“Spend every dollar as if it were your last.” This was 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 the world entered what would be called the “Great Recession.” While the coronavirus is probably not going to lead the the world into a recession, it certainly will cause a significant disruption in the world’s economy.
Just last week, Sequoia issued another message to its funded companies last week where they stated 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.
The effects of the pandemic covid-19 looks surreal with little or no opportunity during this time of outbreak, remember this: lots of successful companies have been created during times like this, I mean economic downturns. Most times, adversity brings out the best in us as we move to be more creative and innovative as possible, not to succeed but to survive. “The quest for survival makes more successful”. Uber, AirBnb, WhatsApp, Square, Pinterest, Slack and Twilio were all created and started in 2008 and 2009during the “Great Recession”
Here are some tips that pertains to funded startups, startups seeking funding and also to small businesses.
Manage your cash. The popular saying, “save your money for the rainy day”; well, that rainy 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. Reduce the number of things you buy and the people you spend on, think of the next thing to do in order to survive.And if 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 get it all wrong by believing that your most optimistic projections that customers and clients are always available. Get realistic, the world will change, so will their purchasing power. Look for new customers and services to render. 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. Life’s all about creativity. Recall when you started your business and had no money and you were super creative on using words 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 strategies and tactics that don’t have a significant cost. Reduce your advertising cost and get on board.
Control employee expenses. Cross-examine your businesses and related personnels, I mean your employees. Look for ways to control expenses related to Travel and events, these 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. Quite harsh, but it’s the best option in a time like this. Okay, this sounds a bit extreme but you need to embrace the mentality that you need to protect the lifeblood of any business. Cash. Revenues and expenses must be carefully monitored inorder to sustain the business. 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.