Dealing with COVID-19 part II: practical tips and resources for enterprise/B2B founders

The impact of a pandemic on enterprise and B2B companies tends to lag behind the impact on the consumer side due to longer contract terms. Rest assured that whether you are serving enterprises or SMBs, they will be re-evaluating services and implementing cost reductions come month- end or quarter-end. While some cuts will be made, this opens up opportunities for B2B startups to unseat incumbent vendors. Here are some things you, as a founder, can consider during this time to mitigate risks and build resilience. (for B2C founders click here).

1. Evaluate different scenarios depending on your runway, LTV/CAC, and industry exposure

• Create a stress test on your P&L and cash flow to get a clear picture of your financial situation and runway: one simple way is to assume 1) conservative case (basecase of your previous business forecast); 2) Downside case (take a 20% hair cut to the topline); and 3) “Calm before the storm” case (take a 40–70% cut to your topline forecast depending on the industry exposure), what do these look like for your runway?
• If you have 18+ months of runway: Consider adopting a more aggressive approach. Lean into competition where others might be less nimble or in a weaker position and buy out contracts from your competitors, especially for customers in bleeding industries. Build trust with those customers in times of need.
• If you have less that 12 months of runway: Take a conservative approach, refocus efforts on resilient industries/customers and take a pause on low LTV/CAC ones. Focus on conversion and bringing cash flow upfront to guard against uncertainty down the road. Oh, and cut the burn now — you do not want to be fundraising within the next 12 months.

2. Don’t sell like it’s four weeks ago: listen to your customers and don’t be afraid to change up your USP

• Redefine your value proposition: Your customers’ priorities and internal goals might be very different now from what they were a month or a year ago, and that impact what product/services they want. The survey below done by Profitwell is a very powerful example of how buyer affinity changed from “additional revenue” to “cost saving” in a year’s time.

• What this means: Use this opportunity to schedule 1–2 calls with customers every day to understand their motivations and state of mind. Is your client being asked to keep the same revenue target with a lot less resources? Are they looking for new sales strategies to drive topline? Adjust your value proposition and sales playbook accordingly.
• How to prioritize on product iterations: It might be the case that you need to make adjustment to your products to go after a different set of customer profile or USP. Break down what changes need to be made for (i) right now, (ii) coming 1–2 quarters of trough; (iii) the recovery, and prioritise accordingly.

3. Rethink your funnel strategy: focus on retention, churn and monetisation

• Acquisition: With restrictions on travel, F2F meetings and conferences, a lot of enterprise demand generation tactics won’t work anymore and acquisition may become harder. If there is a self-serve element to your product, consider offering longer free trials and remove friction by offering simple on-boarding.
• Retention & churn: Churn is a lagging indicator in B2B given the longer contract terms and not effective in keeping a pulse on the health of relationships. What this means: spend time to look into usage metrics so you can get ahead of slow down of usage. Proactively reach out to your existing customers and offer flexibility around plans and payment. If you can convert churn to a temporary churn, then you’ll have a better chance of reactivation down the road.
• Monetisation: Predicting cash flow is essential during this period of time so offer discounts to switch customers from monthly to annual, and annual to multi-year contracts, to mitigate churn and bring forward cash flow.

4. Act fast, act decisively, and over communicate

• Runway compression is happening, and hard decisions will need to be made. It’s much better for team morale and your survival when you cut fast and cut decisively and aggressively, rather than a slow bleed of small cuts every month. The advice from those with many years of experience has been to make deeper cuts than what seems comfortable today. If you are worried about over cutting and hurting growth, know that investors will be razor focused on profitability and much more lenient on growth for the foreseeable future. Below is a death spiral chart from Sequoia’s infamous presentation from 2008 that shows the essence of time.

• What this means: it’s time to act now and over-communicate with your team, give them a realistic and timely view of what you are facing. How you bring your team through this period will define the success of your company.
• This survival guide has some great concrete steps you can take to reduce cash burn. Negotiating hard about office related expenses/capex, and thinking creatively about structuring compensation and people roles are very useful before cutting headcount. We have also listed some perks for Vectr portfolios in the bottom.
• See how Arne Sorenson, CEO of Marriott Group, communicated hard messages to his team. It’s a great showcase of leadership with transparency, compassion, and path forward.

Historically, turbulent periods like this offer great opportunities to disrupt legacy brands and systems. The companies that survive and thrive are the ones that are laser focused on adapting to shifting demands and staying nimble. We hope you will stay safe and here are some useful resources:

Daily web traffic data and benchmark by category:

SimilarWeb Coronavirus Data & Insights Hub

Government subsidies and support:

Shopify’s global list of government subsidies and relief programs

Other incentives and support:

Facebook’s Small Business Grants Program

We also have a list of perks availabile for our portfolios, please reach out to get the details.