How to deal with COVID crisis with dignity?
As most of you know, proverbial winter is coming. Recently I had a lot of conversations with VCs, company owners and employees. I have some insights about the approach that, in my opinion, may prove beneficial and valuable for each and every one of us.
So first — let’s understand what’s happening.
The crisis is coming. The reasons are pretty obvious — Coronavirus forced people to stay at home and killed a few industries in a second. What type of businesses got affected quickest? The answer is pretty obvious: Tourism, events, and beauty. But how is it possible that those two industries affected everybody else? In my opinion (although bear in mind, I’m not an economics expert) the main reason is the fear of the unknown. Most people do not really understand what is happening besides the obvious that is why they decide to cut their spending in these uncertain times. So besides obvious travel and events ban they postpone a lot of economic-heavy decisions like buying a new car or any type of luxurious goods for that matter. In effect, besides most endangered industries other companies followed this trend to limit their spending to be prepared for the unknown.
Now, this may all seem obvious but it still leaves an open question — how to approach cutting the budgets?
Now the answer to that naturally depends heavily on your cost-structure but there is one thing common and certain — this will affect your employees and any companies that you cooperate with. Having that in mind (in my opinion) the first thing you need to do is make everybody aware of what is happening and why. If you were transparent to your people before that will be easier, but if you haven’t — please start now. Once people will understand what is happening around they will be more understanding and in some cases even proactive when it comes to budget costs. They will be able to suggest some solutions that you may have not even thought about. But what is most important — they will feel safer. They will know that their leaders are doing everything they can to make the company stable even if a crisis hits hard (from the info I’ve gathered I assume that worst is yet to happen towards the end of the year). The goal of cutting budgets shouldn’t be just the CEO role at this point — it should be one common goal for the whole company.
Of course, you will make some tough choices of cutting jobs (in the case when cutting salaries is not enough) but please be extra cautious about it. Remember that the firing person will only fuel the crisis and make it bigger — so, in my opinion, it is better to cut the salaries as much as possible in order not to fire people and be prepared also for the better times that will come eventually. There is also another factor to that — most probably (and hopefully) the people you have onboard currently are talented, carefully selected and effective. If that is the case ask yourself a question are you willing to lose this effort you’ve put in them, the investment you have made. Don’t get me wrong — the answer will not be :YES: with every person, but you should at least give this thought a chance.
The other aspect is the companies that give you some services that may seem easy to cut at this moment. The approach you will have here should be exactly the same as your people. Before cutting them loose, talk to them. Ask for discounts, delays in payments, anything. Why? Because if everyone will cut those companies they will fall down. By falling down they will make some people jobless, which eventually (again) will make the crisis bigger.
OK, so we have looked at the “services” section, now let’s have a look at the “incomes” section.
Surprise, surprise — BE TRANSPARENT AND HONEST. Talk to your clients proactively, before they will even talk about this (as then it’s usually too late). Ask them how the crisis is impacting them and how YOU can help. Maybe adding some extra services, perhaps giving some discounts. It is better (in current times) to have a paying customer (even if you had to limit the income) than not having a customer at all. And bear in mind, you have (probably) already limited your costs, so hopefully, you will be also able to limit your income. Naturally, you have to do everything to set some cash aside for the harder times, but please try not to be binary or over-drastic about it. Of course, it would save you more money, but in the end, you will just give a good base for increasing the crisis.
And believe me, the clients will appreciate you talking about it, because they will know they have a good partner on the other side of the deal, not just another one soul-less company that tries to maximize their profit in this situation (which of course everyone should do now, but still remain human and understanding).
The last thing I wanted to mention (which I kinda signaled at the beginning) is talking to your employees about the crisis. Create an all-hands-on-board approach to thinking about the ways your business can survive. You’d be surprised by the number of ideas people will throw. I’m not saying that most of them will be feasible, but at least you are in this together and you will create a common understanding of the problem. Thanks to that (I hope) we may lower down the impact of the crisis.
But then again — do not id yourself — a big crisis is coming and we all need to be prepared.
I hope that those few simple tricks and general approach will help you figure out the best way for your business to survive in the time of need.
At the end I suggest looking at a great presentation created by one of the best Polish VCs — INNOVO:
And the last thing, please do watch SouthPark episode about Economic Crisis:
