Covid is destroying many startups and scaring all of us.
As a founder, it’s both your dream and your livelihood at stake. You’ve probably already taken drastic steps to save cash and extend your runway: stop any non-essential operating expense, called investors for some more cash, discussed with your suppliers and other creditors, maybe had to resort to decrease the days and hours of your staff, and obviously asked your customers for their support.
The questions every startup or small business CEO needs to ask now are:
- What’s my new Burn Rate and Runway?
- What does your new business model look like?
- Is this a three-month, one-year or a three-year problem?
- What will my investors do?
Here is some high-level advice from Sequoia on reviewing your financial assumptions.
But if cash is what will make you survive the next few months of crisis, there is more you can do to recover quickly once the crisis subsides.
1/ First of all, take care of yourself and your team: hopefully you have co-founders who can help take care of business if you get sick. Better not to get sick though, so protect yourself and your team by making sure everyone is confined. And above all, communicate often, clearly and with empathy. You want to try your best to retain your essential personnel so try and keep paying them, maybe through extra stocks options if needed.
2/ Make the most of the current opportunities:
- if you can afford it at all, continue marketing so as to gain some saliency: media is very cheap right now and most companies have stopped all advertising to save cash. Those who can advertise will stand out and continue to build a relationship with their customer.
- if you can’t afford a paid campaign, re-use existing content and focus on free marketing activities, such as CRM.
Here is an old (2008) article from the Harvard Business Review on marketing in a recession.
3/ Learn your lesson and prepare for the future by increasing your level of digitisation: if your product is not digital, can you at least have a digital go-to-market, add some services (eg training) that can be delivered virtually? Review your scenario planning to discuss counter-cyclical measures in your business model. Since the world today is no longer the same as it was a month ago, and likely will be worse a month from now, if your business model today looks the same as it did at the beginning of the month, you’re in denial — and possibly out of business.
This recent article from NfX gives 28 tips to survive in a downturn.
4/ Get some support: call your mentors, advisors and board members. Consider joining an online accelerator so you can talk to other founders and get ideas. Virtual memberships are cheap and enable you to get access to resources and advice.
5/ Lastly, I’ve observed the biggest mistake CEO’s made during the last crashes was not making draconian cuts to expenses quickly enough. They dripped out layoffs and cuts holding on to favored projects with magical thinking that somehow this was just something that would pass. You need to act now.