Editor’s note: This post is adapted from a recent webinar presented by our friends at The Upside Foundation.
Mark Jaine and Ben Zifkin both know a lot about running businesses during times of crisis. The serial entrepreneurs each have impressive experience under their belt, having successfully led businesses through the 2008 global financial crisis. Mark, for example, is the president and chairman of Peerscale, a community of hundreds of tech leaders. He was also previously the president and CEO of Intelex, a leading provider of EHS software. Meanwhile, Ben is the founder and CEO of Hubba, a B2B commerce community in the retail space. Prior to that, he founded the Axsium Group, the world’s largest workforce management consulting practice.
Mark and Ben recently responded to some questions about navigating the current economic downturn that has resulted from the spread of COVID-19. Below we’ve provided a synopsis of some of the main points that they shared.
How should founders and CEOs be evolving their approach to business development?
First and foremost, make sure that you’re talking to your customers. Find out what their motivations and priorities are right now in light of the current situation. Then focus on changing your value proposition accordingly. In the meantime, continue using your existing go-to-market strategy to try to win new business, making necessary changes like eliminating trade shows and other in-person events from your plans.
Be sure to approach things deal by deal and to be realistic. If you provide an essential service or your business is one of the ones actually benefiting from the crisis, keep doing what you’re doing. If you’re like most businesses and facing significant headwinds, however, you need to be prepared to evolve.
Finally, if your buyers have completely shut down, figure out what you can do during this time to try to build some good will with them and to help that community until they turn the tap back on. Any investment you make into your community now will likely pay dividends further down the road.
How can you ensure your business weathers the recession?
We can reasonably assume that the recession is going to last the next 18 to 24 months. As you look ahead over that timeframe, figure out where you want your business to be during this down market and what steps you’ll need to take to get there.
Cutting your burn rate and making sure you have enough capital are obviously going to be critical. You’ll probably also have to make some tough decisions if you haven’t already, including laying people off to help ensure that you’re making more money than you’re spending. You may even have to go into full cockroach mode and bunker down so that you can focus on cutting costs and finding new paths to profitability. It’s also important to make sure that you have at least a year’s worth of cash in the bank so that you’ve got enough liquidity to weather the storm.
One of the silver linings in all of this is that those companies that make it through the crisis will experience a slingshot effect and be really well positioned to succeed when the market recovers. Another upside is that the cost of resources is going to shift dramatically. For the past 12 years, labor has been very expensive, but over the next 6 to 12 months the cost of resources is going to go down. It’s going to be a buyer’s market in terms of employment, which will make building and running a team much more cost-effective.
How should you be adjusting your fundraising pitches in this environment?
Even in the best of times it can be difficult to raise capital since any number of obstacles can completely derail the fundraising process. Unfortunately, the current crisis is only going to make that more difficult. The bar is raising in terms of what investors need to see in a business to feel confident about writing a check.
Having said that, there’s lots of dry powder out there. If your company is strong and stable, and investors don’t have a reason to see it as a risky bet, you’ll have access to lots of money. However, it’s important to go into any fundraising pitch with a clear view for the future. Explain how you’re planning to either ride the tailwinds you’re deriving from the crisis, or how you’ll pivot your business to adapt to it.
What’s the best way to manage your team during this challenging time?
As you communicate to your team during the COVID-19 crisis, make sure that you’re always honest and authentic. You want to inspire your team by demonstrating your confidence and conviction. Remind employees that you’re all in this together and that you’re right in the trenches with them. And make sure that you’re always putting the health and safety of your employees first. Let them know that’s the case and check in regularly to see how they, and their families, are doing.
Finally, take care not to paint too rosy of a picture about what’s going on. Sure you should be upbeat and a source of energy and inspiration, but you also need to be realistic about what’s going on. If you have to cut staff, for example, be honest and transparent about that, and let people know why you’re cutting the people you’re cutting. While they may not agree with what you did, at least they’ll be more likely to understand and respect your decision.
For more advice on how to navigate the effects of COVID-19 on your business, check out this post from Brice Scheschuk.