Inc. Magazine – September 2019

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JEANINE SKOWRONSKI  WEALTH SHARE

Jeanine Skowronski

(@JeanineSko) is

a veteran personal

finance journalist and

the editorial director

of Policygenius, a

New York City insurance

tech startup.

avid Barrett survived

the Great Recession by

making his business as

boring as possible.

In 2007, the founder

and CEO of Expensify

was trying to launch a

prepaid debit card that would

enable—and hopefully encour-

age—charitable giving to panhandlers

in San Francisco. But, as forecasts of economic turmoil

mounted, investors were interested only in ideas that sounded

“sane and reasonable,’’ he says. So Barrett started pitching

the safest related product he could imagine: an automated

expense-report management system.

That worked; Barrett secured enough money to quit his

full-time job in April 2008. He still intended to pursue the

card idea, but soon hit a production snag—and with the econ-

omy in free fall, Barrett recalls thinking, “Shit, I really need

to make a business out of this right now.” So he doubled down

on business-expense management.

Almost 1.4 million small businesses with employees closed

from 2008 through 2010, according to the U.S. Small Business

Administration. Expensify, now with five offices and a staff of

120, wasn’t one of them—a feat Barrett attributes to those

pre-recession pivots. They taught him to “build a product that

is needed in a downturn,” he says. “Sell aspirin, not vitamins.”

Recession war stories may seem out of place during this

prolonged period of economic growth, but there are signs

that a slowdown is on the way. A June 2019 survey from the

National Association for Business Economics put the risks of

a recession beginning before the end of 2020 at 60 percent.

A third of the 2019 Inc. 5000 CEOs expect a recession to begin

this or next year, with another third bracing for one in 2021.

(See CEO Survey, page 65.) Whenever the downturn hits,

these steps can help your business weather it.

Fundraise. Build your cash reserves while you can. Serial

entrepreneur Mitch Grasso had a potential downturn in the

back of his mind while raising capital for his latest venture,

Beautiful.ai. The presentation software company raised

$11 million in Series B funding in March 2018, just 17 months

after a $5.25 million Series A round. “I chose to raise money

earlier than I would have otherwise, even though it cost me

probably a little more” in terms of valuation, says Grasso. “If

there’s money on the table, take it sooner rather than later.

You’ll always find a way to spend it.”

Conduct consumer research. You might not be able to

pivot your entire business model, so figure out what products

and services your customers will need even in poor condi-

tions, says Carlos Castelán, managing director of the Navio

Group, a retail business consulting firm.

Ryan Iwamoto, co-founder of caregiving service 24 Hour

Home Care, started asking his customers for their input when

the federal government introduced sweeping rules for home

health care agencies in 2016. He wanted to be “the first in

market to educate them on all the regulations coming down

in our industry,” Iwamoto says. “It allowed us to build better

relationships”—and has helped boost his company’s revenue

by more than 68 percent since the law changed, he reports.

Ink multiyear contracts with clients, not vendors. Earlier

this year, during a regular assessment of her company’s rev-

enue targets, Sandi Lin considered the potential impact of an

economic slowdown. The co-founder and CEO of Skilljar

was happy to discover half of the customer training platform’s

revenue was on multiyear contracts, meaning “at least theo-

retically, that even if all of our other customers went bank-

rupt,” Skilljar would have some runway—and less pressure to

scramble for new business. Lin applies the opposite approach

for vendor contracts; while Skilljar is sponsoring a major

customer conference this fall, she negotiated a minimal com-

mitment on room nights and seats with the hotel and venue.

Which is a smart business practice in good times, too; as Lin

says, “the most important job of an entrepreneur is to survive.”

The next downturn is inevitable.

Its impact on your company isn’t.

80 ● INC. ● SEPTEMBER 2019 ● ● ● ● ● ●