A Venture Capitalist Shares 6 Ways Startups Can Prepare for the Unexpected
Grow Your Business, Not Your Inbox
As of this writing, a global health crisis has impacted everyday life all over the world. Citizens are social distancing, and offices are closed. Unlike a weather-based disaster that affects only a small area, this has touched every part of the globe. For founders, chances are this devastating event will force you to rethink your business operations. You'll need to reassess priorities and expenses to meet the shift in workforce and production.
A situation of this magnitude can feel overwhelming as you try to balance deliverables with productivity loss due to quarantined employees and the shift to a digital office. Times of uncertainty present unique opportunities for leadership and impact. For founders, it is important to lead by example, be there for customers and employees alike and focus on what can be done. Adapting to the new conditions will help you survive this crisis and build foundations that can ensure the long-term success of your business.
Communications and connections
This is first and foremost a health and humanitarian crisis. Keeping employees safe, informed and engaged is critical. Many of you and your companies are working from home. If you haven’t already, now is the time to make use of intelligent tools to help your team stay in touch, collaborate and be productive. CabinetM has assembled an interactive Social Distancing Technology Stack that is a comprehensive list of tools that can support companies with employees working from home. Full disclosure: CabinetM is a Glasswing Ventures portfolio company, but I would recommend using this tool even if it wasn't.
Related: 6 Tricks You Need to Know About Zoom
Adapting to working this way and having the necessary tools in place to facilitate collaboration will enable you to maintain productivity and keep up employee morale. Newly separated teams will appreciate frequent touch points to help establish a routine and keep everyone aligned. Consider organizing a morning coffee and encourage your employees to share recommendations on how they are coping in these new times. Maintain community through employee book clubs or by hosting an after-work social hour. Make sure to also take care of yourself and connect with your peers. At my company, we've developed a network for executives in our portfolio companies to engage with, learn from and support one another, especially now as they navigate these unprecedented times. If you are venture-backed, lean on your VC: They're there to help advise you through these uncertain times and guide you on your path. You are not alone.
Plan for the worst; execute on the expected
This crisis is likely to affect both your customer acquisition and fundraising prospects in unexpected ways. Contracts that were close to the finish line might be postponed, terms are suddenly renegotiated and prospects that were very interested just weeks ago have gone cold. While this can be frustrating, try not to take it personally. Everyone is trying to adjust to this new paradigm, and there is little visibility into how long it will last. It's important to stress-test your forecasts and ensure you have enough cash to endure operating in this environment. Every company is different, but in most cases, it's wise to assume no net new revenue for two quarters. Try to extend your runway to at least 12 to 18 months. This may require planning several cost-cutting contingencies depending on how your expectations change as time goes by and as more information becomes available. Keep your ears tuned to the market and execute accordingly.
Leverage the government stimulus package
The U.S. has signed into law the CARES Act, establishing a $2.2 trillion federal stimulus package. This package includes a set of loans and tax relief programs that can provide much-needed cash. Perhaps the most notable ones are the Small Business Administration (SBA) Economic Injury Disaster Loans (EIDL) and the Payroll Protection Program (PPP). Assess the programs available to you, check your eligibility and review the application and deadlines. Check the relevant resources for any employees you may have to let go of during these difficult times. The National Venture Capital Association (NVCA) has a good set of resources to help startups right now.
The importance of loyalty
Enduring partnerships can be built when the going gets tough. Being there for your customers today will go a long way towards ensuring their continued loyalty and retention. Although new sales may be impacted, now is the time to be there for your existing customers. Create a dedicated team to ensure that you go above and beyond to add value. The return on your customer satisfaction now will pay for itself multiple times over in stickiness and loyalty over the long-term. The same goes for your suppliers and employees. This is when stories of leadership, compassion and mutual support turn into norms and lay the groundwork for a culture that will outlast the crisis and become part of the company’s legacy.
Innovation during crisis time
Is there an opportunity to recast your company’s product or service to meet a current market need? Companies that can motivate their teams and solicit ideas to help weather this storm are setting themselves up to succeed over the long haul. While uncertainty prevails, there is always room for creativity. You may be able to reposition your product or value proposition to help customers tackle this new environment or launch features that can address a new problem. With some companies having to lay off employees, you may be able to source new and exceptional talent that can significantly accelerate your business. You can look at innovative ways to compensate employees that align with their personal incentives. Whatever it is, be proactively looking out for new opportunities.
Know your business
Every company is different, and there is no one that knows your business better than you. Through strategic and thoughtful decision making, you have the opportunity to build a resilient business, one that has earned the loyalty of your customers, the support of your employees and perhaps even gained a stronger and more competitive edge.