As the COVID-19 crisis unfolds, a lot of businesses find themselves in a tough spot. Studies and surveys tell us that a significant number of small businesses—as many as half—have less than a month of cash on hand. It's frightening to think that if things don't go right for 30 days, most businesses are in serious trouble.
People's instinct is to think: "It's too late now. There's nothing I can do." But there are things you can do now to protect your business and employees (and their families) while supporting your customers. If you're in a business—especially one in which a lot of people depend on you—recognize your responsibility and act.
Don't assume this is the bottom
First, understand that you don't really know how bad it could get—because it could get much worse. If you haven't yet built a cash buffer, it's not too late to start. It may be time to cut costs and preserve cash.
Your obligation as a leader is to imagine what the future might look like and to put yourself in a position to act. Look toward the horizon and try to get ahead of it.
Adopt a 'wartime CEO' mindset
A crisis like this requires you to adopt a wartime CEO mindset, as Ben Horowitz writes in "The Hard Thing About Hard Things." You might have been doing a great job running your business for the past decade during peacetime. But now it's wartime, and something different is required of you. Different rules apply.
"Peacetime" in business means the company has an advantage over the competition, the market is growing, and the company can focus on expanding the market and reinforcing its strengths.
"Wartime" means a company is fending off an imminent, existential threat—a competitor, a change in technology, a macro-economic change, or a pandemic that demands something different from you.
Scenario planning
Ask yourself, "What if things get worse?" If you have 30 days of cash left and revenue is cut in half, then you have 60 days left. What can you do now to make it more likely that revenue will return? Alternatively, if revenue isn't likely to return, what can you do now to put yourself in a better position to survive?
You might have to pivot
Restaurants were forced to close and dealt with it by pivoting to take-out. Owners of distilleries that converted to producing hand sanitizer look like heroes. When you get in a crisis situation, you're always better off if you're nimble enough to do things that support your customers.
This is an opportunity to distinguish your company
People will remember how you behaved when things got tough. It can have great long-term implications for your business. Bad behavior is always remembered, so be sensitive to your customers. You could get focused on an acute problem your customers are facing.
Talk to your employees like adults
A wartime CEO has to be very effective at communicating. When there is an existential threat to the business, your employees will naturally worry. Tell them what's happening and what it means based on what you know—and be open about the things you don't know. Let people know you have a plan for how you're going to handle it.
If people believe in you, they will accept hard choices
The faith employees have in the organization and you in your leadership role are critical to pulling an organization through a difficult time. If people believe in you, they'll accept a disruption of their normal work; they'll volunteer to make sacrifices.
Internal challenges are not your customer's problem
For the most part, internal challenges of an organization are not your customers' problem. Your customers care about their own problems. So limit what you make public.
If you tell your customers and suppliers that you're facing a cash-flow problem, they don't know if you're being totally transparent. If it ends up being a one-off thing, that could forever change their impression of you.
Entrepreneurs step up in hard times
A crisis like this helps to highlight one of the reasons I love entrepreneurs. They all choose to take responsibility for somebody else's family. People talk about becoming a founder like it's this big aspirational thing, but the reality is you're picking up a really heavy rock and carrying it on your shoulders. You're either cut out for that or you're not.
Links:
"The Hard Thing About Hard Things," by Ben Horowitz
Full show notes: https://smith.substack.com/p/wartime-ceo-d71
