Choose your startup’s crisis strategy: Offensive vs defensive

Businesses of all shapes and sizes have been affected by the COVID-19 pandemic, however, startups and small-to-medium-sized businesses are proving particularly vulnerable.

Seemingly overnight, businesses have seen their clients become ‘at risk,’ their sales have dipped, and operations have slowed to a snail’s pace. With venture capital investment predicted to slump by billions of dollars in 2020, and government support packages slow off the mark, there is little help on the horizon for many businesses.

Business leaders are now determining how best to advance. In the same way a paramedic checks vitals before providing treatment, founders have to assess their company’s general health before taking action.

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Depending on the results, their startup will either have to follow an aggressive business strategy or take a more conservative path in order to survive. Failure to do so may lead to ‘knee jerk’ reactions and harm the business in the long term.

So let’s look at how startups can use data to assess their new circumstances, and then decide whether to best take an offensive or defensive stance to weather out the storm: 

First step: Use data to plan your tactics 

Author CJ Redwine once said, “losing your head in a crisis is a good way to become the crisis.”

So, first things first. Gather your team and get an in-depth update on every client. Look at how long is left on client contracts, and if there are any break clauses to be considered. Likewise, get general feedback about client interaction, like if people seem withdrawn or have voiced concerns over continuing with your business.

Next, pay attention to your technical data. Create reports around website traffic, conversion rates, service or product usage, customer service inquiries, and online engagement. Pull metrics that highlight fluctuations in this data, whether negative or positive, to get a sense-check around overall performance.

Then deep-dive into your finances. Burn rate should already be tracked on a monthly basis but it is extra important during this time. Calculate incomings, divided by your monthly burn rate, and assess your roadmap based on these new figures. 

Once you’ve collected and organized your data, you can choose whether it’s best to focus on defensive strategies first, or if your ducks are already in order, move straight to the offensive strategy. 

Defensive measures are a way of steadying the ship — they allow you to understand where you are right now, what options you have available to you and which ones you do not. You should always start here and get your house in order. 

Once you have a stable footing you can move to the offensive tactics which are about improving the situation.

Option 1: Defensive 

A defensive approach primarily concentrates on plugging any holes in your ship. It can also help you better understand your company’s position in a newly turbulent market. 

These are the core steps for the defensive route:

1. Maintain good client relations

Create an Excel spreadsheet on your clients and ask account managers to use it to track client progress over upcoming months, including results, initiatives, and general satisfaction levels. This information will require account managers to have regular conversations with clients and foster a human-to-human relationship. 

Be sure to categorize clients in the spreadsheet. I find it useful to use different colors to highlight those who are high risk vs low risk. You can then clearly identify where you need to focus your energy.

You need to make yourself indispensable to clients too. Do you research on people — look at what industries they are involved in and how they’re being affected by the pandemic. Make it your business to be the solution to any problems they may be facing. 

For example, startups can offer extra free services like consultations, product support, in-house employee expertise, and repurposed content around COVID-19. Making yourself available outside of work hours is also effective. 

The main goal is to provide more value for your clients. You may see profits dip slightly but you’re more likely to retain clients; you may even see contract renewals increase.

2. Cut non-essential costs

Internally, you’ll need to find places to cut costs. Anything you don’t deem to be ‘essential’ needs to be reevaluated. You don’t have to be overly-zealous with your cuts: the aim is to keep the whole machine running, just on a lower gear. 

If these cuts aren’t substantial enough to ease financial strains, ask yourself the tough questions: where has the company been indulgent? What is essential but can be trimmed without too much damage? What is a reversible cut (hardware, subscriptions) and what is an irreversible cut (firing in-demand team members). 

Redistributing is a good budget strategy to pull resources from certain teams to support high-priority areas. Staff from marketing could transition to customer service, or the ads team could help with sales outreach.

Similarly, stopping research and development operations is wise during crises. Employees can be deployed elsewhere in the company and freelancers can be put on pause to lower expenses. 

3. Avoid knee-jerk reactions

Making difficult decisions shouldn’t compromise your integrity. It’s important to set your lines in the sand and stick to them. 

For example, founders commonly provide generous discounts for users during crises, but if this isn’t a tactic you’d consider in stable times, it shouldn’t be an option now. It’s likely your clients will see this for what it is — desperation — and it could drive them further away.

Giving a no-strings-attached discount to a customer means they’ll probably expect more of the same in the future. It’s far better to double down on relationships with existing customers and get them to agree to longer contracts, securing your revenue.

However, after careful consideration a discount is needed to keep a client, put a time limit in the terms to show that it’s a one-off measure. Don’t be shy to ask for extended commitment (like a longer contract) from the client in return for the discount.

Option 2: Offensive 

While the majority of founders will pick a defensive strategy, it may not be the right fit for other startups. Some companies have realized they are in a prime position to capitalize on the current situation. An offensive strategy follows some of the same process to plug holes in the ship, but it also prepares to set sail into battle. 

These are the core steps for the offensive route:

1. Make an action plan for sales 

Get a feel for your market dynamics. Take a close look at your sales pipeline to highlight leads that had been ‘warmed up’ before the pandemic and double down on these.

It’s especially useful knowing the size of the companies involved and how they’ve fared during the lockdown — the bigger the business, the more resources they have to work with. 

Review your outbound procedures too. Shift your sales team to double down on the strongest leads in your pipeline — this ties in well with demonstrating your purpose. If you’re able to prove that your product or service is a necessity and not a luxury, the strongest leads should convert in a shorter time frame.

If you’re struggling to close strong leads, think about changing your targeting — your newly positioned purpose may be better suited elsewhere. 

When you’re following up with leads that have gone quiet, don’t pitch with a hard sell. Instead, ask them how they’re coping personally and professionally, and offer them support like a free consultation or recently published content.

In your communications acknowledge the unprecedented environment we find ourselves in and the challenges businesses are facing. Asking after the wellbeing of people’s families shows that you are accessible and open to having a meaningful professional relationship.

The pandemic has broken down the wall between personal and professional lives, and not accommodating to this may be viewed as cold and unfeeling.

2. Sweeten the deal for existing and new customers

The changing tides affect your customer’s needs as much as your business’ needs. Assess which — if any — additional services you should be offering. 

Referral schemes are an effective way to encourage recommendations and reward existing customers, while reduced prices for clients who sign up to longer contracts mean more secured revenue. 

Another option is to ‘back-end’ contracts in which most of the payments are made towards the end of the contract.

If, for example, your offer clients the option of paying $1,000 for the first six months, then $3,000 for the last six months, the client is more likely to sign with you as it reduces their short-term risk (they will only have to pay you more after you’ve delivered a return on their investment). This avoids dishing out discounts and gives you and your client added security.

3. Be part of the solution with topical marketing and PR 

Remember the data you compiled before deciding which strategy to use? Any increases or decreases you found should influence how you market your business. The fluctuations are indications of the current climate and can help you stay relevant.

Think about what your data tells you — what content are people more interested in? What areas haven’t got the same traction as before? Promote the topics, or content, that people are more drawn to, as well as that which adds value to potential customers. In this way, you’ll position your startup as being part of the solution to the common problem we are facing. 

This might also be a good time to consider external PR. If your product will help us get through the crisis, interact with plenty of journalists, who are pretty much exclusively covering COVID-19 related themes at the moment. 

Whether you go big or fall back, the highest chances of success come from truly understanding the current health of your company and its place in ‘the new normal’ created by the current crisis. Be honest about your business’ financial situation and chances of growth, and you’ll make savvy decisions with long-term benefits.