Founders, 7 Concrete Tools to Weather the Storm
Your Mission: get more runway.
We are enduring unprecedented times right now. How CEOs and entrepreneurs respond during this time will define the future and resilience of their businesses and teams.
The messaging from investors is consistent: raise money and cut burn. This is sound advice, but you need to thoughtfully prepare your business for the next few months.
Over the past few days, we’ve been reflecting on this topic with our portfolio, LPs and advisors. In chatting with Jean-Pierre Chessé, one of our closest advisors who managed a business in the midst of SARS in China, we tried to get clarity on concrete actions that CEOs can take during this time.
Move now — you will regret not moving fast enough
Make sure you are communicating with your teams and keep them safe, communicating with your investors and keep them up to date so they can help you, and setting up a crisis management team to take you through this time.
We acknowledge that every company is different but our overall baseline:
- Move now — you will regret not moving fast enough
- Everything is re-negotiable
- Push your organization to be more agile
We’ve put together a list of 7 areas to review with some itemized ideas. Up to you to make the right choices and decisions on how to implement them.
1. Revenue
- If not already done, collect your Accounts Receivable now and be open to discounts for immediate payment.
- Focus on pushing any revenue that is delivering cash now.
- Cut any revenue that is not marginal contribution positive except if you can get paid 12 months in advance.
- Go to your largest customers and renegotiate your payment terms — ask them for help — Do they have a responsibility to help the smaller ones?
- Be opportunistic: is there a specific service/message/feature that you can offer in this economic environment?
- For any physical store that has some e-commerce, focus on driving revenue online.
Why it matters — Get analytical. We’ve heard it from chatting with our close Fortune 50 CEOs, you can expect all new developments / contrats in discussions to be put on hold for the foreseeable future — at least 2 to 3 months until businesses get a clear line of sight.
2. Cost of Revenue
- Go see your largest suppliers and ask them for a deferred payment / grace period — 3 to 6 months on your next 1 or 3 months of operations.
- Make a list of all your suppliers and renegotiate your payment terms with all.
- Reduce your inventory (sell as much as you can) and engagements.
Why it matters — Be clinical about your changes. Your operating working capital is always optimizable and this work will make you stronger post crisis to accelerate vs. competition.
3. People
- Reallocate your resources: can current retail employees work on other tasks like communications, digital growth/analysis, processes books creation or customer support?
- Suggest your management teams to reduce their salary over the next 3 months.
- Exchange base salary to variable linked to revenue growth or revenue stability.
- Exchange salary for equity — this is where you will create the strongest core team that will drive your future success post crisis.
- Suggest unpaid leave for a month or in kind compensation.
- If you have no other choice, reduce your team that are not critical; do it with respect and in transparency.
Why it matters — Be bold, transparent and consistent. Reaction and decision need to come fast on this front. This will create flexibility within your own organization needed to get through this crisis and come out stronger. Any action needs to be made in transparency and with respect of your teams.
4. Marketing Spend
- Don’t arbitrarily cut your marketing budget.
- Take this opportunity to do a full dive by analyzing and tracking all.
- Focus on existing customers. Your biggest asset is your existing customer base. Place Customer Happiness at the Center of your organization. Cc. Delivering Happiness.
- Consider adapting to their new process and needs.
Why it matters — Be very analytical here. There may be new opportunities to better serve customers. An opportunity to build long lasting relationships and deeper ties.
5. Rent
- If you are a retailer, obviously go and renegotiate your rent for your stores.
- Your landlords don’t want you to go out of business.
- Your landlords will see how much trouble times are on the horizon
- Renegotiate your office rents! If all of your team works remotely or if the office has closed, ask for rent relief / deferred payments.
Why it matters — You need to adjust fixed costs.
6. Bank
- Go negotiate and renegotiate your credit lines.
- Renegotiate your overdraft fees.
- Renegotiate your repayment terms i.e. ask for additional grace periods.
Why it matters — Be one step ahead, the window is probably limited but use this opportunity to renegotiate all payments. Also, interest rates are lower now.
7. Others
- Cut any other costs that are not key to revenue creation.
- Ask your legal and service providers for delay in payment.
- Watch any potential government support / incentives to make sure you benefit from it → please share if you have any tips here.
Why it matters — Rules are changing and will keep on changing in the government effort to curb the pandemic.
Lean on your teams and on your community in these turbulent times, we are all in this together.
Take your decisions with courage, respect and transparency with all your stakeholders.
And remember, tough times create strong companies.
Have another tip or idea to share, leave a comment.
Stay safe.
Interlace Ventures is an early stage venture capital fund focused on investing in technology companies transforming Commerce for Better Consumption.
