Businesses across the technology industry are being significantly impacted by our current economic disruption and restrictive global environment. Regardless of how established tech companies are, they are having to re-evaluate how they manage and operate their business, including revisiting their strategic business plans.
Younger startups face particular challenges. Unfortunately, they often can be “taken out” in times like these, as they typically have scarce cash reserves and a smaller margin for managing sudden slumps. However, with intelligent and fast pivots, young companies can make it through.
Whatever growth stage your business is at, you need to be ready and willing to adapt to a new set of rules and leverage the following steps to alleviate risks and survive the slowdown caused by COVID-19. Here are four key actions to take:
1. Conduct a strategic assessment to understand where you are today and what a “new tomorrow” may need to look like.
Many companies are in what we call a strategic moment. Ask yourself: Where are we now? Where are we headed? And how are we going to get to our desired business result? Companies should tap the participation of all internal stakeholders to seek answers to these questions and conduct an assessment.
2. Perform a 13-week cash flow analysis.
This cash flow analysis can be game changing to a company that is in financial distress. A distressed company must be able to determine what costs they need to cut in order to achieve a cash-neutral position as soon as possible. Much of a young company’s success rests on having a clear picture of where they will be over the next 13 weeks.
3. Build a plan not to fail.
Build a six-month strategic operating plan that includes toggles, off-ramps and on-ramps in case things don’t work as expected. If you aren’t able to achieve the desired savings in one department, for example, what are alternative areas that you can pause or cut? The plan should be aggressive and serve as a conservative starting point toward achieving a desired business result of 25% to 30% in overall cost reductions. (Yes, 25% to 30% in overall cost reductions.)
By basing your strategic operating plan on a conservative starting point, you will save yourself from “death by a thousand cost reduction cuts.” This will allow you to evaluate business units and other large cost centers for savings and efficiencies, rather than moving from one small cost cut to another until you end up in the same place with a 30% cut but essentially have demoralized your organization to get there.
4. Bring in an objective set of eyes.
One of the most impactful actions you can take during this time is to hire a third-party advisor. In times of crisis, business leaders are often too deep in the forest to make objective decisions for their organizations. An outside advisor can provide objective reviews and advice on how to manage the company during the turmoil and help you build a go-forward plan. A third party can also be a significant confidence builder for your investor and stakeholder relationships. (Look for an advisor with deep experience in the tech industry.)
COVID-19’s impact is one of the most complicated and concerning situations we’ve ever faced, and it is continuing to evolve. As companies navigate this uncharted landscape, we will continue to share insights, guidance and best practices that hopefully will help make this incredibly complex and uncertain environment more manageable.
This article was written by Armanino LLP, an independent firm associated with the Moore Global Network. © 2020. All rights reserved. Used with permission.