Leading a high-growth company through an economic downturn
How three CEOs from around the globe are reassessing priorities while staying focused on long-term opportunities.
Chopra’s downshifting was prompted by conversations with some investors with more exposure to Europe and the U.S. who were signaling the market was overheated and primed for a correction. He now says being able to prepare for the downturn before its full scale was apparent proved to be a huge advantage. “Luckily, we were ahead of the curve,” he says. “When everyone else realized things had to change, we’d already had more time to adapt.”
The adaptation took many forms, including a shift in how Chopra spends his time. After pushing into countries like Australia and Thailand, CARS24 paused plans for further expansion and focused on improving operations in its core markets. “We’re doing more customer interviews. We’re looking at every bit of inefficiency, every broken customer process,” Chopra says. “I now spend 30% of my time rolling up my sleeves, reading customer emails, and spending time with employees.”
As for the cash it raised recently, CARS24 is stashing much of it away for now—and not just out of caution. “Every advantage also has a disadvantage. The advantage of raising a lot of capital is we have a long runway,” Chopra says. “The disadvantage is it’s now tempting to take the easy way out. It can make you fat and a bit lazier. Putting the cash aside sharpens your thinking, it’s like shedding your fat and becoming leaner.”
As the downturn deepened, Chopra turned to members of his board of directors with more frequency, seeking support and alignment through what became almost daily conversations. Together they agreed to cut back on some marketing initiatives but keep most tech spending intact. He was surprised at the fruits of this leaner approach: Employee productivity and returns on investment increased; margins grew without sacrificing growth. “You see more ground-up innovation happening when people think inside constraints. People are coming up with ideas that no one was thinking of before,” he says.
Chopra is prepared to endure a downturn that could last a long time, but that doesn’t mean he’s taking his eye off the CARS24 goal of making shopping for pre-owned cars a more pleasant experience for everyone. “We believe in the principle of ‘Hope for the best but prepare for the worst’,” he says. That means addressing short-term challenges without getting bogged down by them. “When I get up, the first thing I think about is how we get to 2035 or 2045. When you apply that long-focus lens and ask if you’re solving a problem worth solving, our answer is still yes.”
“We became more paranoid to create a more efficient business,” Lacerda says. Her team devised a scenario in which the company, an online marketplace for a variety of pet products and services, couldn’t fundraise and had to sustain its ambitions for three to five years. “It’s conscious paranoia because we don’t expect it to happen,” Lacerda says. “But it helped us allocate capital away from projects with a lot of risk and toward commitments to short or medium-term returns.”
Efficiency became the company’s lodestar. “We’ve been talking about our plan to improve our unit economics and our cash generation for the business, how we can make sure they’re performing and how we can scale them faster,” Lacerda adds.
After enjoying growth in revenue from the surge in pet adoptions during the COVID-19 pandemic, Lacerda noticed consumers were spending less on toys and accessories but still spending on food. The shift prompted Lacerda to put a sharp focus not only on growing revenue per customer, but also on the product purchasing cycles that drove that growth. Predictable, recurring revenue took priority over one-time sales, as Petlove promoted subscriptions for staples like food and medicine, often relying on in-house, private-label brands. It also shifted investments into pet insurance as cost-conscious consumers sought to limit overall health-service costs. That segment is growing nearly 80% this year.
One area Lacerda has not skimped on is in product development. Since the pandemic, Petlove has tripled the teams devoted to technology and data analytics, tasking them with improving the customer experience to be faster, simpler, and to offer personalized recommendations. “How do we address this trend of customers wanting to put fewer items in their baskets? How do we make sure they keep adding items? One of the keys is using AI to make better recommendations,” Lacerda says. They include suggestions for purchases that are aimed at helping customers take better care of their pets, such as reminders for regular vaccines.
With the company on track to grow revenue by 43% this year, Lacerda says the focus on efficiency and customers is paying off: “We saw higher conversion rates and higher customer retention. People started coming back more often,” Lacerda says. “That has allowed us to keep our customer acquisition costs under control and continue investing for growth with good unit economics.”
-1666219756.jpg?auto=format&fit=max&w=3840)
“Historically, companies built their engineering teams on-site. Then they decided to build an engineering location in, say, Poland or Argentina,” says Johnson. “The shift happening now is companies are saying, ‘I’m going to build a great remote team, regardless of where people are.’ Once you embrace remote work, embracing a global workforce becomes a much simpler step.”
He now views hard times as a chance to strengthen his company by growing more efficient and effective. “As a CEO, you have to consistently be iterating your company,” he says. “You’re going to have to reimagine the systems and processes that got you to where you are in the first place.”
Although Andela closed a funding round in September 2021, the company, like many other startups, is revisiting costs and dialing back on discretionary spend, for example, and taking more time to make hiring decisions. But Andela is continuing to invest in increased automation and product engineering. Johnson says others are, too, which keeps demand for global engineering talent strong. The company is also helping clients adapt to globally distributed workforces by helping them handle documentation and compliance, as well as employee integration and payroll issues.
One thing that hasn’t changed, Johnson says, is Andela’s focus on improving current offerings and addressing customer needs. “It’s becoming increasingly clear that you need to maintain customer relationships,” Johnson says.
He also remains confident that the shift to remote work, and the insatiable global demand for tech talent, means many more companies are ready to tap Andela’s marketplace. The company now sources talent from 113 countries, up from seven a few years ago, creating new options for potential customers. “If you can grow your potential talent pool by 20 times, all of a sudden you can think differently about who the ideal hire is,” he says.
As Johnson awaits signs that the downcycle is nearing its end, like shortened timelines to close investments and business deals, he remains upbeat about Andela’s long-term prospects. In 10 years, he predicts, a quarter of tech hires will come from global talent networks like the one Andela has built. “This is a huge opportunity for companies looking to do more with less, which I think is going to be a pretty material theme for the next couple of years,” he says.
