During economic downfall, small and young businesses are the first to feel the impact. With limited funding and budgets, startups are left with no choice but to seek creative solutions and keep their main revenue generators — their digital products — afloat. 

The majority of startups rely on loans and financial support from their investors. And when economic recession approaches, these two sources of revenue become much less accessible. Banks and investors alike restrict their funding policies and switch turn to the “maximum feasibility” mode.

Now that you know that getting the next round of funding is unlikely (if not impossible) in any foreseeable future, let’s think of the best ways to operate with the money you already have wisely.

Optimize Costs and Scale Wisely

Even if in a time of crisis you can’t add new functionality to your product with the frequency you’re used to, you’ll still have to ensure its maintenance — there’s no way you’ll be able to cut product-related expenses down to zero. But you can try using MVP to reduce the cost just like startups do.

Maintenance and development are usually the most expensive operations so you might be interested in outsourcing them to software development vendors in the biggest outsourcing regions such as Eastern Europe, Latin America, Asia, and Africa.

Each region offers different developer rates and can supply tech talent with various levels of expertise. For instance, if you plan to optimize development costs while maintaining high-quality code, try outsourcing to Ukraine, Poland, or the Philippines.

Outsourcing your development is an effective approach when you want to scale your product and keep a sustainable number of in-house employees. Certain business models allow startups to hire remote developers who will work as an extension of their existing development teams. Therefore, you can keep your current tech team and scale your product while spending less. Your company can also save a lot of money by staying in remote mode, and that is possible if you implement some work from home policies.

Prepare Ahead of Time

Obviously, you can’t single-handedly reverse or avoid an economic recession. What you can do is outrun and mitigate the possible negative effects it’ll bring about. You might ask: “But what can a startup do to foresee a crisis?" One easy way to identify an approaching decline in the economy is by talking to sales representatives and keeping tabs on the global market. If you notice that the global revenue in the industry is in decline, get ready to launch your survival plan at any moment.

The next logical step is to optimize the budgets you’ve been planning to spend on vendors and subcontractors. If possible, try taking the processes you’ve been outsourcing to third-party companies back to your in-house team or automated software solutions. 

They say that the winner is the one who survives a crisis with the smallest debt. So before a crisis gets into full swing, try to pay off as much debt as possible. Prepare to reduce your expenses by half but make sure you’ll still be able to pay your employees’ salaries on time. 

If the strategy above isn’t your option and you know that your business could use extra money to get through a crisis, you should seriously consider taking a loan. When a crisis strikes, more businesses will be seeking financial support from banks, so use your chance before your competitors do.

Turn the Saving Mode On

One of the natural responses small businesses have to economic decline is to cut as many expenses as possible. In a rush, companies close contracts with trusted suppliers and let valuable employees go in the hopes of getting through. It just seems like a rational and safe way to avoid bankruptcy. 

While “saving mode” can be easily justified from a financial point of view, in the long run, it lowers a startup’s chances to compete on the market later. As the economy comes back to normal, finding partners you can trust and qualified employers all over again can become a struggle.

What’s more, startups that continue working more or less normally during a recession are much more likely to win greater market shares while their competition keeps decreasing.

If you decide to try and evolve despite a complicated period, here are the approaches you can use. 

Don't stop Learning

First, this is a moment in our history that requires excellent communication with customers, vendors, and collaborators — especially in person, by email, and places like LinkedIn. If you or someone on your team needs to improve their English or grammar, take advantage of several free, university-level courses offered through edX, a leading online learning source that includes programs from top schools.

Search for new options to do guerrilla marketing or lookout for the products that can save a lot of money because they are new and interesting to your customers. If you want to avoid expensive commercials, opt for native push ads, or micro-influencers who still dont have a lot of sponsors. 

Stay Positive

The two approaches described above share the same final goal, which is keeping your business afloat during an economic recession. The difference between them lies in how you want to come out of a crisis.

You’ll definitely boost your chances of survival if you reduce all operations and let people go, but your chances of fast recovery will most likely go down. But if you choose to outsource, you’ll be able to increase the competitiveness of your product and remain an active player on the market even in unfavourable economic conditions.