? Now is the time to cash in on them. Use your current customer base to find new customers. Offer referral promotions and other incentives to entice your customer base to share your products and services with friends and family. While often overlooked, referral promotions can increase the number of customer testimonials in your marketing materials (including website, social media, referral sites, ads, etc.). Social proof and word-of-mouth marketing is a strong motivating factor to get someone to try your startup’s products or services, and now is not the time to be shy about the benefits your customers have experienced as a result of your business.
- Stay the course. Change can take time, but it takes even more consistent effort. No matter what size company you have or what phase you are in, famine is part of the natural life cycle of a business. It is just a matter of time before persistence pays off.