Originally written on March 21, 2020. Edited on December 2020. Written as a guide for continuing any business entrepreneurs during future health crises or contingencies.
I have noticed a greater degree of difficulty when it comes to being an entrepreneur and conducting business in Mexico, according to what is being observed in other parts of the world. Given the unprecedented conditions caused by the COVID-19 (coronavirus) pandemic and the impact in our country, coupled with the lack of support in the government, it is undoubtedly a complicated and delicate moment. Additionally, with how the law in Mexico operates, it has been difficult.
In the companies that I am a part of as a Partner and Director of a service company, we have never gone through a similar crisis. Coupled with not having the infrastructure of internationally operating organizations and with a financial heritage behind, actions today push us to survival. Our support has been from mentors, current clients, reliable sources of information, and a touch of intuition that this will very likely not improve, and we have to take the worst scenarios into consideration.
These following points are some actions that have been evaluated and even tested to help keep your organization afloat and alive during a period of economic crisis such as the one experienced in 2020.
Create one from scratch, now. There is not enough capacity in hospitals and the government let things get out of control before taking action. The situation will get worse and business entrepreneur leaders must adapt to all the changes coming in the near future.
Flow must be projected from today to 12 months from now, at least. 18 or 24 months would be ideal, and here any other contingent action could stop. This is the top priority for any business entrepreneur, it is not about selling more or securing contracts; the priority is the administration and entry of money flow to be able to cover the operation and maintain business continuity.
A tool that I have used in several projects has been 13 week cash-flow report, which has the breakdown of the flow week after week. Equally, a file that gives visibility of the runway is important for startups and companies with investment. Without a doubt, you have to consider a percentage from clients not making their payments. This will impact planning, and in these times, this could happen even more.
Eliminate any additional costs that are considered for the purposes of growth and strengthening the business infrastructure. What budgets or investments are being made, and how crucial are they? We must rethink team trips, face-to-face retreats, any intervention in person, given the current world conditions that will not change in the short term. Many of the interactions that we assumed we would be having will no longer exist. Likewise, any investment in Marketing and Sales should be rethought and give priority to those based on maximizing ROI, where the cycles are the shortest and most effective for the business.
An alternative point here is to consider members of functional areas as part of the operation. Even the management and leadership team must get into operating issues in the business, back to the roots and foundations of their profession. People must play multidisciplinary roles and have diversity in their field of action, especially in these circumstances. This change will have a direct relation to the generation of direct income.
Talk to your providers. The current crisis is real, and everyone is suffering in the same way. This is with the goal to maintain the relationship, as long as ways can be found to sustain the collaboration in a block of at least 60 to 90 days, or perhaps more, but always with options on the table:
Think about how you can ensure that you have greater control of the flow, but always speaking transparently with them and without affecting your relationship.
Starting with the heads and leaders with greater responsibility in the organization. Generally, it is a difficult conversation with key people that you would like to keep, and more in an industry such as technology. Since people are exposed, and they are always attractive roles - what you want is to keep those great talent and provide adequate opportunities for their growth. I think that based on the Founders and the C-suite, various adjustments can be made, not only in the net salary but in the schemes in which they receive their salary. Another sensitive issue is how the salary structure must be restored throughout the organization. There are more than 17 alternatives that my partner and I have worked with - unorthodox methods but with clear conversation, we assumed that much of the team would survive, and it did.
It is not a time when people can easily find a new job, but there are certain profiles that can. The dynamics can be handled 1:1 or general, and the repercussions can vary, depending on the company, organizational culture, and tension due to the crisis. Here the priority is to be transparent and upfront with the entire team, reach the best agreements with the members and be in the same boat so that keep moving forward. There will be some who cannot continue, and it is important to fulfill any organizational responsibility to close these chapters in the best way.
Many companies have the same need to control their flows as much as possible, and this causes innovation initiatives, marketing or non-essential projects to stop. Models that support a better ROI clearly evidenced in low costs, or something that allows your customers to continue subsisting can be very attractive. Even more so, within companies that are relatively young. With these circumstances, and without being clear about how long this can go on, make sure to ask yourself:
The answers should support the rethinking of the model and price. For startups that are not yet profitable, finding profitability is critical. If not, your runway may end soon since little by little the investment decline or the cost of raising capital at this time will be very expensive.
There are many organizations that migrating to this is almost impossible on the other hand, others show off their ability to easily do so. What does remote operations entail? Across the spectrum and life cycle of employees and collaborators: Search for talent, interviews, selection, training, on-boarding, performance, team management, and the most complicated, layoffs. There are many factors to consider, and we do not know how long this situation may persist, but thinking of a completely remote and decentralized operation is not something far-fetched, at least for the next 6 months.
In the operational aspect, identify which parts of the customer / user experience must necessarily migrate to the digital plane, to allow your business to be solid for your customers. This will be a demonstration of your openness and persistence as a business entrepreneur.
Once the flow (cash) is assured, it is important to set dates and actions for any scenario. Being business entrepreneurs, founders or leaders of organizations, it is common to think optimistically very often. Nevertheless, at this time the best scenario is the number of contracts / users / clients you have today. Your worst scenarios? Loss (churn) of customers or other more fatalistic scenarios that could happen: defaults, turnover, customers closing operations. Discard any bet or assumption. Tie each scenario to fixed dates agreed upon by partners and organizational leaders and focus on activating what is planned before it's too late - each day that passes will impact your cash flow.
More in emerging economies, this is important. Only first world countries will be able to sustain in the way that our northern neighbors are doing with $2T USD already approved by the US president. What can we expect? Lack of leadership, lack of budget, lack of financial vehicles to support companies, and the complexity of maneuvering through this, all due to the nature of our economies and the debt of so much corruption of the past (and present).
Regardless of the decisions taken, be transparent with yourself and your team. Being strong or weak does not make you a better leader, being honest in a time like this will build trust with people. Any dismissal, any negotiation, speaks for the company and gives clarity about what is happening in your industry and with the world. It is likely that many employees still don’t have a clear sight of the situation. It is not an easy time for anyone, you have to accept it and communicate it.
Furthermore, it is worth mentioning that the health and well-being of your team is a priority. These moments are when those who are really dedicated and visualize a better tomorrow because of what the business is producing, will stay, if communication and incentives are still lined up and at this time.
I have no choice but to go back and keep things afloat. It is a difficult task, the pressure from society is high, and the laws do not help us. As a business entrepreneur, you must have a higher moral score than the law indicates (level 5 & 6 of Kohlberg's theory), and not wait for the authorities to make a move and close your business. Without a doubt, we will have to rethink paradigms during the following months if we want to continue having fun, generating value, and making this country a better place.