Survival Mode: evaluating job opportunities in a market reset
During an economic downturn operators and job searchers need to build communal knowledge and support systems just as much as founders and business leaders do. Here let's dig into practical ways to optimize for job security and evaluate opportunities thoughtfully as the market resets.
By now we’ve all heard enough speculation about the downturn. Is it coming? Is it here already? How bad will it get? What should businesses be doing? In answer to these questions we’ve seen VC firms and Big Tech leaders share advice to their teams. Examples include Y Combinator’s 10 point memo advising its founders to prepare for the worst or the guidance from Uber’s CEO on slashing hiring and marketing. There's lots of stoic talk about the need for businesses to reduce headcount deeply, quickly, and once. Whilst as a former founder myself, I understand, one question I’m posing and keen to see more answers to is - what should employees do about their jobs?
According to layoffs.fyi, just over 190 companies have laid off 30,000 employees so far in 2022. The more widely discussed cuts are coming from companies like Netflix, Cameo, Mainstreet, and Robinhood. Week on week LinkedIn and Twitter feeds are saturated by resilient operators looking for their next opportunity after being laid off from companies they hadn't suspected would be next. Whilst as individuals it’s tougher to participate in open conversations on navigating actual or potential job insecurity, these layoffs highlight that operators and job searchers need to build communal knowledge and support systems just as much as founders and business leaders do.
In building up that knowledge you'll often hear the usual wisdom about the importance of having an emergency fund and/or multiple streams of income. Chances are you have already explored and executed on those options if they are possible for you. If finding a role is still a priority and you're looking for something that lasts, read on for practical ways to diligence the opportunities you find and make a more calculated choice in the company and offer you bet on.
Optimizing for job security in your search
In optimizing for job security an intuitive approach is to focus your search on mature enterprises. After all, they do have bigger budgets and longer business cycles. But whilst large corporations are indeed less likely to suddenly collapse like a startup might, there is not necessarily a guarantee of safety. Through her experience surviving the dotcom crash and corporate America since, Rose Wiegley – a Staff Software Engineer at Shopify – has observed how large companies “can layoff entire business units independent of the skills of the individuals in that unit.” Finding an opportunity that has some stability is less about the company size or stage and more to do with asking the right questions to gauge the health of the company and role.
Question the health of the company
You’ll need to get clear on the basics of the business. You fundamentally want to understand if the company is currently making money and if it is in a strong position to continue doing so. You can divide this up into actual financials and customers.
Ask these questions to learn about the financials of the company:
- Is the company turning a profit?
- How much runway does the company have?
- When and how does the company plan to raise its next round?
- How robust are the mechanisms for financial reporting? (Does the company have clarity on its position and is it able to make timely decisions?)
Along with financials, understanding the customer base as it is today and the growth potential gives you a good indication about how a company will perform. As investors tighten their purse strings, a business’ ability to bootstrap sets it up to survive. If customers are already paying money and likely to continue doing so or possibly even pay more, it’s a good sign.
Ask these questions to learn about a company’s customers:
- How many customers do you have?
- How much are customers spending?
- How much profit are you making on your top n customers?
- What does demand look like? Is there a waitlist?
- How have customer acquisition exercises gone so far?
Question the health of the role
How important is the role to the company’s bottom line? Rose talks about recognizing when a job is solving ‘building the second floor’ type of problems.
“You want to be doing something directly responsible for how the company makes its $ and not something that supports the making. No one notices the second floor unless it vanishes.” - Rose Wiegley
This doesn’t mean there is no hope unless you work in Sales. To illustrate what working on the first floor can look like: in her current role at Shopify Rose writes e-commerce software for a company that sells e-commerce software. There is likely more security in her current role than for example if she were doing the same role at a CPG brand.
As you assess opportunities, figure out which figurative floor a job works on and how long a company will seek to retain that role when times get tough.
Question the health of the compensation offer
Although companies are trying to hold onto their money during a market reset, for you as an employee cash is typically king and you should prepare to negotiate for it. What we’ve seen during challenging times is that when companies cannot really afford to compensate talent properly, that reality can be hidden by over indexing on options. Whilst each employee has different goals and needs, ensuring that the ratio of cash to stocks and benefits works for you and has meaningful value is important.
Ask these questions to assess a company’s position and willingness to compensate employees:
- How is compensation split between salary/equity/bonus?
- Which competitors is the company looking to match in compensation offers?
- What is the cadence for bonuses/ equity refreshes?
- How many shares are outstanding and what’s the current valuation?
- What are the flavors of future fundraising? (Equity c.f. non-dilutive)
- What’s a high/ medium/ low outcome for this company, and what are the likelihoods of each?
- What’s the annualized value of my equity in the event of a high/medium/low outcome?
Adaptability makes the difference
Two years into a pandemic, we've all evidenced that when faced with challenges we know how to adapt. Whether challenging times present as a pandemic, job searching in a recession, or something more personal, getting through it tends to look the same. First, welcome change. Then, plan thoughtfully. All the while, keep asking for help.
At Propel my colleagues and I are excited to be that help by supporting you through our jobs board, connecting you with the 300+ startup founders and hiring managers looking for talent, and creating resources that make you smarter at what you do. Apply to join us to get in on the action.
Why not support your peers by sharing your experiences? What else have you learned about finding good job opportunities in a downturn economy? What other questions would you ask? Get in touch to update this blog with your insights.
Up next in the Survival Mode series: 5 practical ways first-time founders can prepare their startups for a recession. Don't miss it. Get notified when our guide goes live.