Opinions expressed by Entrepreneur contributors are their own.
We’re hearing it everywhere: Tough times are coming — especially for startups. For some, the challenges are already here. According to Layoffs.fyi, 69 startups had significant layoffs in May compared to only nine in February and four in January. As the market changes rapidly, leaders are preparing for a recession, and that means the race to get cash is on.
But securing cash isn’t the only obstacle ahead. To complicate matters further, the median age of startup founders is 34. That means these folks, along with anyone in their 20s, weren’t part of the workforce during the 2008 recession. Their only experience with large-scale economic downturn was watching their parents tighten the purse strings or get laid off. So, how are younger workers — especially leaders — supposed to prepare for the possible challenges ahead? Look to those of us who lived (and learned) through it.
During the 2008 recession, I had a front row seat to the down market. I was a newly minted sales trader at JPMorgan, watching as stocks plummeted, share prices swung wildly, and the employee experience was anything but secure. It wasn’t pretty, but I learned a few key lessons that go beyond the obvious, like tightening up cash burn. Today, I’m an advisor to high-growth startups, and many of my conversations of late are around surviving a recession. Here are my top tips to help you prepare for bumpy months ahead:
1. Strengthen organizational trust
In order to survive a market dip, you need to have confidence in your leadership team, business strategy and the people you work with every day. When organizational trust is low, it becomes a self-fulfilling prophecy that a startup tanks in a down market. Think of it this way: A company with low trust doesn’t scale in a good market. So, how will it do in a bad one?
You also need to account for the interpersonal challenges that accompany financial insecurity. When people are worried about losing their job, they get paranoid. Cue the finger-pointing, accountability issues and poor business decisions.
Remember: Leaders set the tone. Take accountability for your mistakes, invest in your peer relationships, and avoid throwing others under the bus. This will encourage your employees to do the same. Companies who continue to work together during tough times are more likely to emerge stronger on the other side.
2. Model resilient leadership
During economic downturns, leaders need to exhibit strength and endurance. This means keeping your stress private. When layoffs or hiring freezes happen, show empathy and compassion, but don’t catastrophize. The employees who remain will be watching closely — and it’s your job to keep them focused. A great leader’s brain operates like a Trello board with all the company needs prioritized and mapped to the big picture. Get your people up to speed, and march on.
A resilient leader also knows their team’s challenges and distractions, but doesn’t allow the weight of this to overwhelm them. Stay engaged and motivated. Be clear and thorough with your communication, and remove any obstacles getting in your employees’ way. Feeling stuck on a particular challenge? It’s normal to feel stressed and overwhelmed, but you’re not doing this single handedly. A resilient leader knows when — and how — to ask for help.
3. Invest in employees with diverse, adaptable skills
During the 2008 recession, my colleagues were getting laid off left and right, and I was constantly having to switch products to stay afloat. Thankfully, I’ve always been a fast learner, and my ability to adapt kept me employed.
One of the best ways for an employee to secure their position is to learn a variety of skills — especially something no one else can do. A strong leader will invest in building their team’s knowledge and abilities so they can adjust to an evolving business strategy and unstable market conditions.
In the next few months, you may need your VP of Customer Success to lead marketing. Sound far-fetched? The truth is, in a turbulent market, employees will have to take on responsibilities that would usually be out of their scope. You need a team who is willing to wear multiple hats. Those who can’t will have to be let go.
If you’re a startup founder under 35, the thought of a down market may feel overwhelming — insurmountable, even — but the good news is, history is on our side. Business cycles happen. Many companies before yours have weathered worse storms. And: There are major safety cushions you can put in place now to increase your chances of surviving. Focus on the three steps I’ve outlined, and you’ll be more likely to come out on top.