Startups struggling for survival are not uncommon, due to economic changes, management problems, or product issues. Successful startups change directions but stay grounded in what they’ve learned. Ask yourself: if you started over today, would you build the same product? Shiva explains more below.
Your start-up business is like a ship that needs constant steering, careful navigating and monitoring even in calm waters. When the business doesn’t perform well and the waters get rough, it would need a lot of creative thinking, more personal and direct control and agility to keep it afloat. While turnarounds are not new and definitely not rocket science, I have attempted to put down some guidelines for entrepreneurs to think about and keep in mind.
- Take control of the business, personally: This is not the time to sit back or delegate, at least not initially. The CEO/Entrepreneur has to personally get involved in everything and take greater control of the business. Please counsel your team members that this is not personal and you are doing that only for the survival of the business. Also, speed is paramount in doing this.
- Finances are your compass: There is a classic adage that “numbers don’t lie”. This is when your financial hat and your chief of finance/controller become key. Cash is king as it predicts how long you can stay afloat and so are the health of accounts receivables as also sales revenue pipeline and predictability of the pipeline. Many CEOs and Entrepreneurs I know are not finance gurus or some know it a higher level. It is prudent to seek outside help in this area in addition to internal talent to get not only the finances in order but also use the financial analysis as your compass to “navigate through troubled waters”.
- Re-do the strategy: The current strategy or “plan of record” definitely needs a review. It also needs a closer look as to whether it is working or not. The financial compass (see #2 above), gives you one view but the markets, key customers and feedback, which hopefully your team has been gathering would also be key critical inputs to figure out “what is working and what is not” with respect to the market. Based on these inputs, the strategy should be re-done and monitored closely and more frequently than before until the waters are calm.
- Slashing costs: The classic approach that seems to work in most situations is to drastically reduce costs depending on the business. If it is a people intensive business model like consulting, it might mean going after repeat business and staying to core strengths rather than expansion into new markets and doing some unpleasant layoffs. Also, liquidating some non-performing assets as well as reducing capital expenditure, market expansion plans into new areas/geographies and tight control on expenses are good strategies to reduce cost dramatically.
- Re-configure the product and/or its marketing: After reworking the strategy and cutting down the costs and maybe simultaneously, it might be time to either re-configure the marketing approach including parts of the pricing, promotion, placement as well as the core product and its distribution itself. Note that, I am not suggesting re-doing everything! Only that everything might need to be revisited to make sure it works and if not to be redone.
- Review and rally around the organization/operations: This is probably the most uncomfortable time for your organization. You might risk good people leaving, uneasy politics as well as doubts. This is where your leadership skills as well as those of your management team will be put to the utmost test. Get all your top leaders and their teams to rally around you and if necessary make changes in the reporting structure, responsibilities as well as perhaps painfully so, review compensation against performance and non-performers. People may have to take pay cuts or not get paid at all if the cash issue is severe. One serial entrepreneur mentioned to me that “there needs to be purge plan” a crude term meaning a plan to outplace some employees who may not be performing. Do be prepared to do the needful and often deemed the most unpleasant action of laying off people but only as a last resort. Lastly, communicate in detail and often.
- Manager Investors and capital raising/management: This is probably a time when investors will be anxious as well and wondering if they need to jump in. Do be prepared to give them a clear and transparent picture, the reworked plans across strategy, financials, products, marketing and organization/operations. If required, you may be asked to take advise and mentorship from one of the board members and this is not a time to be shy or defensive. Also, if required, do raise new capital and/or loans. Finally, this may also be a transition for you to perhaps give away interim control to a more senior board member who has more experience with the situation depending on the term sheet negotiated with the investors.
- Drive Rainmaker Sales: They call a CEO/Entrepreneur a “rainmaker” for a reason. In addition to your sales leader and the sales team, pitch into driving top deals and increasing sales. Also, do give the freedom to your sales teams to do the right things to win deals including increased freedom in deal making using appropriate discounting, pricing and promotional offers. If comfortable, bring in some top deals yourself.
- Inspire the team to stay focussed: In the confusion of a “perfect storm”, it is easy for people in your business to run helter-skelter and make mistakes, develop fear of their jobs or start losing morale or “jumping ship” aka leaving. Do get some morale boosting activities going and make sure that people are focussed to deliver to the new “plan of record”.
- Win back customer/supplier/partner confidence giving ego a backseat: By now your customers would have got wind of the situation and would be wondering if they should still do business with you and suppliers or partners would be worrying about their payments and how it affects their business. Not only would you have to inspire them to seek their confidence but also perhaps renegotiate terms favouring them as opposed to favouring your business. While some smart entrepreneurs have gotten away with not so good products with customers and renegotiated better credit lines with suppliers in a turnaround situation, you might want to think which is more important “the ego” or the “survival of the business” and doing that in an honest and transparent way. It is better to let “the ego” go and give in a little bit – It doesn’t hurt!
Hopefully, the above ideas will help you save your business ship in stormy waters and stay afloat!
Shiva Venkatraman is a guest editor for chinnovate.com has over 20 years of software and knowledge process outsourcing experience across India, China, Singapore, S. Africa, Ireland, and Canada. The author serves on the executive team of Siloon Software (http://www.siloon.com) and as a strategic consultant to Brainleague, an Intellectual Property Portfolio Management Firm (http://www.brainleague.com) and lives in India.
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