Corona Virus and What it means for your Software Development Budget
Everyone has been impacted by the coronavirus.
In all likelihood, we are now heading for a global recession, a prolonged period of economic uncertainty, stalled transactions and lower revenues. High unemployment and crushed consumer confidence will translate into lower consumer spending and delayed purchases while investors and corporate risk aversion may mean it won’t be easy to raise another round of funding.
So what can you do?
Prepare for a decline in your revenues and cost structure
The majority of business activity has come to a grinding halt. Even if you are still able to provide products or services to your customers, they probably already reduced their spending and postponed purchases of non-essential items indefinitely. If you are a B2B business the current situation may mean you won’t be able to close a deal, get a new client anytime soon and that most of your clients will be extremely price and cost-conscious for many months to come.
Create a lean cost structure
You should assume it is going to take many months for the normal economic activity to restart. So it’s high time to take a closer look at your cost structure and make sure it’s lean and appropriate for the current economic environment. Be more disciplined and focused on doing more with less.
For many technology-driven businesses, one of the biggest cost elements is software development payroll. At GITS, during the last couple of weeks, we have been dealing with a huge increase in international clients exploring various options to cut those costs by adding new hires in Vietnam as opposed to the US or the UK or building entire cost-efficient teams in cheaper locations.
Regardless of the stage of development, many businesses are facing the same issues: huge uncertainty, lower revenue, liquidity issues and pressure on costs.
During the last financial crisis of 2008 and 2009, the funding environment changed dramatically for Series A, B and C, which fell by 40%, 41% and 46%, respectively. Investors are becoming risk-averse again and we should be prepared for the same situation this time round.
Assume that your next funding round might be delayed or difficult to close. Reduce cash burn, make investor money last longer, preserve liquidity and make sure you are in a strong position to take advantage of cheaper user acquisition costs when things stabilize.
For tech-driven businesses, software development payroll is often the biggest cost element so try to optimize it. Focus on building more for less and make sure you get to the next milestone with the money you have left so that raising the next funding round is possible.
Author: Lara from Railay