Scaling a startup in an unstable economy

This article was contributed to TechCabal by Irhose Apori, growth lead at Norebase, a startup that helps entrepreneurs to start businesses and expand into other markets in a transparent, fast, and efficient way.

In recent years, Africa has faced significant economic instability due to a confluence of challenges. High inflation, currency volatility, supply chain disruptions, and insecurity have made the business environment difficult to navigate. 

The unstable economic conditions agitate the core challenges faced by startups seeking to scale. Compared to last year, the first half of 2023 saw a 54% dip in VC funding for Nigerian tech companies. Without adaptive strategies, these growing businesses risk being derailed or discouraged altogether by the unpredictability.

This article will explore how startups in Africa can formulate adaptive solutions to the problems of scaling within unstable economies by drawing from real-world examples and expert recommendations. The goal is to provide a roadmap for startups seeking to successfully expand their reach and deepen their solutions despite economic volatility.

1. Use adaptive marketing and growth hacks

a. Demand generation over lead generation

Focus marketing efforts on generating real demand and sales from existing customers and interested prospects rather than just acquiring new leads that may not convert due to economic pressures. Marketing tactics such as email drip campaigns, community building, and webinars are low-cost ways of educating, nurturing, and retaining customers in a marketing funnel. 

For instance, if you were building a conversion funnel for a SaaS solution, a monthly webinar can act as a growth lever that demonstrates your understanding of the subject matter while giving you a chance to get real-time insights from your prospects. Each webinar can end with a call-to-action that drives customers into a curated community (on WhatsApp, Telegram, or Slack) where you nurture them with interesting and witty content that addresses their pain points. 

Finally, you can use an email drip campaign to retain customers and cross-sell products—65% of a company’s revenue comes from existing customers, highlighting the importance of cross-selling in retaining and growing business from current clients.

b. Cost-effective digital experiments

• Leverage low-cost content marketing and SEO. Using AI, anyone can build a comprehensive SEO campaign that drives qualified traffic to a source.
• Motivate existing users to invite others by incentivizing referrals, and building social proof via social media challenges that leverage user-generated content.
• Leverage automations to respond nimbly to unfolding economic and customer behavior signals with customised, dynamic journeys at scale. In simpler terms, use relevant APIs and AIs.

2. Hedge against economic uncertainties

a. Hedge against economic uncertainties

Keep a portion of assets in stable foreign currencies to protect against currency devaluation. Saving funds in a US corporate bank account is an important contingency measure that will protect you from the unpredictable effects of the floating naira.

b. Incorporate in relatively stable economies

Target countries with steady GDP growth, low inflation, stable currencies, developed financial systems, consistent regulations, and minimal political unrest. Prioritise markets like the US, UK, Canada, Kenya, Rwanda and South Africa. 

By all means, avoid incorporating in very volatile markets.

3. Cut down on costs

a. Review all expenses and look for areas to reduce spending 

Renegotiate contracts and rates with vendors and suppliers. Reduce office space if remote work is feasible. Freeze hiring for non-critical roles. Delay new projects and capital expenditures. 

b. Automate as much as possible

Look for opportunities to automate manual processes using software and tools. This could include HR tasks, customer service, bookkeeping, social media marketing, etc. Automation increases efficiency and reduces labour costs. But provide training to employees to work alongside these new technologies.

c. Retain staff

Avoid layoffs if possible, as hiring and training new employees later is costly. Consider temporarily reducing hours or pay rather than terminating jobs. Support employees by clearly communicating about the business challenges. Keep staff motivated with development opportunities and recognition. Losing key staff now means losing invaluable expertise and company knowledge.

Conclusion

Scaling a startup in a volatile market is not as simple as this article has rendered it. However, if you’re like me and failure is not an option, then you should adopt the lean startup mindset. In no time, you will find yourself piercing through the noise and growing against all economic and financial odds.

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