By Tracey Greene, CAN Founding Executive Director, CBIC Executive Director

As fear and uncertainty abound due to the complexity and unprecedented nature of this pandemic, it occurs to me that limited visibility into what others are doing, (or, what we, ourselves, should be doing) adds to our individual and collective anxiety.
To confront this fear, below is an annotated collection of ideas, resources, inspiration, and sage advice to support you during this challenging time.

Cut Costs:

Eliminate all non-essential spending that does not result in immediate cash return.

  • Immediately figure out your actual burn rate and runway in this new environment. All of your previous projections and assumptions need to be reconsidered and new sources of revenue discovered. 
  • Turn off marketing expenses unless there is something tactical that drives cash. 
  • Call your landlord immediately. They know the risk of losing all their retail partners and they think in terms of 10, 20, 30 years. Get rent relief and be willing to work with them and partner with them. Ask for three months minimum—no rent. Ask if they will put those three months in the amortization or perhaps offer to extend your lease 6 months. Be creative to support each other.
  • Close your bricks and mortar store(s). This decision will likely be driven by cash flow and health risks. If your store may have to close in the future, do it now. Do not wait and burn through cash. Alternative: only be open certain days/times when most busy. Same applies when stores reopen after temporary closing. Protect your brand in these decisions. Do not put your customers, and, therefore, your brand at risk.

Find Sources of Capital and Manage Cash Flow.

Cash on hand is critical – think 6-12 months business survival. The most important thing during this time is conserving cash and being prepared. 

  • If you have a revolving line of credit, draw it down NOW. The interest cost is a small price to pay for the security of the cash.
  • If you have less than 12 months of cash on hand, start preserving cash NOW. It is incredibly painful to have to lay off people who you worked so hard to recruit and train, and who have worked so hard for your shared future and vision. You MUST think about the business surviving first so you will live to fight another day and have any hope of re-hiring people later. Triage accounts payable and stretch vendors to 90 days or more. Tell them what you are doing is to ensure your business survives.
  • If you have more than 12 months cash on hand, move to conserve cash immediately. Defer discretionary expenditures. Look for opportunities to reduce non-strategic expenses like rent or other things where you may be able to renegotiate the deals.
  • Look for opportunities for "customer financing" by getting happy customers to prepay for the next 6-12 months of product/services now to drive cash flow. Offer them an incentive, if possible. Customers often wish to support businesses they care about. This is one way they can.
  • Decouple cash and debt accounts. Highly recommend cash is in a separate bank from your loans so the banks do not sweep the account to pay the debt. If your loan is tied to your other accounts, have a conversation with your lender. If your account is tied to a credit card, they may consider switching methodology of having a minimum in an account. Have a conversation with them. 
  • If you have autopay set on, consider whether or not you make monthly payments in full or make minimum payments. 
  • Find all possible sources of capital. Do not hesitate to continue to raise capital with third party investors. Fundraising rounds take 12-18 months. 
    • If you have a term sheet on the table or are in mid-raise with "soft circled” funds, do what you can to get it done. 
    • Reduce the size of your round, if needed, to get cash and focus on managing your business.  
    • Venture funds will continue to invest, but only after a few months go by to allow them to reassess the market dynamics. The valuation they may eventually offer will be much lower even if there is no apparent reason for that. 
    • Some angels may halt investing until they understand their own personal liquidity. They are also thinking about their families and their own health -- the majority of them are over 60. Expect them to be cautious and slow-moving for at least 6 months.  
    • Locally, the Charlottesville Angel Network continues to evaluate funding applications. Now more than ever they are committed to investing to foster a business environment where entrepreneurs grow, thrive, and enrich the community. The group just completed their first virtual pitch meeting with strong investor attendance and are geared up to continue with monthly virtual pitch meetings. 
    • Look to family and friends and credit cards and second mortgages to stay alive.
    • Y-Combinator is fast tracking investments in startups tackling COVID-19. 
  • Look for opportunities to sell services to customers/prospects for short-term revenue flows to keep the lights on. Think about where your expertise is and how you can leverage that near-term to create value for someone.
  • If you are selling to enterprise or government buyers, expect everything to stall. Sales pipelines will shrink and nothing will move forward for months. Expect that revenues you were counting on from companies not already under contract will not materialize anytime soon.
  • If you had contracts with cancellation clauses, expect to see half of your enterprise customers exercise those clauses. Government buyers don't tend to cancel in the near term, but commercial enterprises will start shedding expenses:
    1. Unless you had already been able to prove clear cost savings for them. 
    2. If your value proposition is about generating more revenue for them, still expect them to cancel as many of their prospects are not buying right now.
  • Look into an SBA Economic Injury Disaster Loan to cover accounts payable, debts, payroll, etc. 
  • Exhaust all Small Business Relief Programs. 
  • Complete cash flow planning—it is fundamental to know when things need to be shut down. Again, consider 6-12 months business survival. 
  • If you have a CFO, support her during this uncertain time. Here’s a great article by Steve Blank on Action Today for CFO’s 

Other Considerations:

  • Pivot! Rethink your business model. It WILL change. If it hasn’t already in the past 30 days, get started immediately, before that ship sails (or sinks)! 
  • Preserve Customer Relationships: They are concerned and want to hear from you; however, be mindful of risks of your employees’ physical exposure to customers.
  • Ensure Compliance: Make sure you are following the law as it relates to laying off employees. Engage a fractional HR support firm right away if you don’t have the in-house expertise.
  • Leverage Insurance: Get on the phone with your broker asap. Most policies are not designed to address this situation. However, some do have business interruption insurance that specifically mentions a virus or pandemic. Check your insurance. Insurance brokers recommend making a claim for business continuity or business disruption payments REGARDLESS as they may approve disruption claims. Immediately change your workman’s compensation policies as the number of employees working changes. Think about this as it relates to all insurance policies.
  • Stay Informed: Read up on Survival Strategies for Your Startup and join timely webinars as they come online.  
  • Stay Connected: Reach out to others -- peers, mentors, advisors. Be honest and open. We are all looking for ways to be helpful to others, and we all need guidance in some way. 

On the Other Side of the Pandemic

The strategies to open stores and businesses after they are closed will be cash and resource driven and should be strategically planned out. Consider this activity from a cash perspective. Tool your company now for a period of lower volumes and slower growth—all considering cash flow. 

What we learned from the recent recession following 9/11: while it was very disruptive and uncertain, it was a thin recession. If coronavirus resolves itself quickly, this could be a V shaped recovery as fiscal stimulus supports and businesses come back online. Meaning, there will be a lot of support post pandemic, when stores and businesses reopen.

In summary, act quickly to preserve cash so you have more options 6-12 months from now. Expect the situation to get far worse than you expect: think 30% unemployment, total shutdowns, 12-24 weeks of "social distancing," and a possible viral rebound in the fall. If it's better than that, you'll be ahead of the game.

The businesses that came out of the 2008 recession are some of the best businesses. Keep your brand intact, going from SURVIVE to THRIVE as you go through this.

Confession of a Startup CEO:

“I will never forget how my first big exit completely fell apart in the fall of 2001 and took many months to put back together (at a lower price). Or how I had bankruptcy papers on my desk in 2008. Or the incredible pressure of having to keep my family afloat and protect my staff - many of whom had become close friends and all of whom had families of their own. In both situations, I acted too slowly, was overly optimistic about how soon things would turn around, and pushed the company too close to the edge. I was too optimistic and overly confident of my own ability to impact a market being buffeted by forces far larger than I could overcome - no matter how hard or smart I worked. But we adapted, learned, and thrived. You can too.” 

Stay well. Act fast. Remember, YOU are the core of your asset. Take care of YOU.

About the Author
Tracey Greene
Author: Tracey GreeneWebsite: http://CvilleInnovation.org
Executive Director, Charlottesville Business Innovation Council and Charlottesville Angel Network
Tracey's passion for igniting the Charlottesville area’s entrepreneurial and high-tech community is evident by her extensive volunteer roles over the past 15 years, coupled with her current roles as Executive Director of CBIC and the Charlottesville Angel Network, which she founded in 2015. Tracey has served for more than 25 years in sectors including biotechnology, start-ups, trade association and non-profit management delivering results in a variety of roles –communications, public relations, marketing, legal, fundraising, investor relations, technology training, operations, conference and event management, leadership development, and more. Tracey’s enthusiastic community building stimulates personal and group excellence. She is probably best known as an influential connector who seemingly knows everyone and inspires thoughts into action.