How growth companies can reinforce their resilience – a story of pivoting and bootstrapping
Business Watcher with Professor Yannick Dillen
By Yannick Dillen
Professor of Management Practice
A new year equals new opportunities. Yet 2024 also comes with some inherited business obstacles from last year. Young growth companies are still facing an entrepreneurial climate that is impacted by fluctuating interest rates, global geopolitical tension, and persistent inflation. These circumstances cause investors, consumers and the business world overall to be cautious in their behaviour. As a result, growth companies have a disadvantage in terms of investments and purchases, compared to established companies. What can they do to remain resilient? Yannick Dillen, Professor of Entrepreneurship, shares some ideas on how start-ups can reinforce their resilience.
How did recent years affect young growth companies, especially those still seeking their product-market fit?
After several prosperous years with soaring valuations, 2022 marked the start of a tough phase. Many young growth companies had developed products or services but hadn't yet cracked the formula to generate a strong demand – which is a condition for solid profits. If these start-ups wanted to survive, they were forced to ‘pivot’. Adjusting parts of your business plan can help to work more efficiently – or align better with changing customer needs.
How can growth companies reinforce their resilience?
Professor Yannick Dillen explains how pivoting and bootstrapping can help growth companies reinforce their resilience.
What does pivoting mean? And why is it important for start-ups during a tough economic and global climate?
Pivoting refers to making strategic adjustments to a startup's business model. This could mean that you enhance your operational efficiency - or reorient offerings to match new customer preferences. As access to capital becomes more challenging, pivoting has become almost routine for young companies still searching for or revising their growth formula. Startups typically lack the rigid structures of established companies – and this makes them well-positioned to respond swiftly and adapt their business models.
What strategies can start-ups use to extend their runway to the next round of financing?
A strategy that young growth companies are increasingly adopting is ‘bootstrapping'. It means that you learn to manage your limited financial resources more wisely. This might involve diversifying into consultancy alongside software-as-a-service to generate temporary cash flow. Or you could opt to focus only on the most profitable regions or customer segments. And you could use the least expensive sales channel to boost margins.
Will companies with growth ambition need to continue to deploy these survival strategies in 2024?
Both pivoting and bootstrapping will certainly remain part of the daily reality for most young, ambitious companies. Even more essential will be to reinforce the resilience they have already built over the past two years. However, I remain hopeful that – sooner or later – brighter days will finally emerge.