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The above discussion on impacts and strategies to minimize the threats proves that the downtrend is a serious topic. It can destroy startups or even small businesses.
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What Is A Downtrend? A downtrend is a serious issue often faced by businesses. Small businesses get affected by it more than others. A downtrend is a change in the demand for stocks in which the investors are not interested in buying the stocks of a business in fact they want to sell their existing stocks. A downtrend is a result of a startup’s business activities and security. Most startups surrender to the downtrend. A startup can face a reduction in their cash flows, and demand loss, they may be forced to reduce their staffing, and also be forced to limit their marketing. Startups suffer big time in a downtrend but they do have an opportunity to make changes and stay afloat. Implementation of key strategies can save a startup from succumbing to the imp[act of a downtrend.
Impact Of Downtrend On Startups • A downtrend affects startups to a heavy extent and many startups fail to make a comeback. A downtrend can impact a startup in many ways like- • Reduction In Cash Flow- • There is a common issue in startups that they operate on very tight cash flow. As a startup generating heavy funding is difficult they need to follow this method of tight cash flow. If a delay in payment occurs from the customer’s end the whole cash flow cycle gets disturbed. During a downtrend, companies may face a lack of funding and it will automatically reduce the cash flow.
Loss Of Demand- • During downtrends, customers often opt for limiting their purchase or even completely stopping it. If a startup company’s target businesses or clients go out of business then the startup might as well succumb to losses. Loss of demand can create a heavy impact on the startup and its business activities. • Reduction In Profits- • There is a common trait between customers and business owners that both limit their spending during downtrends. So a startup whose financial resource is dependent on sales is going to suffer big time. Customers limiting their expenses can create difficulties for startups in generating their revenue. A loss in revenue is all a loss in profits.
Credit Crunch- • Not just customers and business owners limit their expenses. Lenders or investors may also reduce their outflowing cash. This creates more pressure for startups as it makes the credit area a huge challenge. • Down going Stock Prices- • Reduction in profits, and cash flow reflects on the financial reports of a startup. This will directly impact the stock prices of the business. The impact can be as heavy as the dividends can disappear. • Downgrading Product Or Service Quality- • The worst impact of a downtrend is the downgrade of product quality. Due to limited resources and funding startups are often required to decline the quality of their product or service.
Reduction In Staffing And Productivity- • Heavy losses in revenue of a startup create a shortage of financial resources. This shortage makes the reduction in staffing inevitable. Startups look to minimize their expenses in every possible way. Reducing staff is the most common and easy way to control expenses. The staff reduction will reduce productivity as well. • Restricting Promotional Activities- • One of the biggest tools for businesses to gain high sales and revenue is marketing. Although it is quite an impactful and effective practice, startups are forced to restrict all types of promotional activities in a downtrend.
Strategies Startups can Adopt In the Face Of Downtrend • 1. Observe The Signs • The early stage of a downtrend is the best time to implement solutions or apply strategies to overcome the challenges. Observing economic changes and financial panic among consumers can help in identifying the possibility of a downtrend. • Economic Change- Ups and downs in the stock market are early signs of a downtrend. • Financial Panic- Customers will react in financial panic during hard times. The abnormal dips in sales are big red signals before a downtrend. • Observing the signs early can offer startups time to strategize and minimize the impacts of the possible downtrend.
2. Flexible Agreements According to experts, flexible contracts offer businesses to deal with downtrends without completely transforming their businesses. As startups might find it difficult in transforming their business, flexible agreements are a better solution. The flexible agreements allow startups to plan for the loss of business and areas to make up for costs. 3. Accelerate Training Excelling the skills of employees can offer huge benefits to a startup. As a downtrend can impact and force the staff to be reduced at a startup keeping the high-performing employees ready with all essential skills and training can be a game changer. As the production damage will be minimized if employees have the essential skills.
4. Invest In Promotional Activities • Startups often completely stop their marketing campaigns during downtrends. But the downtrend is not affecting a single business so many businesses opt for stopping their marketing efforts. • Customer Trust- During a downtrend, if a startup promotes itself customers may believe that the business is stable in hard times as well. It will create trust between the customer and the business organization. • Low Costs- As most businesses opt for stopping marketing practices, the cost of advertising drops. So a startup can avail a huge marketing opportunity and that too within a low cost. • High Sales- With marketing, a startup can have visibility during the tough times of a downtrend. This will directly impact the sales of the company.
5. Enhance Client Relationship • The downtrend is a situation where existing clients will require more attention. Selling products or services to existing customers is a lot cheaper than selling to new ones. • In order to enhance client relationships startups can- • Concentrate on top clients • Observe competitor’s clients • Receive feedback from own clients • In a Downtrend phase, startups must retain existing clients and enhance their relationships to minimize the possible threats.
6. Downsizing Inventory • Inventory is a costly affair. In downtrends maintaining an inventory can be really challenging. For startups, it is an ideal way to get rid of the extra inventory and invest in the high selling products or services. • 7. Manage Cash Flow • As a downtrend directly impacts the cash flow of a startup, it is important to manage cash flow for startups. There are a few steps in managing cash flow in an improved manner for startups- • Paying down debts • Collect in an aggressive approach • Set periodic KPIs to monitor the financial stability
8. Set New Goals A downtrend may force a startup to change its business practices so it is better to redesign the process with new goals. Once the goals are decided a startup must inform the stakeholders and if the stakeholders are not agreeing, the startup must convince them of the reason for new goals and benefits. 9. Automation One of the most innovative approaches is automation. Although setting up automation processes in a startup can be challenging due to its costly nature of it. Automation can serve a startup by completing repetitive tasks more efficiently and effectively. It will be beneficial if the startup needs to reduce staffing due to a downtrend.
10. Ensuring Product Quality Due to the downtrend, many companies may opt for compromising the quality of their product or services. It will straight away impact customer loyalty and experience. A startup must ensure that the product or service quality stays ahead of its rivals. It will ensure better customer experience and relationships. Conclusion The above discussion on impacts and strategies to minimize the threats proves that the downtrend is a serious topic. It can destroy startups or even small businesses. On one hand, startups can be destroyed due to downtrends on the other hand it also offers golden opportunities. Creating customer trust and brand reputation with the reduced costs of advertising can offer high sales.
