If there was ever a time when you had to rely on your entrepreneurial spirit, and the characteristics that enabled you to create a business, it is now. Some useful information below from our colleagues at the Dublin BIC.
Protect your sales pipeline
All your assumptions about customers, sales cycle and revenue need to be re-examined immediately. The starting point is a review of your sales pipeline – review each of the customers/sales in your plan to re-evaluate your assumptions (now assuming that the original sales projections are no longer valid). The sales cycle, and time to close sales that you had anticipated, will also need to be reviewed.
If you have a B2B model, understand how your customers have been impacted. Have your customers been forced to temporarily cease trading? If so, whatever revenue forecast and sales cycle estimates you had will need to be updated.
If you have a B2C model, you will experience a change in consumer behaviour due to reduced consumer buying power and uncertainty. In this context, do you need to reset the key metrics for the business. Is your marketing spend still achieving the outcomes you envisaged or do you need to recalibrate the spend and channels?
Finally, talk to your customers. There may be an opportunity for you to pivot in the short term to maintain some sales volume.
Manage your cash
Cash is king so your priority should be to map out a revised financial plan to year end and do a scenario analysis in which you assume the crisis will run for three to four months followed by a gradual return thereafter. What does this scenario mean for your revenue and what what changes to your business model might you need to implement?
Implement an immediate phase one cost reduction plan, and then over the next two to four weeks plan what you would do in a more severe phase two cost cutting exercise. The phase one cost reduction plan should examine all areas of variable and fixed expense and be a realistic review of your situation.
Examine all cost lines in your budget and seek freezes and deferrals, where at all possible. Probably the biggest line item for most companies will be staff cost. Avail of the government supports where you qualify and if you don’t qualify reduce staff numbers and/or reduce working hours to ensure your business survives. If your business is established and can afford it, consider a short-term loan as long as you can be sure you have the capacity to repay.
The global economy is suffering and with the current stock market volatility, we expect that there will be a significant dip both in start-up valuations and total rounds raised during 2020. Angel investors and VC funds are likely to invest less in new investments and instead focus their investments on existing portfolio companies. New funds, such as DBIC Ventures, will have the funds available to make new investments but will probably have a longer and deeper due diligence process.
Due to the overall decrease in available capital in the markets, however, the valuations at investment will probably decrease and be subject to a tighter scrutiny. For the start-up, it will be harder than usual to acquire customers, meet potential clients and start showing traction. In the short-term, this may delay fundraising but should not affect your longer term investment plan.
Our advice to the start-ups currently preparing for a seed round in 2020 would be to make sure the proposition is still valid in these changing markets, continue to engage and brief potential investors on progress, continue to develop market validation and make sure to review and manage cash in the expectation that the round will take longer to close than anticipated.
Your employees are looking to you for guidance and reassurance in these uncertain times. As the business leader, you should communicate regularly and honestly with staff about the current status of the business and continuity planning as it evolves. Take the time to understand the broad range of government supports as these will guide you and your employees’ decisions in the coming weeks.
You also need to consider other business stakeholders – customers, suppliers, creditors, investors, for example. Share your business continuity plans, understand their perspective and ask for their continued support.