Don’t Panic You Can Save Your Startup
Running a startup in a difficult economy can push you to your limits, but dealing with a crisis could just be the opportunity to learn new ideas that could transform you and your company forever.
The coronavirus pandemic has changed the business landscape we are all familiar with, and it’s hard for anyone to accept the sudden, devastating changes yet accepting the changes is the best step moving forward. The best action any startup founder can take is to not panic.
Needless to say, a lot of people’s idea of a startup is rather skewed. We’ve all heard amazing success stories about young entrepreneurs who turned billionaires almost overnight.
Sadly, there are just as many stories about catastrophic failures that don’t get talked about nearly as often. Stories about founders and CEOs who have lost their houses, savings, and sometimes friends and families, while chasing their dream project.
Ideas are easy. Implementation is hard. -Guy Kawasaki, AllTop Co-founder
Here are some tips I’ve learned over the years to help you not only survive but thrive at a startup;
1. Planning and planning
Create a real plan together with your co-founders and investors and look the truth straight in the eye. Things will get worse before they get better again.
Formulate a plan to survive the next year and a half without outside funding. This strategy should guide you to make hard and needed decisions. Make sure that you, your co-founders, and your employees understand the vision you have and the measures that you will take in the next weeks and months.
2. Lead by example
Everyone is looking at you for leadership, this is your time to shine and show strength. You need to be a calm leader.
3. Know your weaknesses
Your first step is to identify areas of vulnerability and decide which of these can be mitigated early. Ideally, you have measures in place to diversify revenue or accelerate profitability and make sure that your financials are in order. Have a solid financial model and run financial scenarios.
This will further help you to know when to pull the trigger on major changes as things play out.
4. Protect your best assets
It’s your responsibility as a founder to keep your employees safe make sure that your employees feel comfortable. You might want to put a board resolution in place that allocates a leader in case you or any other board member get sick or need to be quarantined.
5. Communication is key
Do not make decisions without your board, even if you can do so from a legal standpoint. Make sure they are part of the process. If you do ask them to help the company and give you more funding, make sure you communicate it in advance, and after you have all the facts.
6. Ask for advice
I believe in the power of people working together, So go and ask your mentors for advice, talk to your peers, and quickly validate your business decisions.
7. Burn rate
You don’t want to be in a position of needing to raise capital during an extended downturn and reduce future financing risk. You can avoid this by reducing your net-burn rate, or increasing free cash flow. Plan to act and stay as lean as possible. It will help you to calculate different scenarios.
8. Keep investors in the loop
You never know how investors will react to situations like this. Strong companies will always be able to get more funding, and some investors might see this as an opportunity to get great deals. High valuations may be harder to come by, terms may become more taxing, and the size of a potential investment round may be limited.
10. Follow your roadmap
Do not lose focus on your long-term goals. You shouldn’t let external forces unnecessarily influence your path. I know, it can be tough when conditions deteriorate, but staying focused on long-term goals can help you with a frame of reference by which to measure short-term decisions. It will also help you with a plan for the recovery period.
11. Stay on track
This is good advice always — not just for downturns. This means discipline with costs, forecasting, or hiring. Use this time to establish a culture of discipline for all conditions. Be helpful, smart, and prudent. With an established culture of discipline, you will be in a better position for any shock to the business and it will bring your team closer together.
This is a challenging time. When people talk about entrepreneurship being tough, this is what they mean. It’s a true rollercoaster ride. But remember, it’s also a time to grow, shine, and give.
Don’t shy away from asking questions. If something confuses you, clarify.
If something bothers you, get other people’s thoughts about it. If there’s something you don’t know, ask someone who does. If you have an idea you aren’t sure how to process, ask your team members to help. Remember that there will always be someone who can provide a fresh perspective of things.
Embrace your business like you embrace your family your friends and your pets.
What doesn’t kill you should make you stronger and many great companies developed in difficult times.