How to Manage Your Business During the Coronavirus Crisis

Top 3 tactics I have used over the years

As an entrepreneur and business leader, your first responsibility is to keep your team safe and healthy. Many companies are enabling people to work from home, avoid travel, and take advantage of paid sick leave.

You also need to take care of your business. As someone who has managed high-growth businesses during economic downturns, I can tell you that I always wanted to keep the pedal to the metal and take market share. If you have a better, cheaper product, a downturn provides the sense of urgency to prompt customers to try new solutions. However, market share gains generally can’t overcome the revenue slowdown, so don’t kid yourself — you will still need to cut costs to stay alive.

If you are profitable, you want to stay profitable. If you are burning, you want to cut your burn to give yourself more runway to eventually raise funding in a better environment.

In my experience, companies are always too slow to respond while they are waiting for the demand signals to materialize. Your sales pipeline tends to lag reality — you will hear something like “the customer needs more time to decide,” and then the deal finally dies. Your pipeline will be healthy until it isn’t. But when you’re in the heat of battle, it’s hard to stop firing!

The typical response to this type of macro environment shock is to dial back expenses, manage cash tightly, only invest where returns are high and certain, and be more modest on top-line expectations. But how do you do this, really?

Here are my top three tactics that I have used over the years:

1. Play the portfolio game. Inside your business, there are multiple products, customer sets and go-to-market channels. There will be a distribution of performance. Now is the time to shoot the dogs and invest in the stars. Don’t worry about “long-term strategic positioning blah blah.” You have a mandate to kill questionable projects! Focus on what has excellent near-term ROI and move resources into those areas. This is not the time for long-term strategic expansion initiatives — it’s time to get focused.
2. In any business, there is always 10–20% in excess costs everywhere. You should implement a top-down mandate for a 20% cut to all expenses outside of headcount (see next bullet). Don’t micromanage it. Just set the target and let the team figure it out. Renegotiate contracts, turn off unused software contracts, slim down on perks. With the current pandemic, the travel, entertainment and events budgets will take care of themselves.
3. In terms of employees, there are a number of approaches. The biggest challenge here is that you are affecting people’s lives. The best way to think of the issue is that if you have too much people cost in your business, the jobs are going to go away sooner or later. It’s better to let people get on with their lives if your company can’t provide a sustainable career for them. Here are some ideas:

• I think that broad-based RIFs (reductions in force) damage morale and culture. This type of headcount reduction is a dumb, blunt instrument for panic situations or for ineffective organizations.
• Instead, remove the bottom 10% of performers across the company and it’s unlikely you’ll notice the difference. Often teams perform better. This is performance management, not a RIF, although you should include HR in the process to make sure this is handled correctly, because laws vary.
• The other way to remove people cost is to get more aggressive with teams that are not core to the mission. This could be dovetailed into the portfolio optimization in #1.
• You can also look at your org structure. Sometimes you will have teams that are “I formations” with managers who only have one direct report. Flatten the organization, and you can free up more capacity to do work. As a general rule, for something customer-facing, a manager should have about 10 direct reports. For other roles, 5–7 is a good number. Every organization is different, but almost always there are ways to improve the effectiveness of the organization.

This is not an exhaustive list. There are plenty of other approaches to controlling costs and extending cash. As a general rule, you will want to take an “all of the above” approach and use every tool in the toolbox. (And to be realistic, yes, you may need to conduct a broad-based RIF despite the cultural cost.)

Don’t panic, but take the opportunity as a mandate to build your business into something leaner and more resilient!

And if you are worried about slowing down on strategic projects, I will just say that clearing the deck can open your eyes to new opportunities that you have never considered and give you even more freedom to try new things.

Good luck,

Klee Kleber | Builder & Co-Founder at BuildGroup