We had the annual budget statement in the UK this week. Chancellor George Osborne focused on the macro risks which face the global economy. Continued weakness in the Eurozone. Slowing growth in China. Turmoil in many emerging markets. Wherever you live you are familiar with the narrative.
The startup world has caught the bug. Many investors believe that the so called bubble in valuation is deflating. Blogs and analysis are full of advice about how to weather the storm. Cut costs. Focus on profitability. Use your cash to survive. This routine is just as well known. I was going to count all the articles I have read with this type of advice. But I ran out of fingers and I couldn’t be bothered.
Because this is bulls**t. Sure if your business is weak a downturn will kill it. Then again if you don’t believe you are building a great business you should end it yourself. But if you do have that belief, an economic downturn is going to be the best opportunity you will ever have.
The only way to make sustainable gains in market share
First, a shrinking market is the only true time for any business to gain market share. This truth about business strategy is often lost in startups. New businesses gain market share. Or create new markets. All the time. It is part of the cycle of innovation and disruption.
However in a growing market established businesses also survive. And grow! Look around in strong sectors and the old world companies are rising. Just not as fast as new entrants.
Take a look back also into some “ancient history”. The iPhone launched in 2007. As the new device started to gain traction, the world entered its worst economic recession since the 1930’s. Much of the tech explosion was the new mobile ecosystem taking advantage of that downturn.
So now is the time to attack the established players in your market. And the biggest opportunity lies with B2B SaaS. About a year ago Tom Tunguz pointed out that legacy companies still generated 93% of revenue in the software sector. The first mobile revolution was consumer led. Now is the time to change the face of the business IT market.
Offer your customers more hope not less pain
For B2B SaaS the best way to take advantage of this opportunity is to offer your customers growth.
Every business from the leaders of the Fortune 500 to the corner shop will be hearing the same advice we are hearing in the startup ecosystem. Cut. Fire. Save. Survive. The biggest consultants are polishing cost reduction methods as we speak. The corporate finance guys are dusting down asset disposal proposals. All the experts know what to do.
But companies don’t suffer because of high costs. When the market is tough the struggle is to find customers and close sales. The cost base looms up in the management reports because revenue is squeezed.
And cutting costs is horrible. Firing people is inevitable. Letting go of cherished projects. Or eliminating positive stuff like benefits, training and that sales conference in Disneyland. Just talking about it wears management down. Another day of poring over spreadsheets. Trying to forget the people and products that lie behind those red numbers.
Don’t join the circus. Make your SaaS different from the market. Think about how your product helps grow revenue. For example, maybe your software helps your customer save time. How can the buyer use that time to increase sales? Or offer a better service to customers? Or improve their reputation in the community?
Two things will happen. Your customers will want to talk to you. An hour of positive news will be an island of joy in their schedule for the week. And they will start to buy.
SaaS is the future
SaaS is perfect for this environment. There is no upfront cash cost. Business needs to change to meet new challenges anyway. So the hidden cost and barriers are reduced. Offer a positive, revenue growth message. And use this opportunity to change the enterprise software market forever.
In the midst of chaos, there is also opportunity.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.