SBO director and head of growth
There’s one key thing that every founder, CEO and manager must focus on now, and that is understanding your exposure and the impact to your company’s cashflow.
The first step of this framework is starting with assessing your current revenue and cashflow streams and ‘suring it up’. For all businesses, it starts with assessing your current customer base.
I recommend the following steps.
- Do a risk assessment of each of your customers and understand their ability to pay their current invoices.
- If there are any laggards, pick up the phone and get them to pay their outstanding account.
- If they are already doing it tough, offer a payment plan. Get them to commit to a small, affordable weekly repayment on direct debit (via credit card to help their cashflow).
- Secure recurring revenue.
- Review your existing contracts and terms and conditions and ensure you have built in robust termination clauses so you have plenty of notice if customers decide to cancel their contract with you.
- It’s inevitable that some customers may ‘fire’ you. Just make sure you have plenty of notice and time to prepare for that scenario.
- Provide more value for the same price.
- You need to prove your value to your customers and show them that they need you more in this time economic uncertainty.
- Ask yourself: ‘How can we position our services/products to help our customers weather this economic storm?’
- Consider providing these additional services/products at concessionary rates.
- Or, divert existing services into this new offering.
It’s important to note that this is not a time to start squeezing every dollar out of your customers if they are already hurting.
Be empathetic and acknowledge that we’re all in this together and about to feel some pain.
Overall, the objective here is customer retention.
Divert all efforts to engaging with existing customers and ‘over-communicate’ with them.
For our business, this is the exact framework we are rolling out with all of our clients.
As a founder, an accountant and a financial advisor to a lot of small businesses, I know this is the time where our clients need us the most.
It’s time to step up and help where you can.
AirTree Ventures co-founder and general partner
The most important thing we had already been working on with our portfolio companies is cash runway. This is now the most important issue to solve for, given that nobody knows how severe nor how long the impact on demand will be.
Apart from cashflow, the other aspect we are focusing on is helping people through this with emotional support and providing links to counsellors.
For many/most of our founders and employees, they will have never been through a major economic crisis (the GFC was 11 years ago!) And, they do not know how to process what is going on, both in terms of the health of their family, friends and employees, but also then their business, which a couple of months ago was thriving and now it is seeing demand fall off >50%.
We can’t solve every cashflow problem, but we can make sure our founders and employees know that we are here to help them, and that it is OK to be anxious, and even scared.
Communicating your feelings at a time like this is key to keeping us connected and human.
Luxury Escapes co-founder, angel investor and former corporate lawyer
I’m involved across a number of businesses and it’s definitely not a one-size-fits-all approach. A lot depends on the sector the business operates in and the business’ forecast cashflow.
For early-stage businesses, it’s critical that the business has enough runway to survive to cashflow breakeven given the rapidly changing funding environment. This could mean working closely with staff with regards to paid and unpaid leave, as well as redundancies potentially. For businesses working from expensive shared workspaces, working from home is a logical cost-saving.
For the past decade, many startups have focused on fast growth, comfortable that they will be able to raise money when they need to. That mindset is quickly changing and there will be a switch from growth to survival. This is most critical in terms of marketing and team spend.
Where the business is later-stage or in a more defensive sector, it’s a slightly different roadmap (less about short-term survival and more about ensuring the long-term stability of the business) but it absolutely puts every cost (be it fixed or variable) into sharp perspective.
Arguably the biggest challenge for business is uncertainty on the depth and breadth of the crisis. While China seems to be somewhat coming out of the worst impacts of the pandemic within two months, it’s impossible to model any sort of outcomes in Australia based on such limited data.