Cash is king in times of crisis
In this turbulent period, ScaleUpNation is talking to scale-up CEOs who share their concerns and their advice on how to go through the crisis. Most scale-up CEOs are asking themselves: “How badly is my industry affected by the lockdown? What changes are needed immediately for my business to survive? Are we cutting all unnecessary costs? How to prepare for a long-time lockdown?” Here are some tips we collected from our community.
Prune your operations
Scale-ups are used to operating under extreme financial uncertainty and are good at lean operations. In the current situation, it is more important than ever to prune your operational activities – ranging from not-needed functionality to rework, waste and stock.
Menno van Dijk, the founder of ScaleUpNation: At ScaleUpNation, we are ultra-focused on cash. We did a quick restructuring last month and we are now relentless in collecting money and very thrifty in our spend. Cash is King in times of crisis.
Michiel Vos, the founder of CocoPallet: Many of our suppliers are faced with cancelations and have more time and resources available for our project. Face-to-face meetings and travels have been canceled and moved online. This is also a cost and time saving for us.
Bessie Lee, the founder of WithinLink (China): Assess how long you believe the impact of the outbreak is going to be. At the end of January, when the outbreak started in China, my company had already confirmed revenue to cover 80% of our annual cost. I took the decision to plan for the worst case scenario, which is no more revenue for the rest of 2020. To cut 20% of the costs, we looked at all cost items and started making changes: downsizing office space, no replacement of vacant positions, 25% salary cut from March till December and cutting all miscellaneous costs such as travel, entertainment, company car, etc. Everybody started working from home when the outbreak happened. 70% of us will be working from home for the rest of the year, given that we have downsized the office space.
Prune your product
In times of crisis, it is important to prune your value proposition of all the extra details that do not address urgent customer needs. For instance, Familie van Rijk, a catering company in Utrecht that delivers lunches to nearby offices, lost more than a half of their customers since the lockdown. Instead of closing down, the founders quickly made a change in the company offering. They are now delivering specialties and gift packages to private customers. The company is not only able to keep all the employees but is also helping local food suppliers to stay afloat.
Hui-ting Lee, the founder Lime Agency (Singapore): During the lockdown, multiple projects and events have been cancelled or postponed, and this is affecting the financial aspect of our business. However, this period of downtime has allowed us to focus on the core of our business, which is branding and marketing consulting. Since January 2020, we have launched a new online platform www.lime-zest.com for individuals, startups and SMEs. We have affordable branding kits available for purchase online, and one-on-one digital coaching sessions. As most companies are now working from home and spending the majority of their time online, now it is the best time for us to focus on sharing our tools and expertise through this platform. It is a unique opportunity to move towards an even more digitized service offering. We are working hard on launching an online digital course materials.
Menno van Dijk: In times of crisis, only the business models that are really strong survive. Even an overwhelming social challenge such as the one we’re going through is an opportunity to come up with something more enlightened. What if these potentially long-lasting restrictions on travel and group gathering actually liberate our programs? What if we could make all our content, tools and connectivity formats available digitally? It would potentially be more impactful, definitely be much more scalable, and also more affordable.
In times of crisis, it is important to prune your value proposition of all the extra details that do not address urgent customer needs.
As demand for your product drops, how can you avoid massive waste and obsolete stocks? Restaurants have an ample supply of meats, seafood, and produce. One restaurant in Houston is trying to make the best of a very difficult situation with creativity, and offering something that many customers will really value. The demand for prepared food has dropped off drastically, so this restaurant is selling ingredient packages instead (at good prices too).
In the Netherlands, one of the industries that is badly affected by the crisis is flower business. Flowers are extremely perishable, they don’t last long. Dutch flower companies came up with creative ideas on how not to waste their products and delight their customers. One company delivers flowers to nursing homes to cheer up elderly people who need to stay indoors. Another company delivers flowers to the hospitals as a thank you gesture for the medical staff who are working day and night to save our lives. One company has created a new value proposition: any company can now order a beautiful bouquet to deliver to their employees who are working from home and having a difficult time adjusting to the crisis.
Protect your employees
- Provide clear communication to employees on what to do
- Provide autonomy and decentralize decision making
- Provide an infrastructure for remote work
Get in sufficient cash
- Strive for 3 months of cash at hand
- Immediately pursue options for extending loans, and accounts payable
- Make use of rescue propositions from government
- Identify the most effective and least disruptive cost-cutting measures
- Ensure adequate buffer stock of crucial parts and other inputs on hand
- Check the situation at key suppliers and ensure their reliability
Help in the community
- Target community outreach organizations in your area
- Encourage your employees to volunteer
Commit to your customers
- Reach out to and stay close to your customers. Help them.
Step up your business model
- Articulate your concrete needs and share them with the ecosystem. Many individuals and institutions are there to support you, they just need to know how