The National Association of Business Economics surveyed dozens of expert economists this past fall about the likelihood of a recession anytime soon, and three out of four of those who responded said they were certain that another major recession would hit the US economy not later than 2021.
Not very heartening news for those contemplating a startup or those who have just set up their startup. But Reid Hoffman, who co-founded the hugely successful LinkedIn and is a partner with Greylock Partners, said in a recent interview that taking the right steps ahead of time can protect most any startup from going down in flames if and when the next recession hits. Entrepreneurs who value their ideas and cherish their new businesses would do well to take heed of what he advises.
Liquid assets are a must, is the first thing Hoffman advises all startups. Keep enough cash in the bank so that if worst comes to worst you can operate your business with a skeleton crew for at least six months.
Second, Hoffman emphasizes that a strong customer base, built on firm customer loyalty. will help any business weather the coming storm. Never sacrifice a customer’s trust just to make a sale, he tells people. A startup with trust is a startup with friends — and it’s your friends that will get you through a financial crisis, not your sales figures.