Is the Economic Upturn Beginning? What’s Ahead for Startups?

Economic activity has started to increase from the bottom it hit recently. Is the economic upturn beginning? As more and more states lift restrictions, people and businesses can increase spending, which is spurring economic activity. Although the data on this will lag a bit, it can be seen by observation alone.

It will take many months, if not a year or more, to reach the economic health we had pre-COVID, but we appear to be trending in the right direction. As a CEO / Founder of a startup, there are leading indicators that you really need to be looking out for as you decide when to start reinvesting in growth.

So when should startups begin to ramp up investment activity from the reduced levels brought on by the COVID shutdown?

  • Certainly, increases should occur before economic activity returns to where we were; otherwise, startups will be behind the curve relative to their competitors.
  • Some worry about what will happen to the economy if there is a second COVID surge later this year. It’s important to point out that we will be closer to the release of a vaccine or a treatment protocol (which all indications suggest are likely by early 2021), which would dampen the economic impact of a second wave.

Therefore I am starting to believe the answer to when a business should start to increase investments in growth is soon, quite soon.

  • That said, it's certainly situation-dependent. (For example, a startup in the travel industry may not want to begin investing as soon as a startup that sells enterprise software to otherwise healthy businesses).

So how do I know when is the right time to start investing in growth during this economic upturn?

  • Several leading indicators can help show when a startup should invest again.

Burkland’s CFO Services team will share its perspective on leading indicators in next week’s blog post.

_____

Burkland offers expert CFO services, accounting services, and tax services to startups across the United States. Reach out to us to learn more about how we can help your startup or portfolio company navigate the COVID-19 health crisis and downturn.