Surviving a recession as a bootstrapped business

I think it will be WAY easier for bootstrapped businesses to survive during this recession vs. funded startups. Here's why:

Startup funding is getting slashed. Valuations are dropping like crazy. Thus, startups cannot spend on things just for the sake of spending.

This means that the companies that survive are the ones who figure out an efficient way to spend. Guess what types of companies are the best in this (hint: bootstrapped ones).

It also means that bootstrapped companies who are profitable will get more opportunities to get funded.

Exciting times.

It's really important to get back to basics in times like these. So while I appreciate his more broad advice, I appreciate even more steps that are super practical and doable, now.

For example, if you're subscription based, you can significantly reduce involuntary churn by retrying failed subscription payments. Over 20 percent of failed CC payments are fixed by simply rerunning the card. So if you're not already doing this, setting up automatic retries could save you a lot of money. (Just don't retry a charge more than four times, as that may get it flagged as potential fraud.)

Another practical piece of advice is to give users who are trying to cancel their plans the ability to pause their accounts instead of canceling outright.

What recession? 😏

Well written and I remember going through many of those phases. Very funny that you mentioned Kodak as that is what went on in my head. Adapting is key - even if you think it's for the short or mid-term.
The technology that popped up during the pandemic was amazing. We had an in-person social skills training company that needed to adapt quick or die. Learning no-code and automation saved us.

Great article for those trying to understand the economical uncertainty we are facing. Large question is just how bad will the recession be and how will that impact (credit to the) "what changes in the day-to-day lives and workflows of your prospective customers". For almost all, 2020 recession lives in recent memory allowing us to think back on how we weathered the storm.

Key differences in the current recession vs 2020

• (Near Term) Velocity of economic slowdown. In 2020 we saw economic actively drop in less than a month, similarly to fall 2008. This was due to sudden shocks to the system (health and financial respectively). As long as we don't see a military shock (most likely current case) sliding into a recession may take time to have wide spread impact, thus giving people a false since of long term opportunity, leading to short term overcommitment. Be optimistic be but realistic on duration of customer commitments.
• (Near Term) Consumer saving rate peaked at ~30% in 20' vs 5.2% currently, vs 7.5% pre-pandemic, couple that with inflation causing the average family spending an extra $5k to live the same lifestyle a year ago. Consumer driven and discretionary spending (non-essential spending aka fashion and leisure items) grew at astronomical levels in 20/21, realistically those trend will reverse and likely overcorrect (aka fall) below pre 2020 levels.
• (Long Term) Beware of stagflation, happened in the 90's in Japan, Europe in 2010's and barely avoided in the US in the 80's (plenty more examples in history). Watch what transpires and correlate to history, simply be mechanical not emotional on decision making. https://www.linkedin.com/pulse/reducing-inflation-come-great-cost-stagflation-ray-dalio/

It is true that if people are wanting to cut costs, often subscriptions based saas are one of the first ones to be eliminated. However, as a bootstrapped business it is easier to pivot in comparison to other kind of corporations. You can always create new services that are more adapted to the current problems in the world or modify the strategy from your already existing business to retain customers or get new ones.

Tough times are coming ahead. Startups need to be careful while spending cash like anything. Thanks for sharing this anyways.

Never heard of a recession discount before. He explains that, essentially, instead of firing people you are having a hard time paying during a recession, you can ask people to take a pay cut and then pay them back when things bounce back.

Seems a little risky to kind of become indebted to employees (because what if you don't bounce back?) but I do like that it offers another option to people rather than just letting go of their team. Also, I imagine that the founder should also take a paycut if he/she is going to as that of their team.

I keep coming across articles about a "downturn," giving businesses advice on how to survive it. And I agree that businesses should "accept that change is happening" but that's obvious - change is always happening (Remember how: Change is the only constant?). Businesses at any point in time, no matter what the economy looks like need to focus on profitability. A ton of successful companies were founded during a recession (Microsoft and Apple included), but at the end of the day, so long as you're not over-reliant on external funding (which won't be a problem if you're bootstrapped anyway), the basics always apply: Keep costs below revenues, and ensure you have enough cash flow to keep yourself ticking. Repeat.