🎪 👨🏾‍🚀 📼 Twenty-eight Steps to Survive and Succeed in Crisis 🛀🏽 🕤 ⬅️

“Empires of the future will be empires of the mind” - Winston Churchill.

In a period of global pandemic and financial downturn, company founders are faced with a new reality. The world is rapidly changing before our eyes. Overnight, stable economic development gave way to gloomy chaos. If you're running a startup right now, this time is likely to be one of the most difficult in your life.

I have been in a similar situation twice, and I understand well how the owners of companies feel now. With lastminute.com , a European travel site, we hit the epicenter of a storm during the September 11 crisis. And in 2008 at Trulia we faced not only a recession, but also a catastrophic crisis in our main market - the residential real estate market.

From almost any point of view, crises are terrible. But remember - they always end. Crises are a cyclical part of a market economy. The only way to create a landmark company is to act not like everyone else. In a crisis, survival requires acting and thinking differently.

I found that there are three distinct and equally important elements of how to deal with the crisis:

1. The first is loss management. It will be the most difficult and painful thing that you will do as a CEO, because it affects people, but often it is not so much about WHAT as about HOW. Your empathy and speed are most important.

2. The second is moving forward. You must reorient your focus, your tactics and your team so that you can get ahead after the crisis.

3. The third is psychology management. It is very important that you, your team and the people around you are healthy, balanced and productive.

Both lastminute.com and Trulia became stronger after the crisis due to the operational actions we took in these three areas. I continue to adviseto my portfolio companies, the tactics we used to deal with these very difficult days, weeks, and months, and I feel that it will be useful for the entire startup founders community if I make this information publicly available.

Loss management

This is by far the most difficult and least fun part of the job of the manager or founder of the company. First of all, remember that behind every decision about downsizing, outsourcing, reorienting or restructuring, there is a person.

1. Accept the new reality and probably change the plan to give money priority

Suppose everything is worse than you expect. The market has changed dramatically and your previous financial plan is likely to be pointless. Therefore, it is necessary to change the plan to reflect the current reality. For some companies, the market niche simply ceased to exist. Get ready and plan based on the worst possible scenario, and rejoice if it does not come true.

First of all, your main task is not to run out of cash. There are two ways to do this. Either you start generating profit, or you are trying to survive long enough and grow efficiently enough to be able to get a new round of financing.

We have seen many times that the leaders in the markets are those companies that survived the recession, while everyone else surrendered or went bankrupt because they could not raise additional capital. They had the determination and desire to fight in order to create a solid company. That was my experience with lastminute.com, where the fact that we survived and became the only European online travel agency that survived the end of the crisis gave us a huge advantage during the economic recovery.

2. If you need to fire, do it safely and as soon as possible

The best way to lay off is one big cut at the start of the crisis. There is nothing more demoralizing than multi-stage layoffs, while saving money is the key to survival. Always remember that dismissal turns someone else's life at the most inopportune moment. Be as humane as possible, kind and generous. We did this in Trulia through a job fair, renting a conference room at a nearby hotel and inviting every company we knew that was looking for employees.

Now this is even more important, because the reduction, unfortunately, is likely to be done remotely. After the dismissal, be sure to tell the remaining employees how painful it is to fire people, but you think this will be the only round of cuts - now the company is in a more stable and solid position. The peace of mind that you give them is crucial.

3. During cuts, focus on the part of the team that remains with you, but take care of those who cut

At some point in Trulia we had to cut a third of the company. It was incredibly difficult. I found that the CEO has to spend more time on those who leave. But remember that your most important job as a leader is to motivate and communicate with the rest of the team. They rely on you in leadership and support. Helping them do their job really well is exactly what will save your company and their jobs.

4. Focus on victory, not survival

If you worked economically from the very beginning and have a reliable financial pillow, do not make significant cuts. If you really need to start saving, make sure it can make a difference. This means that you must not destroy food or engineering teams. These teams are critical to survival.

Set other tasks for employees you don’t want to fire, because most likely you will still need these people. For example, if you have an office manager, but no longer have an office (or you work from home, as we all do now), send him or her to support sales or operational tasks.

5. Stop hiring new employees, but be prepared to take advantage of new opportunities

Sometimes hiring a super talented employee can help you survive the recession. In addition, attracting such people to the crisis will be cheaper and more affordable. Be honest - ideally, offer to raise their salaries when the recession ends. Or offer them an increase in stock.

Be prepared to hunt the best talents if you can afford it. This will help strengthen the company's position both during and after the crisis. Please note: if you made reductions, then you should not do hiring for a while. This may be misunderstood by the team.

6. Assume that you cannot quickly attract financing

You are better off avoiding meetings with venture investors in the near future because you will not get their attention. Most venture investors I know invest much less, as they focus on their current portfolio and wait for the situation to stabilize. That is why we constantly advise the founders to raise money when there is an opportunity - after you survived the economic downturn, you are especially keenly aware of the benefits that capital provides for survival.

7. Encourage prominent employees with company stocks

You still want to reward some of your best performers. Give them stocks. Tell them that you cannot pay them more because of the current money situation, but you want them to know how much you value them. Thank them personally for their commitment and contribution, and make it clear that if they stay with you and the company, they will have a bright future.

Even a small reward can now be of great importance to reduce the feeling of loss.

8. Adjust the compensation package where possible to reduce costs and share risks.

Be creative in how you pay employees. For example, you can increase commission as part of the motivation for sales teams. For marketing and engineering teams, you can add bonuses or pay to achieve the team’s common goals.

However, keep in mind that this can introduce uncertainty into the lives of employees, so make sure they are prepared for this and share the risk. If everything goes well, then everyone will actually work better and earn more money - and the company will flourish.

9. Review marketing plans

This is traditionally one of the most obvious ways to save. Long-term projects and initiatives can be postponed. Review all your marketing channels and their cost-effectiveness - focus on channels that provide fast return on investment.

Cost indicators in a crisis are changing - plunge into the data and review your strategy. It is possible that new opportunities will appear, as contracting companies are interested in additional income.

PR becomes secondary if it does not have much influence on market sentiment. In times of crisis, people do not pay much attention to business news.
Large external agency contracts should be suspended or substantially reduced. Now is not the time to update your site. But all this can greatly damage the agencies. Try to inform them as early as possible and be creative in your relationship.

10. Reorient marketing to the most effective ROI activity

Challenge your team to find the marketing channels with the lowest cost and highest return on investment and get the most out of them. Freeze any events. If you have a budget for events, then with its help you can finance new initiatives by redirecting to other areas.

11. Review the contract, including lease

It is never superfluous to ask for a discount or better payment terms. However, keep in mind that these companies must also stay alive. They probably also have to fire employees. We all feel bad. Be honest, but asking won't hurt.

12. Reorient channels and manage sales yourself

Focus on the channels you can control. If you sell through partners, you can no longer expect them to continue selling your product. Most likely, they are now busy with other things. Therefore, it is extremely important to control what you can control. If successful, this will give you an additional advantage in the form of increased margins, and will be a great incentive to reorient channels towards direct sales.

13. Stimulate faster payments from customers

Offer discounts to get paid faster. The cash in the account is worth a temporary decrease in gross profit. This is especially true when money is in short supply.

14. Verify all software and infrastructure costs

Most likely, you have something that can be reduced. Additional costs for AWS? Multiple licenses for Salesforce? Contractors using Google accounts on a corporate domain? We must decide what is really necessary and what is luxury.

It is time to tighten the belt. Start by abandoning what no one is using, then move on to what is simply “pleasant” but not critical — for example, additional licenses for design software that you can share with external designers, or additional places on GitHub.

Progress

An economic downturn is the best time to prepare your company for growth . Your major competitors are likely to be knocked down and unable to respond. Many of your smaller competitors will run out of money while in sleep mode, unable to respond to your actions.

As long as you manage losses, at the same time you must make moves to gain new positions.

15. Find tangible imbalances in supply and demand

Crises tend to create large gaps between supply and demand. You need to either find a new offer to meet the needs of current demand, or change your positioning so that it is attractive to new demand (or find new types of demand).

Eliminating the imbalance on the supply side: if you see a significant reduction in volume in a downturn in the market, do not try to resist. It's pointless. Instead, become an excellent partner for all your counterparties, and you will find yourself in a favorable position when everything is restored. If you provide a valuable service in an economic downturn, then when the situation recovers, you will be very much in demand.

At Trulia, we did this by providing integration with brokers and technology partners, so the whole list of real estate items fell on Trulia at a time when these partners most needed low-cost distribution.

We also used this time to integrate the partner ecosystem into our long-term perspective. This is not just about business development - you must attract your team of engineers to do the work on your side. Most likely, counterparties will do their part to integrate their platform with yours, because they need an increase in the number of users.

At lastminute.com, we used the crisis to get more resources at the lowest prices. We assumed that people would again begin to travel in the not-so-distant future. So, we got access to all Eurostar trains and sold tickets for them very cheaply - in accordance with the new demand. These steps helped stimulate supply and demand in the long run, which was important when the market recovered.

Elimination of imbalance on the demand side:how can you provide services to companies so that they can quickly cut costs or increase revenues? Negotiations, which were usually quite complicated, can become surprisingly easy if you can directly influence profit and loss. You can use the new opportunities to make changes in relationships that previously could meet resistance.

At Trulia, we agreed on deals with newspapers and online portals to take sections related to real estate, add our brand and integrate with our system. Since most companies in recession are reorienting, how can you help them turn cost sources into sources of profit?

16. Watch for changes in behavior as consumers and companies become more economical.

The behavior of your customers will change. The level of prices comfortable for them will also change. This often creates opportunities if you keep track of changes and be flexible. In Trulia, we included a list of “collateral objects” in the main search during the recession in the real estate market. This became a very popular feature and was one of our largest growth segments during the crisis. Closely monitor changes in customer behavior. Ask yourself and your team: “What can we do to meet the current needs of our customers or solve their problems?”

17. Speed is your asset. Drive faster and try new things

Anyone can become a chess grandmaster if he can make two moves while the opponent makes one. During a crisis, you have the opportunity to make three moves in a row in front of your competitors, as their employees will be doubly slow during a crisis.

18. Reinforce your product many times

Now is the time to make sure that you are doing “painkiller, not vitamins.” The only way to make a breakthrough in this new reality is to significantly improve the product or service.

Talk to all of your best customers. Immerse yourself in user analytics data. Find out how users interact with your product today - what features they like and where they experience problems. Compare the current user behavior with the previous one. Identify new types of user behavior that you can support and develop to make your experience with the product better.

Be creative, ask how you can solve problems in new ways. These questions will not only improve your product; it can also save your company because you will see problems and reasons why users are leaving. If you strengthen your product during a crisis and interest users, just imagine what will happen after the crisis subsides?

19. Turn fixed costs into variables

This can give you more flexibility as you grow. Maybe you had a content marketer who had to be fired? Are there any third-party services that can provide a similar service, but piece by piece? You can develop this variable when you begin to grow again, and even add new contractors and service providers.

It may seem that this contradicts my advice to refuse agencies, but in fact it is not. Independent contractors are more profitable than most agencies - and for some posts they can be more profitable than staff members.

Converting fixed costs to variables at the expense of people creates change management problems that you need to solve; explain to your employees why you are doing this and for how long.

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This is a good way to use engineers during a recession; it can lead to significant cost savings and increased efficiency. This is also an important skill that requires constant development.

All successful startups have tried a lot, doing more with less. Is it possible to automate basic customer service activities, optimize sales functions, or reduce operating costs? The most obvious way is to do this using technology more efficiently.

Again, you must explain to your team what is happening and why. In most cases, key employees who may suffer from such changes can either switch to a different role in your company, or succeed in other companies, where there are still a lot of processes that are tied to a person.

21. Make your sales more effective.

If you can find ways to increase the likelihood of converting a lead into a buyer, you are creating a great way to increase profits in the future, even though you are reducing costs (you do not need to attract as many customers as possible).

In Trulia, with a small team, the conversion was about 2% of the real estate agents we contacted. We carefully studied the data and developed a data processing method to better identify potential customers. As a result, we increased conversion to 20% by the end of the recession.

22. Build a high performance culture

During a recession, everyone should work with maximum efficiency. This is not discussed. Realizing 95% of the goals means not achieving them. If you don’t have a strong productivity culture - clear, measurable goals for everyone - then create one.

1. Explain what you are doing and why.

2. Give everyone clear, measurable goals.

3. Metrics should be available to the entire company.

4. Be honest - revise goals to be realistic.

Psychology management

Crises are psychologically difficult for everyone. Your team needs you to give all your best. You must take care of their psychological state; calm clear head will help to cope with all difficulties. And most importantly, be as humane as possible and show more empathy.

23. Empathize with employees

Basically, the prevailing way of thinking "what will happen to me?" in times of fear and uncertainty. Even if you have enough stress from managing the whole company, understanding the problems of your employees is crucial in order to help them work well.

Be as transparent as possible and explain in detail how the company can overcome this crisis, and what everyone can do to contribute to it.

24. Encourage employee rapprochement

Get to know each other even better. Let everyone at the team meetings tell something about how his day went, which made them happy or upset. Be sure to mention birthdays, anniversaries, and highlight fun or touching shared memories.

Create as many warm emotions as possible. Despite the fact that so many important things are happening, it’s even more important to devote time to the little things that make people human. Teams that are emotionally involved are also more effective. This type of communication makes work more meaningful, both during and after the crisis.

25. Try spontaneous actions

Call people. Sing a song for them. Send a funny gif. Use your imagination, think outside the box. All this will show the team that you care about them. Keep within - no one wants to feel like they should be at work 24/7. But show your employees by deed, and not just in emails, that you care about them.

26. Quickly adapt your company's culture to current reality

Now everyone is working at home. So bring all the team meetings online, but try something else, for example, working hours online for all managers, or setting aside a period when everyone is online together with a video broadcast, just working and interacting.

The team’s happy hours, or “Quarantinis,” as we call them at NFX, bring lightness in difficult times. For example, everyone can arrange for a company a virtual tour of the house.

The next crisis may be different and may require different steps, but you need to respond quickly to help everyone stay involved and feel safe. In general, many of these changes may remain after the crisis, so make sure that these methods are suitable in the long run.

27. Focus. Conduct sincere, honest conversations with yourself and your team

Attention to “vanity metrics”, pet projects that need to be abandoned, and other activities that can be done in normal times, have now become a critical burden and should be avoided.

Ask yourself and your team difficult questions.

First of all, now is the time to focus. In fact, it is about managing psychology and how to help people focus on the most important at a time when you have no right to make a mistake.

28. Celebrate small victories.

With all the uncertainty and stress, take the time to celebrate the team’s small victories weekly. Build a long-term vision, but focus on the near term and things you can achieve quickly. In the long run, the impact of seemingly small victories can be striking. Small victories provide great support in difficult times and give you a sense of progress and success when everything is gloomy around.

Nothing is impossible

Crisis is always difficult - negativity and fear are everywhere. But I went through two catastrophic market collapses, and both of my companies were ahead of the competition, so I can assure you that this is a matter of training the will. As soon as you understand that only two options are possible - either the recession in the economy will end, or it will last forever, then it will become easier for you to assess the situation without emotions.

Yes, this is a crisis. But this is also your opportunity for a breakthrough if you choose that kind of thinking.

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Twenty-eight Steps to Survive and Succeed in Crisis