3 unusual moves natural products companies should take in this economy

We’ve been on a wild financial ride this year. We’ve had bank failures, inflation and interest rate hikes, all the while wondering if a recession is coming, if we are actually in a recession or if we’ve dodged a recession.

One thing to keep in mind is that the economy is cyclical, and it will rebound. But in the meantime, companies must make strategic decisions to protect their businesses. As someone who has provided funding to companies—like Stasher, Coola and Baby Gourmet—at different stages for almost 20 years, I’ve learned that the path forward in a down economy isn’t always the obvious one. 

Here are three surprising things that startups should do right now.

1. Invest rather than lay off 

For companies that need to cut costs, downsizing is a logical way to do so. It’s certainly a strategy many companies have taken lately: The running total of tech layoffs for 2023 is approaching 228,000, according to Layoffs.fyi. And sometimes downsizing is necessary.

But I suggest startups take a long, hard look at other ways to cut costs because layoffs can negatively affect your ability to compete in the market. Hanging on to your skilled and talented employees is key to continuity. The time and money spent finding, hiring and training a new employee when you are ready to rebuild your team often far exceeds what you will have saved.

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I’d even argue that it’s time to focus more on your team. Put time and effort into employee engagement, training and development opportunities right now. Cross-train your team to enhance flexibility and adaptability within the organization. Foster a positive work culture—it will not only help you retain your talent but will also set you apart from companies that are letting culture go to the wayside, leading to employees who feel undervalued.

2. Go into debt

Almost one-third of businesses fail because they run out of working capital, according to CB Insights. Having enough funds to maintain operations, make payroll, buy equipment or grow is obviously essential for business continuity. In recent years, VC money was plentiful, and bank loans were easy to access. But all that has changed, leaving some companies scrambling for funding.

One way to secure working capital is something businesses often shy away from. They hear the word “debt” and think about drowning in credit card bills or student loans. But I’m here to tell you debt is not a four-letter word.

Think of it this way: You wouldn’t buy a house without debt. A mortgage allows you to buy the house you want rather than the house you can afford with the cash you have on hand. Likewise, debt helps you have the business you want.

With debt, in the form of a line of credit, businesses can not only get the working capital they need, but they will also maintain control of their company and ownership of their equity—something they can lose if they take on investors. This way, you can remain in the driver's seat with your business decisions, and you stand to retain more of your profits and eventual payout.

3. Make hasty decisions

Economic volatility can be scary and leave you feeling uncertain about the path forward. Retreating and waiting for the storm to pass or taking a pause to observe and then making decisions seem like safe routes to take.But we’ve been in economic downturns before, and the key is taking what we learned and applying that knowledge quickly. According to McKinsey & Co., successful companies acted fast during past recessions by increasing productivity, preserving growth capacity, divesting more, heading into downturns, acquiring more as the recovery started, and creating operational and financial buffers.

Additionally, capital is becoming harder to secure, so acting quickly can help you to get the money you need. Taking too long to decide on a course of action can put you in a bad position.

Why embrace these unconventional strategies?

During an economic upheaval, embracing unconventional strategies has the potential to help businesses navigate challenges. Flipping your initial thoughts on their heads could very well be the right method to navigate economic turbulence and emerge even stronger.

By avoiding layoffs and prioritizing the retention and development of talent, startups can solidify a competitive advantage in the market. Employing debt as a means of working capital presents entrepreneurs with the opportunity to maintain control and ownership while attaining the necessary resources to sustain operations and even grow. Finally, by making prompt decisions, startups can proactively adapt to the perpetually shifting market landscape.

Companies that employ unexpected approaches—along with creativity, resilience and strategy—are poised to endure the storm and thrive, forging a path toward long-term success.

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