As the economy begins to re-open, CEO's who have been able to navigate this crisis will need to immediately begin assessing the state of their capital strategy. Here are 4 steps to take now:
It's all about speed:
Your company’s survival in this downturn is dependent on your ability to make decisions with 2% of the required information. This is what separates top performing CEO's from mediocre. This is not the time for committees, study groups or widespread consensus building. Even with imperfect information, the future of your company depends on your ability to make rapid decisions and execute.
If you’re a CEO waiting for more information to help you decide what to do, then your investors, or more likely the market, will make those decisions for you.
Huge segments of the economy have shut down and even with re-opening it is likely that shopping patterns won't return to normal until people feel safe. With millions of people out of work, your revenue plans are no longer valid. To understand the state of things, you need to rapidly assess your KPI's going forward.
What do your numbers tell you about your environment now? When will you have numbers for the re-opening at the various phases? What are key inflection points and how do your KPI's march to those goals? What do you believe the world will look like each quarter until you run out of cash? For seed and Series A companies burning cash, such as startups, how much cash do you have? What’s your monthly cash burn at your new low revenue level? How many months of cash do you have? Cut costs to stay alive for at least 24 months. While in Vistage CEO coaching, I (along with most of my CEO friends) were very impressed with this group's ability to predict the macro-economic trends. You should tracking external factors in the broad economy, with them -- https://itrondemand.com/vlog. You should be thinking about the unemployment numbers, how that effects the health of your current target market and whether these shifts can lead to new markets for your products/services. Having a handle on these numbers will help immensely when approaching investors who will be curious about your ability to understand the new environment.
If you were raising money, validate whether your investors are still on board – with the same terms – or at all. You will need to update your PPM, Pro Forma and Pitch Decks with your new understanding and an internal assessment with details like:
- Operating Numbers
- Liquidity and likely cash-out date under your worst-case scenario
- Accounts receivable, accounts payable
- Sales pipeline/forecast
- Marketing programs spending
- Payroll costs/other variable costs
If you don't have those materials, you can find free resources here:
Whatever assessment you develop, you need to get feedback from your board and investors. While you’re seeing just your own company, hopefully they’re getting data from multiple companies across a wider set of industries. If you’re a startup you’ll also get a sense of how much of a nuclear winter the funding scene is for your market/company.
Once you have agreed on what the world will look like, it’s time to execute. I think every plan should include:
Non-dilutive funding Now is the time to optimize your company's formation to garner tax credits, opportunity zone treatment, NIH and DOD grants and international grants/subsidies. Read More About Non-Dilutive Funding
Pivots Are there now new customers, new services and new channels to pursue? Which parts of your business model can now serve the new normal where business is booming – remote work/education, social cohesion over distance, telemedicine, home delivery, etc.?
Daily Updates to the employees If you don't have a regular cadence to your communication and strategic planning systems, then I highly encourage you to deploy Traction in your business during this time. This tool is like an operating system for your business, which will help you to manage to goals and find inefficiencies.
Next, plot out the changes to your operating plan in conjunction with your pro forma. What cuts will you make to spending programs – marketing, service, manufacturing, R&D? What are your hard choices – what layoffs to make, renegotiate payables, rents, leases, how to trade off cash management versus revenue growth? How can you shift focus to customer retention versus acquisition?
For a free training on how to put this together, go here Pro Forma Training
This re-opening phase will be even more difficult than the shutdown, because you are now going to need to make choices and people will look to you as the CEO for the plan.