CEO’s & CFO’s of The Circle convened with Karl Jacob to discuss “How to survive so you can thrive in Wartime”. Karl shared actionable (albeit painful) tips-and-tricks learned from the scar tissue he endured through the ’00-’02 and ’08-’10 (+’11-’12) downturns. Those same lessons that allowed his companies then to survive (and sometimes thrive) are the same that he’s deploying today at LoanSnap, where is the CEO and co-founder.
As a brief disclaimer: these are wartime strategies and tactics, not to be used during peace time. They will be painful. They will cause you to lose friends and break promises.
These tactics will have long term consequences but in war all that matters is short term survival so you can be around for the long term.
“Peacetime CEO knows that proper protocol leads to winning. Wartime CEO violates protocol in order to win” – Ben Horowitz
#1 Accept Reality
Dig into every aspect of your business and how it can/will be impacted. Come up with a worst-case scenario, then imagine even worse. A lack of action will result in death.
Find the companies, people and customers you can trust and work with them to survive. Don’t waste time with people who are unwilling or unable to recognize the new reality.
#2 The Golden Rule
He or she who has the gold (cash) makes the rules. Horde cash, stop paying bills, and when they call, first stall, then re-negotiate.
Start from ZERO spend and decide what to pay based on what your company and team need to survive.
Everything is negotiable: rent, advertising, people and funding. All of these things will get cheaper, so if you’re not negotiating then you’re burning.
#3 Delete Your Plan
Reevaluate all your assumptions. Email your board tell them to throw away the plan.
Come up with multiple scenarios including how to get to profitability ASAP. Focus on customers that immediately return a profit
Recognize your partners, suppliers and customers are going thru the same thing. Make them your partner in surviving together
#4 Get Lean
If you are burning cash, no matter how much runway you have, you need to have a plan to get to profit with the cash you have in the bank.
Layoffs are inevitable, do them quickly and aggressively. Start from zero and only add back the people who are critical to your business success
#5 Lead, Don’t Cheerlead
Lead by example. Cut your salary. When you take action, be decisive, be unpopular and move on.
#6 Investor Psychology Will Reverse
VCs will prioritize their portfolio companies –> In a downturn, investors will double down on their portfolio companies to “save the winners.” This means there’s far less money for companies outside their portfolio
The unthinkable will happen –> Investors will pull term sheets, not wire funds, and act in their funds best interest rather than the company’s. They might even push to sell too early. Remember, Facebook almost sold to Yahoo for $2 Billion because of investor pressure…
We Will Prevail
The market will recover, your customers will buy your product again, your team will be okay. You will be okay. In the end, we will all be okay….and stronger…and more appreciative for the wonderful gifts we took for granted.
“All great companies have at least one crisis during their lifetime” – Bob Kagle