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Summary:

Recession-mongering got you down? Regardless of what the pundits and macro-metrics say, 80% of your time still should be focused on bringing money in the door. The “R” word might be hovering, but here are 7 ways to power through the economy’s speed bumps and grow […]

recession.jpeg Recession-mongering got you down? Regardless of what the pundits and macro-metrics say, 80% of your time still should be focused on bringing money in the door. The “R” word might be hovering, but here are 7 ways to power through the economy’s speed bumps and grow your business anyway.

1) Leverage the power of free.
Free stuff drives behavior but be to sure to use a second stage premium. For example, the first premium you can use to drive registration. The second stage premium (SSP) would be a reward for bumping incremental revenue. See also, Chris Anderson’s latest opus in WIRED magazine: Free! Why $0.00 Is the Future of Business.


2) Turn up low-cost marketing.
A great idea is to present at industry get-togethers. Stirr.net here in Palo Alto, California hosts regular events that allow start-ups to showcase. In some cases, such as Crowd Factory run by Alex Mouldavan, you get supplemental media coverage via TV news.


3) Don’t cry for me Argentina.
Don’t tear-up for the U.S. economy just because it has back-to-back bad quarters. Consider this: the U.S. gross domestic product (GDP) undermeasures the services component of the U.S. economy (the most relevant component to the tech industry) and hasn’t been updated by the GAO in 40 years. Quiz: how great a contraction is required, over two consecutive quarters, to call it a recession?: 0.8%; 5%; 12%; or 22%? Right you are if you guessed 0.8%! I think I lost 0.8% in productivity when my dog Baxter demands two walks.


4) Sell to save your client money.
You have to realize that selling
is a contact sport, and as a startup you probably don’t have existing business. This means to get it, you’re going to have to win it away from the client’s current vendor. This is easy, especially in a down economy, if your sales effort is focused on saving the client money.

Pay special attention to the following 5 Things that Put A Client Account in Play — these are universal, but occur more frequently in a down economy and that means more opportunity for you:

(a) change in control at the client level (a change in ownership of the client’s business; a big stock hit; etc.)
(b) change in current vendor performance
(c) loss of favor in vendor
(d) change in purchasing manager/decision maker
(e) change in cost/value to client
Source: UCMS

5) Stop minimizing expenses. You’ve minimized long enough. OK, reward staff for money saving ideas that simultaneously grow. For example guerilla ad techniques that translate into registered users executed by your sales team should be rewarded.

6) Carrot & Stick Gambit. Give your clients a rebate, something they’ll like in a recession. That’s the carrot. The stick: require them to pay half of the discounted-fee upfront. For example, the customer acquisition cost to a credit card issuer (a bank) is about $45. So, when I first started UCMS, I charged $22 — a rebate the banks liked. It worked for me because I required First Chicago Gary Wheaton Bank to pay me $11 of that discounted acquisition cost up front. This is what I call Recession Financing.

Two other forms of domestic-Recession Financing are demonstrated best by Stanford GSB-alum, Andy Laats (I met him recently at a conference): a) borrow against accounts receivable; b) borrow against an international letter of credit. Andy later sold his business, Nixon Branded Watches to Billabong.


7) Build during a bust. Sell during a boom.
Worse is to build during a boom and sell during a bust.

An equally important concept is what I call “Treasure Management for Founders.” This will be the subject of my next post.

Larry Chiang is the founder of duck9, which educates student borrowers on how to establish and maintain a FICO score over 750. He is a frequent contributor to Found|READ. His earlier posts include: 9 Techniques For Closing a Deal via Voicemail, How to Work The Room; 8 Tips On How to Get Mentored ; and 9 VCs You’re Gonna Want To Avoid, and 9 Things Stanford B-School Won’t Teach You.

  1. THanks for such a awesome tips.

    Would surely give some of them a try.

    Srini
    http://codingweb.blogspot.com

  2. [...] and regulation limbo. this ftm Knowledge file details the promise of digital bwww.followthemedia.comHow to Turn Your Revenues Up As Economy Goes Down to use a second stage premium. For example, the first premium you can use to drive registration. [...]

  3. Larry
    Great insights. In particular I liked para 5 “Sell to save your client money” and the five things that put a client in play. I think that this happens more that people realise in a downturn. If your offering is a “save money” proposition, downturns can be the time to grow.

  4. Larry Chiang Friday, March 7, 2008

    @Srini. Thx!
    @Mat. In the past we called them “5 Warning Signals an Account is in Jeopardy”

    Also, I should’ve linked to this GENIUS. Andrew Chen talks about migrating UP registered users

    http://andrewchen.typepad.com/andrew_chens_blog/2007/05/level_up_for_fe.html-

    Mr Chen states, “Everyone is familiar with freemium models – that is, make it free for most people, but in exchange for the advanced features, make people pay for the package.”

  5. 14 Chapters. Over 500 Pictures. « WhatTheyDontTeachYouAtStanfordBusinessSchool Thursday, September 3, 2009

    [...] How to Turn Your Revenues Up As Economy Goes Down [...]

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