What Makes a Startup Resilient?
December 15, 2020
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In the startup world, resilience is vital for success. As an entrepreneur, you’re going to face countless challenges, both internally and externally, that threaten your longevity and profitability. The best, most successful businesses aren’t the ones that are able to prevent or eliminate these challenges, since such a feat is practically impossible; instead, they’re the businesses that can survive through these challenges and adapt.

Resilient startups are much more likely to succeed. But what is it that makes a startup resilient?

Capital

The majority of problems can be solved with an adequate amount of money. If your business is struggling to pay its vendors and employees, you can tap into an emergency fund and get through the rough patch.

If you’re looking to expand in a new market, you can dump a massive sum of money into your expansion and not worry about exhausting your budget. If you’re not generating enough recurring revenue, you can invest heavily in marketing and advertising to get more visibility for your brand—no sweat.

Accordingly, resilient startups tend to have access to a lot of capital. They had multiple rounds of successful funding or generated enough revenue to build up significant cash reserves. Unfortunately, this is a pipe dream for many startup entrepreneurs, since the lack of access to capital is one of the main challenges threatening them. However, there are many other factors to improve the resilience that you can rely on.

Decentralization

You can also improve startup resilience with the help of decentralization; decentralization allows you to distribute your business in a way that prevents it from becoming too dependent on any one variable. For example, you can physically decentralize your business by adopting a remote work model. Rather than relying on a single main office building, you can allow all your employees to operate remotely; no single point of failure can wreck the business.

Many businesses use cloud computing for this reason; rather than storing everything on local physical servers, you can store your data in the cloud. This way, a single catastrophic event won’t be capable of eliminating your access to data.

Cross-Training

Cross-training can be thought of as a form of decentralization, but since it applies to the skills of your employees, it can be a bit harder to manage. The idea of cross-training is simple. You’ll have the individual employees within your startup train each other on their respective responsibilities. You can achieve the extra, yet critical training within a single department. With this cross-training, you’ll strengthen the capacity of the department, or allow each department to train the others.

As a result of each employee having knowledge, individual employees can take time off (including vacations) without impacting your startup’s capacity to perform. It also means you can afford losses of talent. While it’s never ideal to lose one of your star employees, it’s much easier to manage if there are other people on your team who can handle their responsibilities when they’re gone.

As an added bonus, cross-training allows each individual on your team to gain a better understanding of how the organization functions overall; they get to see the context for each person’s responsibilities and understand how the company works at a high level.

Willingness to Cut Losses

Next, a resilient startup must be willing to cut losses. This can be exceedingly difficult due to the sunk cost fallacy; when we’ve already invested significant time or money into an endeavor, we’re much less willing to cut our losses and move on. Instead, we want to make our investments “worth” something by continuing to invest in them, hoping that they’ll eventually pay off.

Startups that are unable or unwilling to cut losses, suffer heavily. It’s much better to identify areas of waste and cut them before they do any further damage. For example, you need to be willing to fire your marketing agency if you’re not getting the results you want. You need to be willing to pull out of a major city if the market isn’t there for your services.

Risk Management and Adaptability

Resilient businesses also have a risk management strategy in place. CEOs are keenly aware of the biggest risks to their startup’s success, and they know what’s necessary to mitigate those risks.

In line with this, one of the most important factors for resilience is adaptability—the ability for your startup to change in response to new information, newly available resources, or new circumstances (as well as new risks). If your competitors introduce new products, your customers’ opinions change, and your entire niche begins to evolve, you can’t survive if your business remains exactly the same. Instead, you need to be willing to try new tools, new workflows, and new approaches.

Gradual Changes

That said, it’s important that all of your startup’s changes be somewhat gradual. Many startup entrepreneurs are excited to grow the business as quickly as possible, making the business as large as possible, but this can ultimately work against you if you aren’t careful. If you invest too much, too quickly, you’ll end up paying for things you don’t really need and failing to pay for things you do need. You may also spread yourself and your team thin in an effort to achieve some arbitrary expansion goal.

Taking your time with new changes allows you to invest more deliberately. It also allows you to see the results of your efforts in real-time, so you can tell whether your strategies are working and update them if necessary.

Multiple Revenue Streams

Next, you should think about creating multiple revenue streams for your business. Most startups operate with one mechanism for generating revenue—a core product or service that drives the entire business model. However, it’s much more effective to create multiple revenue streams simultaneously, with several products, services, and alternative ways of making money.

The obvious benefit here is that increasing your number of revenue streams will increase your total amount of revenue. But this is also important as a protective measure; if any of your major revenue streams fails, you’ll have multiple other backups to make up the difference. This is also important for managing your client portfolio; you never want to be overly dependent on any single client.

Openness to Feedback

Feedback is the best way to improve your business, since it tells you things about your business you might not be able to discover on your own. Collect customer feedback to learn more about what they think of your business and collect employee feedback to learn more about how you can make the business run more efficiently and improve morale. Of course, collecting feedback is just the first part of this process—you also have to be willing to act on it.

A Strong Leader (and a Strong Culture)

Finally, a startup can benefit greatly from strong leadership and a strong culture. The leader of your startup will be responsible for setting the tone and making critical decisions for the business’s success. They’ll be the person in charge of identifying risks and avoiding threats—and the person capable of motivating employees even in the darkest times.

Leaders also work to build and preserve the culture within a startup. The culture itself can increase resilience to threats. If you train employees to see challenges as exciting, and see mistakes as learning opportunities, and see hard times as opportunities to build character, you’ll be much less likely to suffer from low morale or unmotivated workers.

Making your startup more resilient demands a significant investment of both time and money, but you’ll be better off for it in the long run. You can’t prevent all the challenges, obstacles, and detriments you’ll face as a business owner, but you can make your startup strong enough to resist them. Unfortunately, resilience is a difficult factor to measure objectively, but you can always make progress to improve your capabilities here.

Image Credit: the lazy artist gallery; pexels

Timothy Carter

Chief Revenue Officer

Timothy Carter is the Chief Revenue Officer of the Seattle digital marketing agency SEO.co. He has spent more than 20 years in the world of SEO and digital marketing leading, building and scaling sales operations, helping companies increase revenue efficiency and drive growth from websites and sales teams. When he’s not working, Tim enjoys playing a few rounds of disc golf, running, and spending time with his wife and family on the beach…preferably in Hawaii with a cup of Kona coffee.

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