How To Identify a Stable Tech Company in These Uncertain Times | by Mandi Gunningham | Nov, 2022

Tips and Questions to help you choose the best company for your future

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The tech industry is a hot mess right now – we see it in the news every day. Twitter is in a league of its own, But all the tech giants are on fire. Constant layoff announcements threaten to ruin everyone’s vacation. this timeline Shows 180K+ tech professionals affected by layoffs in November 2022 alone.

I think it’s safe to say that none of us enjoy living in a state of complete uncertainty about our livelihoods. So, if you’re laid off or scared for your job, or want to educate yourself, let’s talk about what got us here. And what should you look for to identify a stable company before joining?

My company recently had an extensive meeting that focused primarily on reassuring employees that we are not facing any layoffs – that’s good! However, our CEO went a little further to explain that we are not facing the same economic turmoil as we have always been focused on sustainable growth and profit rather than growth at all costs. Not being too immersed in the economic side of the tech industry, this gap baffled me – why would a company disregard profit? so i did something my own research,

The standard economic model for most Silicon Valley startups has been the growth at all costs approach for nearly twenty years. It seemed like a solid model based on precedent in which a company prioritizes growth over profitability. If the company grew quickly and captured the market, the return on investment (ROI) would be guaranteed. Increased spending, such as marketing expenses, to acquire customers was justified, and an ever-increasing workforce was needed to maintain the scale of growth.

photo by Ellie Bergin

so it comes down to Unit Economics and Customer Retention, This was a new concept to me, but, in essence, unit economics looks at cost and revenue as it relates to an individual unit. Too often, for software companies, our “entity” is a customer because our goal is to grow our user base. Statistically, these models tend to have lower customer retention, which means they do not yield an equivalent return for their higher marketing and acquisition spend. This may indicate that this strategy is less than sustainable, but ultimately, it was considered a standard, aggressive strategy that investors came to rely on.

That is, unless you happen to be faced with a global pandemic causing massive economic change. Who could have seen that coming, but we’ve all learned some hard lessons over the years. And the lesson for investors and companies is: sustainable development matters!

At the start of the pandemic, I think this model was often promoted – tech companies grew at an unprecedented rate because their customers had no other choice. But if you look in the long term, that too was not sustainable. Eventually, people will be able to return to restaurants, so companies like DoorDash and UberEats were bound to see huge losses.

And of course, no one should expect to exit the global pandemic in a stable economic condition. That’s just unrealistic. But how tempting it is to look at those big numbers and think that we are invincible!

So what’s the alternative?

steady increase

Most economists and experienced executives agree that the alternative is to focus on sustainable development. The companies that are weathering the ongoing storm are the ones that saw through the initial pandemic and the short-term development of the idea, This will finance our growth for years,

photo by michelle dot com Feather unsplash

A sustainably grown company focuses on profitability first and uses its return on investment to drive reasonable and steady growth. These companies are more concerned with retaining customers than acquiring new ones. They just want a steady return on investment from their acquisition cost rather than rapid growth.

Why does all this matter to you as a job seeker? Continued growth and customer retention means that workforce requirements will also grow permanently. If churn, or the number of customers leaving, is low, the number of employees needed to support the system will be known and reliable. No drastic changes – no layoffs.

This all sounds great, but a company is unlikely to announce its growth strategy in an interview, especially if they are relying on old models, such as growth at all costs. You can ask a direct question: What is the development strategy of your company? Has it changed at all in the last year?

photo by Cottonbrow Studio

This might give you an interesting answer – it might even indicate a white lie. Here are some more probing questions to ask:

Is the company profitable?

Depending on your interviewer’s role, they may not have exact numbers, but they should be able to talk about whether or not the company is profitable. I wouldn’t consider it a red flag if they don’t have the information, but definitely follow up with your recruiter or HR representative to get a more definitive answer.

Your company seems to be growing rapidly right now; What is the company’s strategy for retaining these customers?

Again, an interviewer for a technical role may not have the expertise to spend in this area, but they should have some idea of ​​the company’s overall strategy and culture around customer retention. If their answer is more focused on getting new customers then it can be a red flag.

How do you plan to scale your application to support customer growth?

If the company is growing but technically has no plans for scaling, chances are they will not retain new customers – red flag. A yellow flag would be that they are currently “learning” how to scale the application. However, if they have a thoughtful approach to scaling the application, you are definitely in a safe position.

How are you supporting the internal development of your teams?

It’s a looming question that can indicate a company’s internal growth outlook, which says a lot about its growth outlook in general. If new employees are given the tools and management support to train, learn and grow, they focus on sustainable internal development. A company that throws new employees head first can expect to see churn in employees, not just customers.

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