Why does (potential) recession mean re-evaluating positioning?
In this write up from Caryn Marooney about how to think about startups’ risk factors going into a potentially down economy, the first thing on a list of advice for every single startup is re-evaluating value proposition and messaging. Why?
First of all, whether or not the macro economy is or is not in a recession is irrelevant. If your buyers perceive that there’s a recession, or the VCs you were counting on raising from think it’s too risky to invest right now, objective reality doesn’t matter. It matters how people feel and how they’re experiencing the world.
For that reason, everyone should be checking in with with their value propositions, positioning and messaging right about now. This does not mean everyone should be updating them, but rather that the founder / founding team should scheduling an hour or two to review the current value propositions, positioning and messaging and make sure it still works, given the changing macro economic environment. Some startups won’t be impacted at all; some will be minimally impacted and others will have to make a drastic pivot to survive. You need to make sure you understand which of those categories you fall into so you can take appropriate action (which could, once again, just be more of the same).
Here’s why you need to check in.
Priorities change
Your customers’ priorities and internal pressures are likely to change if they think we’re in or approaching a recession. Perhaps they were previously concerned primarily with enabling developers to move as fast as possible; now they are not interested in giving the engineering team a bottomless budget. Perhaps they have become increasingly risk adverse. Perhaps they care a lot more about retaining customers when they used to care about acquiring new customers. Perhaps they have a hiring freeze, so your awesome project that cuts the time it takes to onboard a new developer in half is pretty useless now.
If your customers priorities change, you need to adjust how to position your project and your commercial product. It could turn out that the value proposition they care about is totally different, or that changing the space you’re trying to win alters the entire competitive landscape in your favor.
Pressures increase
The other reason to check in with your value proposition, positioning and messaging is that it becomes even more important to get it right than it was in the boom times. As budgets get smaller and people feel their boss breathing down their neck to penny pinch, it’s that much more important for customers to feel like they are getting massive value out of your product. People often feel like they’re under more stress during a recession, especially if there’s been cost cutting internally and they’re essentially working short staffed. Undifferentiated value propositions will just be ignored, people won’t take the time to make sense of confusing positioning.
Being able to cut through all the pressures on potential champions, potential buyers and potential users will give you a huge advantage, and could be the difference between successful exit and failure. That means being able to clearly tell each stakeholder how you make life better for them individually and for the whole organization they work in, quickly and succinctly.
What if I’m just an open source project?
Does this all matter if you’re an open source startup just focused on widespread user adoption at this point? Absolutely.
First of all, the days when you could raise a next round of fundraising based solely on your open source project and community could very well be over. So you probably need to think about your monetization strategy sooner rather than later.
Secondly, and for a related reason, you need to get that community adoption faster, without burning as much cash. Ensuring you’re communicating the right value proposition, positioning your project correctly and focusing on a small enough audience of target users is the best way to use the resources that might have to stretch longer than you anticipated.
Do you need to work with someone like me? It might be helpful, if you’ve taken a look at your positioning and decided it needs to change. You should at least be able to see on your own whether or not there’s trouble brewing among your customers that you need to address. You can also refer to the template positioning canvas here. If you can fill it out on your own, and are happy with what you get, then you’re golden. If you can’t, or if you know there’s trouble in your market and you’ll need to pivot, you might want help.