Background
A startup is a company or organization in its early stages, typically characterized by high uncertainty and risk. The Covid-19 pandemic has significantly impacted the global economy, with businesses struggling to cope with the fallout (Gauthier, Morelix, Officer, 2020). The current downturn has been particularly tough on startups, which often lack larger businesses’ resources and a financial cushion. Many startups have been forced to lay off staff, reduce salaries, or even close altogether. This has led to a slowdown in the startup scene, with fewer new businesses being founded and existing startups struggling to survive. Despite the challenges, some startups are still managing to thrive in the current climate.
Introduction
Startups are a significant force in economic growth, and the recent recession has taken a toll on them. While large corporations could withstand this storm, numerous startups were compelled to shut their doors. This is tragic for the economy both as a whole and for the business owners who lost their enterprises. They are the companies that consistently push the boundaries, developing innovative concepts and goods that have the potential to transform society. Moreover, when they are successful, they produce wealth and jobs. For entrepreneurs, the present recession has been brutal (Bernstein, Townsend, Xu,2020). Several have been made to shut them down, and those still operating are fighting for their lives. Flexibility is the ability of a company to pivot from one endeavor to another quickly. Strategic sensitivity and organizational flexibility are its two facets. Organizational flexibility is the ability of companies to implement or adjust administrative procedures and structures. A few actions can be taken to assist startups in surviving the current recession.
Robustness
One-way startups can thrive in the recent recession is by being robust (Evans, Bahrami, 2020). This means the startup should have a clear purpose and core values that control the startup’s behavior and actions. Setting up a delegating authority with a clear framework, such as Flexibility with Practice, helps reduce micromanaging, which empowers the primary workers to make critical decisions and take action in times of need. The team’s freedom to work enables them to move fast and swiftly when responding to a situation. When a team is faced with a problem, and they first have to seek permission from management before acting, they waste much time, leading to losses and extended recovery time.
Hedging
As the global economy faces an unprecedented downturn, startups must use every tool at their disposal to survive. One essential tool is Hedging, which can help protect a startup from downside risks by anticipating risks and mapping priorities (Evans, Bahrami, 2020). By mapping out different possible scenarios, startups can plan for the worst by developing contingency plans, as they hope for the best. This has allowed them to make quick decisions and adapt to the crisis as they barely have time to think in the middle of an emergency. Startups can also thrive by focusing on their key priorities to streamline their operations and focus on their core competencies. This will allow them to save money and become more efficient. Lastly, Hedging is an investment that functions like insurance to shield a startup from the possibility of economic losses. Hedging is comparable to insurance because we purchase an insurance policy to safeguard ourselves against various failures. For instance, let us say we want to protect a valuable object against flooding.
Versatile
The current economic downturn has led to a challenging business climate, and many startups struggle to survive. However, those that can be versatile and adapt to the changing landscape are more likely to succeed. One way that startups can use versatility to their advantage is by being willing to pivot their business model. For example, a startup specializing in selling physical goods may need to shift to selling digital products or services to stay afloat. In the current business environment, it is essential to be innovative and think outside the box (Evans, Bahrami, 2020). Startups need to build a team of versatile and adaptable employees.
Agility
In a rapidly changing and uncertain environment, agility and frequent communication can help a startup business to thrive. Being able to respond to change rapidly is a critical success factor for startups. They need to be able to make decisions and take action quickly. This requires a high degree of flexibility and responsiveness. Startups must also be good at communicating with their stakeholders (Evans, Bahrami, 2020). This includes customers, investors, employees, and the wider public. A business that uses business intelligence becomes agile. A company can get valuable data from BI on many different activities but say it has utilized it to demonstrate that a worker manually billing customers is unproductive. Perhaps it went unnoticed before, but a company can now automate the task with an RPA solution, freeing the employee to work on more important tasks and spend less on labor. This increases business productivity.
Liquidity
Liquidity is one of the most important aspects of any business, but it is significant for startups. In a crisis, startups need to be able to access liquidity to survive and thrive. A startup can use liquidity to thrive in a situation by utilizing its financial resources to maintain operations during decreased revenue (Kiyotaki, Moore, 2019). The most crucial liquid is assets, followed by financial markets, certificates of deposit, and time deposits. Equities and bonds listed on exchanges are liquid and may be quickly sold by a broker. Collectibles and gold coins are simple to sell.
Resilience
A startup can use resilience to thrive in a crisis by maintaining a positive outlook, being adaptable, and having a support system. When a crisis hits, it can be easy to panic and feel like everything is going wrong. However, a resilient startup can weather the storm and come out stronger on the other side. It is vital to maintain a positive outlook (Goshen, 2020). This means seeing the crisis as an opportunity to grow and learn instead of a setback. For instance, a startup with a robust policy will bounce back faster when the crisis hits. A business having remote working conditions will survive an emergency.
Elasticity
Startups can use elasticity to survive the current downturn by making their products and services more affordable and adapting their business models to the new reality. The recent economic downturn has hit startups hard. However, some startups are not only surviving but thriving in the current climate. One way startups use elasticity to survive the recent downturn is by adapting their business models. For example, many startups that previously relied on advertising revenues are now turning to subscription-based models. This is because advertising budgets are generally one of the first to cut when businesses want to save money (Bistline,2018). Lastly, the economic concept of elasticity describes how susceptible one financial component is to fluctuations in another. For instance, how supply or demand fluctuations affect price changes or how demand fluctuations affect income changes
Viscosity
Viscosity is a measure of a fluid’s resistance to flow. The higher the viscosity, the more resistant the fluid is to wash. This can benefit startups because they can slow down their operations and maintain their current output level. There are a few ways that startups can use viscosity to their advantage. One way is by reducing the number of new products or services they introduce. This will help reduce the amount of money spent on research and development and allow the startup to focus on perfecting the products or services they already offer. For instance, a food industry startup can maintain startups to ensure the quality of products and maintain businesses like their operations.
Barriers
There are many barriers to flexibility for startups. One significant barrier is the lack of resources. Startups often have limited resources, which can make it challenging to be flexible. Another barrier is the need to focus on the core business. Startups usually need to focus on their core business to succeed, making it challenging to be flexible.
Additionally, startups may have a limited customer base, making it challenging to change product offerings or pricing. Finally, startups may be hesitant to make changes because they fear failure. These are just a few potential startup flexibility barriers (Oliva & Kotabe,2019). Another instance of barriers to flexibility for startups is the legal compliances from legal firms and operational problems that need maintenance costs.
Conclusion
In summary, a startup can survive a crisis by having a cash cushion to fall back on. This will help it weather any short-term disruptions and keep the business afloat. In an emergency, customer needs and preferences can change rapidly. Flexibility will allow a startup to adjust its offerings to meet these changing needs. A startup should also focus on its strengths and stay positive during a problem. Each startup needs to cope with measures to enhance its operations whenever an emergency arises.
Reference
Bernstein, S., Townsend, R. R., & Xu, T. (2020). Flight to safety: How economic downturns affect startup talent flows (No. w27907). National Bureau of Economic Research.
Bistline, J. E. (2018). Turn down for what? The economic value of operational flexibility in electricity markets. IEEE Transactions on Power Systems, 34(1), 527-534
Evans, S., & Bahrami, H. (2020). Super-flexibility in practice: Insights from a crisis. Global Journal of Flexible Systems Management, 21(3), 207-214.
Gauthier, J. F., Morelix, A., & Officer, C. I. (2020). The impact of Covid-19 on global startup ecosystems. Startup Genome.
Goshen, Z. (2020). What makes new firms resilient? A spatial analysis for Romania. Regional Science Policy & Practice, 12(5), 913-930.
Kaur, H. (2020). Digital Marketing: A Ray of Hope During Pandemic Recession. International Research Journal of Commerce Arts and Science, 11(7), 30-37.
Kiyotaki, N., & Moore, J. (2019). Liquidity, business cycles, and monetary policy. Journal of Political Economy, 127(6), 2926-2966.
Liñán, F., & Jaén, I. (2020). The Covid-19 pandemic and entrepreneurship: some reflections. International Journal of Emerging Markets.
Novy, D. (2022). Dennis Novy discussion of Startups and employment. Economic Policy, 37(111), 539–541.
Oliva, F. L., & Kotabe, M. (2019). Barriers, practices, methods and knowledge management tools in startups. Journal of knowledge management.
write