321. Turbulence 😵💫
How to focus your team during a downturn
Hi there 👋
I was once told that in a startup you can expect your role to change every six months. Sometimes it’s a tangible change like a new title or a new team; other times it’s a spiritual change like your business has just pivoted or you’re going after a new target audience. Sometimes the change comes from the outside, like what many in tech are experiencing today with the SaaS downturn. We’re definitely in a season of change. The hopeful news is that this too shall pass, a new season is always around the corner, and turbulent times are part of what we signed up for — we got this! If I can be of any help to you or your team in the coming months as you navigate choppy waters, please don’t hesitate to reach out.
Wishing you a great week ahead,
Kevan
(ᵔᴥᵔ)
Thank you for being part of this newsletter. Each week, I share playbooks, case studies, stories, and links from inside the startup marketing world and my time at Oyster, Buffer, and more.
Say hi anytime at hello@kevanlee.com. I’d love to hear from you.
Four ways to focus your team during a downturn
With the macroeconomic picture becoming less bull-ish, many venture-backed companies are beginning to brace themselves to weather whatever storms may come in the next 12-24 months. Take this letter sent to Y Combinator’s companies:
And, if you’re interested in the finance perspective, check out this video from the folks at Craft Ventures, which goes into even greater detail on the steps that startups should consider taking to prepare for the season ahead.
As marketing leaders, we have the delicate job of balancing a message of realism and clarity while maintaining motivation and psychological safety. We must weather the storm while keeping the crew engaged.
It’s not easy.
Having been through several seasons of ups and downs, I’ve learned to take moments like this in stride and to treat them as opportunities to thrive together with your team and come out the other side stronger. Specifically in a downturn, you need to bring a different mindset to your team and to focus on aspects of the business that can sometimes get lost when you’re coasting through prosperous times.
Here are the four areas I tend to highlight when going through the turbulence with my teams.
0. Be kind to one another
Always start here, even in good times but especially if your team is feeling stressed. A culture of trust, respect, and affirmation shouldn’t change just because the circumstances have.
1. Watch your efficiency metrics
If you don’t have any efficiency metrics in your list of KPIs, I’d suggest adding some. Efficiency can mean different things to different teams, so feel free to choose the metric that best aligns with your company’s growth levers. In general, these are some of the main ones:
LTV : CAC — You’ll want to aim for no worse than 3:1 ratio for this metric. At Buffer we were fortunate to have a ratio as high as 10:1 in good times and even 8:1 in slower times, buoyed by our non-paid channels like SEO and word of mouth.
CAC Payback — With cash a bigger consideration, CAC Payback should be no longer than 24 months and ideally less.
Conversion velocity — In a sales-led business, this would be the length of your sales cycle, which can often extend during a downturn as customers take longer to make purchasing decisions. With freemium or self-serve, you’ll want to watch the free-to-paid conversion and trial conversion rates to see if these are decelerating. In either case — sales or self-serve — you’ll want to update your growth models accordingly.
Yield — For sales-led businesses, yield helps you compare the dollars you spend with the dollars you generate. At Oyster, we are looking at our spend → pipeline ratio as a signal of how our efficiency is increasing or decreasing.
Tomasz Tunguz from Redpoint Ventures wrote a useful blog post this week about the four types of startups in a recession. Here’s the diagram:
And he wrote:
The x-axis is the Zero Cash Date: when the startup runs out of money. The y-axis is sales efficiency: a proxy for product-market fit (PMF). Typically, most startups selling into the small-and-medium business segment would like to be in 14-18 months’ payback. Enterprise startups should be between 18-28 months.
Here again is where efficiency comes into play. During a recession, the companies that operate most efficiently are the ones that come out ahead.
Of course, alongside efficiency, there’s cash in the bank, which leads me to …
2. Be conscious of your spend
Operating a marketing budget in a downturn does not mean saying “no” to everything. It simply means being more aware and thoughtful about how you spend your budget.
Step one is tracking your spend so that you’re aware of what’s going where. Here’s a free template:
Then step two is aligning your teams to a mindset of prudent spending. This can mean empowering each of your teams to decide how they spend by giving them a set budget number they can use. Or this can mean having tradeoff conversations as a marketing team any time a major expense comes up.
3. Double-down on sustainable channels
Often times, when cash becomes a focus, the marketing budget becomes a focus because it tends to be one of the biggest line items. Understandably so, paid acquisition channels are under the microscope. So while you’re proving out the efficiency of these channels, you should also be working to build your sustainable channels. This multichannel mix will prove hugely beneficial once the boom times return, too!
Here’s a list of some of the more sustainable channels you can find. (Sustainable simply means that they can grow exponentially without you needing to put in more incremental dollars or effort to scale them.)
SEO
Word of mouth
Earned media / PR
Syndication
Organic social
Referral
4. Innovate
As a startup gains momentum, you may find that a lot of your systems, processes, channels, and tactics are “solved problems” that can be shortcut by using existing playbooks. This is great for speed and execution. And a lot of these playbooks are really excellent! (I know I have a series of playbooks I like to run.)
But sometimes running an existing playbook or operating solely in the space of “solved problems” can limit the potential of your marketing strategy.
Especially in a downturn, it can be critical to innovate and find these blue-ocean ideas that can help you grow your brand (if cash is tight) and your revenue (if paid acquisition is scrutinized).
As a rather reckless example of innovation, we once stopped publishing blog posts at Buffer for 30 days just to see what would happen. It was reckless because the blog was our number one source of acquisition. But the innovation proved quite illuminating — our traffic numbers didn’t dip, and the innovation put us on a path to focus on updating and improving previously-published, evergreen content, a tactic which is now broadly known as historical optimization.
Over to you
How are you managing your teams through turbulent times? How are you dealing with it as an operator or IC? Wishing you lots of peace and strength, and let me know if I can help!
Misc.
TikTok boom. A really interesting perspective on the role that TikTok is playing in the entertainment space (not just social media):
We’ve been watching the streaming wars for the past few years, but we were looking in the wrong place. “Video-based social media” was the Trojan horse. The gatekeepers of the content kingdom were being vanquished while we obsessed over subscriber growth at Disney+. The new occupant’s ascent to the Iron Throne was financed with a different currency — not monthly subscriptions or cable packages, but attention. Specifically, our youth’s attention.
About this newsletter …
Hi, I’m Kevan, a marketing exec based in Boise, Idaho, who specializes in startup marketing and brand-building. I currently lead the marketing team at Oyster (we’re hiring!). I previously built brands at Buffer, Vox, and Polly. Each week, I share playbooks, case studies, stories, and links from inside the startup marketing world. Not yet subscribed? No worries. You can check out the archive, or sign up below:
Thank you for being here! 🙇♂️
I’m lucky to count folks from great brands like these (and many more) as part of this newsletter community.
