Smiling female owner taking steps to protect and grow her business.
“Spend every dollar as if it were your last.” This is a quote from Sequoia Capital, a leading venture capital firm in Silicon Valley. No, this was not a quote from yesterday but from 2008 when we entered what would be called the “Great Recession.” While the coronavirus is probably not going to lead the USA or the world into a recession, it certainly will cause a significant disruption.
Perhaps, not so ironically, Sequoia just issued another message to its funded companies last week where they communicated that the “Coronavirus is the black swan of 2020.” The message had three parts. One, stay healthy and safe regarding family and friends. Two, disruptions are/would be occurring as it related to business revenue, supply chain and travel. Three, they offered advice and counsel across six major areas that included cash runway, sales and marketing forecasts and critical operations expenses.
While the effect of the coronavirus seems surreal and that opportunities are limited, remember this: lots of successful companies have been created in downturns. Adversity sometimes brings out the best in us as we move to be as creative and innovative as possible, not to succeed but to survive. Uber, AirBnb, WhatsApp, Square, Pinterest, Slack and Twilio were all started in 2008 and 2009.
Here is some advice that pertains to funded startups, startups seeking funding and also to small businesses.
Manage your cash. You know the saying, “save your money for a rainy day”; well, that day is now. Examine the cash you have on hand and imagine how you could make it last for at least six to nine months. And it you don’t have enough cash on hand, look at how you could cut expenses or increase sales by doing something different.
Examine or revise your sales forecasts. Don’t fool yourself and believe your most optimistic projections. Get very realistic. The goal is not to hunker down and hide but to devise or brainstorm ways you could actually sell more of your products or services. Perhaps it’s new markets, customers or leveraging a partnership.
More creativity, less cash for marketing. Remember when you started your business and had no money and you were super creative on using word of mouth, organic social media and key networks to sell your product or service? Well, get back into that mentality. Be more creative with respect to your marketing expenses and look for ways to use marketing tactics that don’t have a significant cost.
Control employee expenses. As you examine your business, look to control expenses related to employees. Travel and event costs probably can be controlled. If you were looking at increasing your business footprint, you might want to hold off on any additional monthly rent expenses. Instead, see if you can temporarily reduce your expenses by not hiring any additional employees, perhaps use freelancers or contractors. Also, let your current employees work remotely. To help with any workload issues, consider hiring a college intern.
Spend every dollar as if it were your last. Okay, this sounds a bit extreme but you need to embrace the mentality that you need to protect the lifeblood of any business. Cash. Either cash going out in the form of expenses or cash coming in from revenues. You might also be able to negotiate with your suppliers or landlords, letting them know you need some form of cooperation in order to survive. If you do cut employee expenses, look for ways to inexpensively keep employee morale high.
Startups and small businesses that survived 2008 and beyond didn’t take life-threatening risks with their companies. Survival mattered more than market domination. Take the necessary steps so that you come out of this disruption stronger than ever.