The Lifeboat Strategy for Your Startup Here is Plan B
Ask yourself these four questions to lead your business through a time of uncertainty.
“Winter is coming.”
This is the one blog post that I hope I’m completely wrong about.
With the Covid-19 virus a worldwide pandemic, if you’re leading any startup, you have to be asking yourself, “What’s Plan B? And what’s in my lifeboat?”
Here are a few thoughts about operating in uncertainty in a pandemic.
Impact
Social isolation and a declared national emergency have had an immediate impact on industries that cluster people; conferences, trade shows, airlines/cruise ships and all types of travel, the hospitality industry, sporting events, theater and movies, restaurants and schools. Large companies are sending employees to work at home. Large retail chains are shutting down their stores. While the impact on small businesses and workers in the gig economy hasn’t made the news, it will be worse for them. They have fewer cash reserves and less margin of error for managing sudden downturns. The ripple and feedback effect of all of these closures will have a major impact on our economy, as each industry that gets impacted puts people out of work, and those laid off workers don’t buy products and services.
The Lifeboat Strategy for Your Startup Here is Plan B
It’s no longer business as usual for the rest of the economy. In fact, shutting down the economy for a pandemic has never happened. I hope that I’m very wrong, but the impact of this virus could change how we shop, travel and work for years.
If you’re running a startup, your first priority (after your family) is keeping your employees and customers safe. But next the question is, ‘What happens to my business?”
The questions every startup CEO needs to ask now are:
- What’s my burn rate and runway?
- What does your new business model look like?
- Is this a three-month, one-year, or three-year problem?
- What will my investors do?
Burn Rate and Runway
To answer the first question, take stock of your current gross burn rate i.e. how much cash are you spending each month. How much are fixed expenses (those you can’t change, i.e. rent?) And how much are variable expenses (salaries, consultants, commission, travel, AWS/Azure charges, supplies, etc.?).
