Brace yourselves, winter is coming!!!

Coronavirus is the black swan of 2020. As with all crisis, there are some businesses that stand to benefit. However, many companies in frontline are facing challenges as a result of the virus outbreakA distinctive feature of enduring companies is the way their leaders react to moments like these. Employees are all aware of COVID-19 and are wondering how leaders will react and what it means for them.  

False optimism can easily lead the company astray and prevent leaders from making contingency plans or taking bold action. Avoid this trap by being clinically realistic and acting decisively as circumstances change. Demonstrate the leadership your team needs during this stressful time. 

We suggest leaders to check health of their business by doing the following:  

  1. Cash runway: Can business withstand a few poor quarters if the economy sputters? Is there any contingency plans? Where can business trim expenses without fundamentally hurting the business? 
  2. Fundraising: Private financings could soften significantly, as happened in 2001 and 2009. What would can be done if fundraising on attractive terms proves difficult in 2020 and 2021? Can the business turn a challenging situation into an opportunity to set the venture up for enduring success?
  3. Sales forecasts: Even if the business don’t see any direct or immediate exposure, anticipate that customers may revise their spending habits. Deals that seemed certain may not close. The key is to not be caught flat-footed.
  4. Marketing: With softening sales, companies might find that customer lifetime values have declined, in turn suggesting the need to rein in customer acquisition spending to maintain consistent returns on marketing spending. With greater economic and fundraising uncertainty, companies might even want to consider raising the bar on ROI for marketing spend.
  5. Capital spending: Until the business has charted a course to financial independence, examine whether capital spending plans are sensible in a more uncertain environment. Perhaps there is no reason to change plans and changing circumstances may even present opportunities to accelerate. But these are decisions that should be deliberate. 

In downturns, revenue and cash levels always fall faster than expenses and nobody ever regrets making fast and decisive adjustments to changing circumstances. Always remember what Darwin said: “Those who survive are not the strongest or the most intelligent, but the most adaptable to change.” 

Give a shoutout to our team at info@yy.ventures if you are willing to join forces to to fight the pandemic.