How to navigate market volatility with operational excellence

Sven von Sperl
September 6, 2022

The global economic environment has been flipped on its head and Venture capitalists (VCs) have tightened their purse strings. Founders are shifting from growth at all costs, to lean operations and optimising the resources they have.

Across the globe, we’ve seen the startup ecosystem hit hard by the latest economic downturn. We’re seeing inflated valuations re-adjusted as well as early-stage funding take a 22% decrease from the market’s peak last year.

At Cape, we’ve found other ways to achieve operational excellence by saving money, operating lean, and building resilience in our systems.

Want to learn how to navigate the choppy waters ahead with confidence? Here are six strategies to help you achieve operational excellence in a down market.

1. Reward and motivate your team to perform at their peak

No matter what industry you’re in, your employees are your biggest asset. Rewarding and motivating your team to perform efficiently and effectively is key to your long-term success (especially when navigating a down market).

In difficult times, it’s important to recognise that your team is along for the ride with you. With the right support and strategies in place, you can make them feel valued and boost loyalty.

Here’s the thing: we’re experiencing one of the strongest labour markets in recent memory right now. With unemployment at record lows, retaining your people is much more cost-effective than hiring new staff.

So, how can you keep your people around for the long term? Rewards and recognition are a key part of the puzzle and can help improve motivation, increase productivity and level up your team’s quality of work.

Plus, it doesn’t have to be costly or complex to show your team you care. Look for simple, cost-effective ways to reward your people, including:

  • Public recognition: spotlight an employee of the month, do a social media shoutout or feature your employees in your company newsletter
  • Private recognition: send congratulatory emails, set up one-on-one thank you meetings, and treat your team to vouchers or gift boxes to celebrate their efforts.
  • Job satisfaction: create a healthy and productive work environment tied to your company values, where leaders provide clear direction on people’s roles and offer learning and development opportunities.

2. Conduct a cost analysis across your business and reduce wastage

Businesses in a downturn need to be proactive about making every dollar count and ensuring resources aren’t being wasted across the company.

A cost-benefit analysis is a great way of doing this. It compares your projected and estimated costs and opportunities which helps you determine whether something is a smart business move or not.

This kind of analysis offers a data-driven approach that removes personal biases, makes decisions simpler and can uncover hidden indirect and intangible costs.

So, what are the steps of conducting a cost-benefit analysis?

  • Establish a framework for your cost-benefit analysis: here you’re identifying the goals and objectives you want to achieve or address any concerns your business may be facing. You’ll also need to decide what metrics you will use to calculate and compare business costs and benefits.  
  • Identify your costs and benefits: here you will be making two separate lists - one for your estimated costs and another for your projected benefits. Your costs will likely include:
  • Direct costs: expenses directly related to the production of a specific product or service and can include things like software, labour and equipment.
  • Indirect costs: these are all your fixed costs needed to operate your business, which can include rent for your office space, computers and utilities.
  • Intangible costs: these are costs that are harder to quantify or estimate but have a big impact on your business including costs associated with boosting employee morale and customer satisfaction.
  • Opportunity costs: any potential benefits or costs associated with choosing one product or strategy over another.
  • Assign a value to each cost and benefit: once you’ve made your lists, assign a dollar value to each cost and benefit which will help you accurately estimate and compare each one.
  • Add the total value and compare your costs and benefits: if your total costs outweigh your total benefits, you can start making adjustments to your business processes and weigh up any alternatives and options to reduce costs and achieve your business goals.  

3. Identify sustainable growth channels, rather than short-term wins

When funding is drying up and fixed costs are rising, one of the smartest ways to support your growth is to pivot your marketing strategy. While above-the-line campaigns and traditional marketing (such as print and TV ads) can deliver results, they come with hefty price tags.

Instead, it’s worth pausing your high-cost channels and shifting to lower-cost options. A great example is prioritising strategic partnerships as well as social media marketing, which can be managed in-house and still help you achieve your growth goals.

Social media marketing allows small businesses and start-ups with limited marketing budgets to achieve brand awareness and provide personalised customer service which all increases trust and credibility with your ideal audience. It also has the potential to increase your conversion rates, because you’re directly engaging with your target audience.

4. Invest in your product and make it ‘sticky’

Let’s face it: it’s a pretty crowded market out there. With so many different products and services on offer, it can make it a little hard for customers to choose between brands.

So, one of the smartest investments you can make in uncertain times is this: building a product that stands out from your competitors.

That means getting clear on the problems your customers are facing and the unique ways your solution can help them. Plus, by designing a streamlined customer experience, your audience will have another reason to pick your brand.

5. Diversify your risk as a business

With a lot of economic uncertainty ahead, diversifying your brand’s revenue streams can combat your risk. It’s important to not rely on a sole stream of income because it might not always bring the results you need to stay afloat.

It’s all about being proactive and setting up contingency plans in case your main source of income dries up. By diversifying your revenue streams, you’ll be able to ride through any challenging times or slow periods with a more reliable source of cash flow.

Take this example: if you’re a bookstore, you could consider adding a cafe or pop-up coffee cart to your shop as a way to boost your income and give your customers another reason to spend with you.

6. Automate your internal systems where possible

Automating your operations is really important in uncertain times, with smaller budgets, increased competition and the need to cut costs.

Removing repetitive, manual processes and automating internal systems can reduce the chance of human error and improve efficiency - giving your team the ability to focus on what’s really important.

Finding which process to automate will be different for each business, however, this can include repetitive admin tasks, data reporting, and even expense management, such as controlling employee spending.

Final thoughts

In these uncertain times, you can still achieve operational excellence with the right systems and processes in place. While you can’t control how the market is going to perform, you can control how well your business is prepared for the challenging times ahead.

The best thing you can do to set your business up for success is to take care of your time, streamline your operations and look for additional ways to boost your revenue.

Sven von Sperl
September 6, 2022