Every week, new speculations emerge of an impending collapse in Silicon Valley. When will the bubble give way? No doubt, recent years have been marked by feverish startup growth and the enormous valuations that accompany them. And any savvy investor knows this sort of pace can only last last for so long. Sooner or later, the bubble is bound to burst.
As the co-founder of a webinar marketing platform, ON24, that's weathered and thrived in the wake of two major downturns -- the dot-com crash in 2000 and the financial recession in 2008 -- I've learned what it means to create a recession-proof business. In good market conditions, it's easy to forget how quickly things can change. From day one, every entrepreneur should build their company with the inevitable in mind, and a plan to survive it.
If you're beginning to map out the business plan for your startup or in the early stages of your endeavor, keep these four tips in your mind with every business decision you make.
1. Have a revenue model from day one.
The days of discovering your monetization strategy as you go are ending. Investors have had their fill of startups whose revenue streams never seemed to materialize. Today, investors want to see a business model capable of turning a healthy revenue from the start. Simply put, you have to sell something. No more giving your core product away for free in hopes of eventually coming up with a way to make money from it. Instead, develop your monetization strategy from the start. Know exactly how your business will make money and stay afloat. And if you absolutely have to give something away for free, give only enough to entice your customers to buy something further down the road.
2. Be willing to pivot.
Every entrepreneur is in love with their business idea. But you have to be married to the success of your company, even at the expense of your original idea. When you make the decision to start a business, be sure to check your ego at the door. I hate to break it to you but your idea is not perfect. And even if it was, the unforeseen events will occur, difficulties and challenges will arise, or new opportunities may surface. It's important that entrepreneurs are ready and willing to embrace changes to their ideas in order to ensure the success of their business. Years ago, we founded ON24 as a multimedia financial network. Today, ON24 is a webinar marketing platform that supports many of the largest businesses in the world. There's no way ON24 would have been successful if I was unwilling to change and pivot the business away from what was originally intended. As entrepreneurs, we have to be willing to adapt with the changing tides of the market.
3. Provide real, tangible value for your customers.
There's a reason funeral homes are said to be recession-proof -- there will always be a need. I don't mean to be morbid, but the example illustrates an important point: good businesses provide real value to their customers regardless of market conditions. When you're developing your company's product, keep this in mind. Solutions and products that provide abstract value are usually first to get cut. Consider the newly popular software segment of social media analytics. Chances are when markets turn, knowing the number of likes in social posts is no longer essential to a company survival and making the decision to cut the program is easy. Provide your customers with a product that's a need to have, not a nice to have and has a tangible impact on their bottom line.
4. Steer clear of Silicon Valley fads.
As we all know too well, Silicon Valley can fall victim to tech fads. Every year, new verticals of startups crop up each tackling a different problem in the same way. Consider on-demand services. Before Uber, this market was largely untapped. Now, you can get nearly any product you want delivered right to you all through a mobile app. But competition is steep, margins are slim, and long tail success is still questionable. Businesses built with only the latest trends in mind are usually the hardest hit during downturns. Before you decide to start your entrepreneurial venture, ask yourself if the company you want to create is simply an extension of a fad, or is it a truly unique solution that fills a real market void.
Whenever you start your business, just keep in mind: founding the company is the easy part. It's surviving and thriving over time that's more difficult, and will determine your business's success. Surviving a downturn is not rocket science, but it can be easy to forget in good times that things eventually will cool. With a little foresight and planning, you cannot only create a business, but build a better business that will truly endure.