Updated: Apr 8
I don't know about you, but the last three weeks have felt crazy and a little surreal. It's been overwhelming, and I wanted to share a few things I've done to get through past crises in my life.
As an entrepreneur and investor, it is natural to swim in chaos. Life is a sea of possibilities. Your Most Important Job is to roll with the punches and keep your eyes open. And also to cultivate joy and abundance every moment you can!
This week I talked to friends in my network, and we discussed moments that rocked us to our core.
Dengue fever in Argentina
The financial collapse of 2008
Crypto winter one CWI (1K down to $250).
Crypto winter two CWII (20K to present price)
The Japanese triple threat - tsunami, earthquake, nuclear disaster.
COVID19 has been its own personal hell, but we can get through it. What is clear is that every company and person needs to pull out their P&Ls and budgets and formulate a new plan of attack.
Cash conservation must be the top of mind. This is the number one lesson as a business builder and being self-employed: Cash is king, keep as much as you can. Use cheap credit intelligently.
Here are some strategies I've used to conserve cash.
Step 1 - Examine every expense.
What is your #1 KPI? Does that expense help you reach it? If you absolutely can't kill it, then look for alternatives that are cheaper and more flexible. E.g. At&t ($150 - $600) vs GoogleFi ($20 - $80) or MailChimp ($10-$299/month) vs SendFox ($49 one-time + $10/month)
Step 2 - Renegotiate everything.
Start with all of your recurring expenses that you couldn't kill in Step 1. Email and ask if they are offering a discount as a result of the economic crisis.
Step 3 - Reduce payroll expenses fast.
During the 95% market crash mentioned above, we asked employees at my company to reduce their pay by a minimum of 25% so we could keep the team intact. I also talked to everyone privately about their survival number (just enough to cover expenses). Many of those that had equity stakes were willing to drop their pay.
If your team has equity options, this may be a time you can compensate them with more. If your organization does not have options, this may be an excellent time to put together an option pool.
Reducing an employee's paycheck is a scary topic to bring up. Lots of communication should be flowing both ways - keep your employees up to date on the company's cash-flow situation and make sure they know they can come to you if they have unexpected expenses that pop up. If you manage this process well, you can build a lot of long term trust with your employees. Fierce Conversations is my favorite book on this.
I hope this helps. If you liked this post, please share and like!
Feel free to reach out to me if you are a startup that needs assistance navigating these uncertain times. I will be working with a team of investors, engineers, and salespeople to help VC backed companies develop new products and messaging that sets them up for success in this fast-moving recession.
One more thing! Here is a shout outs to my rockstar portfolio companies!
I'm an advisor & investor at TWO12, as a result of the crisis they are offering their $200/month Cap Table Management Solution and giving it away for 2 months.