How your startup can survive a crisis

In the early stage of a crisis, there's a period where everything seems to grind to a halt.

Whether it’s recessions, a pandemic, or a huge ship jammed in the Suez Canal, the initial question for businesses, especially startups, is: how do you survive?

But once you’ve moved past that, is that all you can do? Or is it possible to aim for growth even in a downturn?

Businesses that thrive during tough times don’t just adapt—they evolve. This evolution demands flexibility, a strong cash position, and the boldness to rethink everything.

Stone & Chalk has gathered a team of industry experts to reveal how you can not only navigate challenging times but emerge stronger.

Cash is king, but flexibility is queen

One of the first things to understand is that cash flow remains paramount.

It doesn’t matter if you have the best idea in the world—without cash, your business can quickly face existential threats. Businesses don’t fail because they lack vision, but because they run out of cash.

That’s a harsh reality that entrepreneurs have had to face during recessions, and the pandemic only amplified this. While cash is the lifeblood, flexibility is what gives businesses the breathing room they need to keep going.

In recessions, the first thing that goes is often marketing and innovation. Companies become more inward-focused, trying to reduce costs rather than expand.

But what if the right strategy during these times isn’t contraction but calculated expansion?

Tim Lea, founder of Fractonium, highlights that a crisis can be the perfect time for startups to recalibrate to focus on products or services that clients need right now, rather than what they want.

“You have to ask yourself: Am I selling vitamins or painkillers?”

In a crisis, people don’t want vitamins—they want solutions to immediate problems. A business that can identify the new pain points that have emerged and pivot to solve them is more likely to not just survive, but thrive.

This point of flexibility was driven home by businesses that pivoted during COVID-19, from alcohol producers switching to hand sanitisers, to restaurants rapidly evolving to a takeout-only model.

These businesses weren’t necessarily in survival mode; they were in reinvention mode. They identified an immediate need in the market and adjusted quickly to meet it.

The importance of scenario planning

When businesses are caught up in the day-to-day panic, they often forget the importance of putting things down on paper.

It’s easy to be swept up in fear and emotion, but businesses that thrive are those that take a systematic approach to planning. Scenario planning is a great way for your business to think ahead and prepare for different possible futures.

Instead of guessing what will happen, you plan out a few different scenarios—like the economy getting better, worse, or staying the same. This involves:

• Identifying key factors that could impact the business (e.g., market trends, regulations, technology changes).
• Developing different scenarios that include best-case, worst-case, and middle-ground situations.
• Exploring the impact of each scenario on the organisation.
• Creating strategies to address or build on these potential future scenarios.

When you sit down and think about each of these possibilities, your business can then plan how to handle each situation. This helps you be more flexible and ready for whatever comes next.

As Josh Chye, partner at HLB Mann Judd advises:

“Get it on a spreadsheet,” Josh advised, “and look at worst-case scenarios. How long can your business survive if revenues drop 50% or more?”

For startups, this often means focusing on cutting discretionary spending and renegotiating terms with suppliers. But it also means understanding government support options and stimulus programs.

During a crisis, like the pandemic, governments around the world, including Australia’s, rolled out billions in stimulus to help businesses stay afloat. Programs like JobKeeper gave subsidies to help businesses retain employees even when revenue had taken a nosedive.

In a less ‘widespread’ crisis, there still is often funding available through government programs and initiatives – particularly if you look at the local and state levels. You can then leverage them for long-term gains.

The power of relationships

Another critical strategy is the importance of building relationships—both with customers and investors.

Raising capital during a downturn might seem like an uphill battle, but as Tim Lea points out, it’s not impossible.

“The worst time to raise money is when you’re desperate,” he cautioned.

Investors will still fund good ideas, but they’re looking for traction. If you’re trying to raise money in a downturn, make sure you have a product that people are already paying for or showing significant interest in.

In a crisis, relationships with clients become even more critical.

Businesses that have a strong connection with their customer base are better able to understand new pain points as they emerge.

In the same vein, businesses should maintain transparency and communication with their clients. Let them know what you’re doing to adapt and how you can continue to meet their needs, even if those needs have changed.

Pivot is not a panic button

One of the most important ideas is that it’s okay to pivot or even close up shop if the business model isn’t working.

Matt Prouse, Head of Industry at Xero notes that if your business is failing before a crisis, it’s probably not going to recover post-crisis,

“[A crisis] is the perfect time to exit,” he says. “No one will judge you for closing up shop now. In fact, this could be the best moment to rethink your business model or even start something entirely new.”

Pivoting isn’t just about survival; it’s about thriving in a new reality.

The pandemic forced businesses to rethink their models, from shifting to online services to launching entirely new product lines.

Startups, particularly, are in a prime position to make these shifts because they often have more agility than larger corporations. You’re not locked into a way of doing things—so don’t act like you are.

Investors are looking for needs, not just novelty

When it comes to raising capital, the game has changed. Investors are more cautious, and they’re focusing on essential businesses—those that provide real, tangible solutions to current problems.

Josh Chye notes that even amidst the pandemic, startups that were solving immediate issues, like Airwallex (a Melbourne-based Stone & Chalk ), were still able to raise capital.

Matt Prouse echoes this by emphasising the shift in investor focus. Investors are now looking for businesses that aren’t just “nice to have,” but “need to have.” They’re looking for companies solving today’s problems and positioning themselves for tomorrow’s world.

That’s why it’s critical for startups to reassess their value propositions: Are you solving a crisis-problem (or a post-crisis problem) – or are you still trying to solve a pre-crisis problem.

Final thoughts on how to survive a crisis

Crises have upended the world, but it has also created new opportunities for those willing to seize them.

Flexibility, cash management, and a clear understanding of your customers’ needs will help businesses navigate this crisis.

If you’re a startup, now is the time to adapt, to experiment, and to take calculated risks. You may not have control over external events, but you have control over how you respond.

And in that response lies the opportunity to thrive.