"Decisions are measured by actions. Actions are measured by the results."
This COVID-19 crisis is not the world’s first financial recession and it won’t be the last. It’s not the world’s first pandemic and it won’t be the last.
For entrepreneurs and startups teams, this is not the first time to take hard decisions and won't be the last. In startups environments, every single day is a day of decisions. Most of those decisions are made under uncertainty, and hence the major principle for startups is to be agile and flexible.
The key challenge into these current circumstances is not the company's cash reserves or the client base. It's something else, that defines the foundation of the startup:
the value of the people!
This crisis can become the optimal opportunity to build solidarity and teamwork among the startup team members or the clear alibi to uncover selfish perspectives and egoism.
Before unveiling the top 6 survival actions for your startup, let me define what is a startup, in a more quantitative approach. The term startup refers to a company in the first stage of its operations, so a startup has:
less than 4 years of incorporation
up to 75 people of personnel
less than US$ 5M annual turnover
Action [1]: Protect your people
The top priority of early state founders is to protect their most valuable asset; their people, their employees. Protect their health and income.
Now it's the time for leadership, built on trust, courage and a clear vision.
Now is the time to identify companies onboarding people for their talent, or hiring people just for their skills. Τhe former will care the most and treat their team as the major asset for the future of the company. The latter will abandon their personnel, considering them as "consumable", cheap labor and replaceable.
Now is the time for the employees to realize if the founders are true leaders, captains with a greater vision to change the world, or opportunists, envisioning their bank account.
Now is the moment true leaders establishing a great team.
And this is the time to build the foundation of a strong culture inside the company, based on a big vision, trust and solidarity.
Action [2]: Reduce your burn rate by 50%!
While the medical and pandemic aspect of this crisis might be under control during the next couple of months, (summer 2020), the financial impact will stay longer.
Having in mind a horizon of 12 to 18 months of heavy economic disturbances, be prepared for a drastic cost reduction of 50%.
If you think it is impossible, consider that it's vital and start with the next:
zero salaries for founders and CxOs. Now is the time to believe in the meaning of your company and not in the money.
50% reduction of working space and rental costs.
reduce by 15% the salaries of the top-paid 25% of your employees.
reduce by 10% the salaries of the next top-paid 25%.
reduce by 5% the salaries of the next top-paid 25%.
zero reduction to the lowest-paid 25% of your employees.
Action [3]: Focus on top 20% clients with 80% turnover
Your clients also face the economic effects of this crisis. Your biggest clients are more likely to support your business, buying your services or goods.
Don't waste your time convincing your weakest "audience" to follow you during those difficult times.
Focus on your top clients, bringing you the major stake of your revenues.
Develop your business model imitating the strategies that onboarded you those top clients and try acquiring similar clients.
Action [4]: Find a Partner
Now is the best time to partner with teams or startups that can complement and enhance your business model.
"Walking with a friend in the dark is better than walking alone in the light." Helen Keller.
This way you provide a more complete product and you target a super-set of your joined client base.
Action [5]: Do NOT get a loan!
If cash is your major challenge, don't get a loan. Period.
There are alternative sources of cash that can provide you active funding.
A loan will fix your short term liquidity needs but will lead you to long term entrapment. Soon, sooner than the end of this crisis, you will need to start paying the loan monthly installments. And this can become the tragic epilogue of your business!
Study carefully your cash flow and be absolutely sure that you need a cash infusion. Check that you minimized unnecessary expenses, you can delay payments, and that you forecast the right amount of sales revenues.
If you really need cash, there are options providing you with active funding. Graypes GmbH is a Swiss company that uses algorithms and AI to rate business ideas and uncover investments. This way Graypes drastically reduces the time and cost of business evaluation and funding. Around this core service, Graypes is building an open community of innovators, experts, that helps innovators and their top ideas on funding, mentoring or B2B partnership.
Action [6]: Be online
You should not delay anymore in transforming part or the entire of your business model into an online service or e-commerce.
Regardless of the COVID-19 crisis, we live into an online and global business world where the more vital change is not just digital transformation but specifically:
digital online transformation!
Now is the time to transform your business in order to overcome space limitations like office, store, city, country and be able to deliver your product or service 24/7 globally!
Bonus Action [7]: Check-out support programs
Many countries around the globe have already designed and developed financial programs for the support of the startup and entrepreneurial ecosystem.
Read carefully the term and conditions and decide carefully your participation, considering your needs and your company's social responsibility. Governments are starting printing money and throwing them from the helicopters, without taking seriously that at the end eventually, the check will be paid by all the taxpayers!
Here are some noticeable countries: Switzerland, India, UK, USA
Epilogue
The COVID-19 pandemic is likely to challenge at a great extend the capabilities of startups for survival.
Surviving this pinnacle crisis will strengthen the immune systems of startups for future challenges!
Nonetheless, through planned actions, rapid adaptation, and comprehensive contingency planning, startups can survive the impending stress test. Like white blood cells after a severe infection, surviving startups can develop resistance against the forthcoming challenges they will inevitably face during the journey of their lifetimes.
Thanks for your time and always live your day with a smile.
The Cyclyst
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