Mini-series: Best practices for surviving in a downturn Part 3 & 4

In the last part of our mini-series, we’ll focus on best practises from our portfolio companies and other software businesses, when it is time for phase 2 and phase 3 — how to make most of the opportunity and what to consider when getting ready for post-COVID-19.

You can read about Phase 1 — Accept the new reality & secure continued operations here

Now it is time to improve your operations and solutions continuously. You need to extend the runway so that you come out stronger at the end.

• Step up your leadership.
• Continue to improve your cash flow.
• Tune or innovate your offering to serve your customers even better.
• Enhance your interactions with both your sales teams and your customers.

Phase 2 — Make the most of the opportunity: step up your leadership, constantly monitor the evolution of the markets and enhance your value proposition to your customers.

There is a silver lining in all this for an early-stage company with a still modest revenue stream compared to the industry giants. The hit to your business will hurt, but as long as you stay in business, your position in the market should strengthen and you will have a chance to make up for lost ground relatively rapidly when things improve.

Now is the time to step up your leadership. Crisis leadership requires frequent and honest communication with a positive tone. It will likely be more frequent than what you think it should be. It is absolutely essential to keep the mission ultra-clear and to keep morale up after tough changes have been implemented. Continuously measure how people are coping in the new environment and be swift to give support. Support also the people you might need to let go, as the way you handle this is as important as the actual decisions you make because it will form the foundation for how you and the company are perceived in the future.

Continue to consider cash-flow improvement opportunities to increase your cash buffer. Take a hard look at what bills really need to be paid and when. Renegotiate big ticket items like office leases. Who still needs an office now that most team members are working remotely? Explore additional financing. For instance, venture debt providers are very much open for business if you are venture capital funded and have at least 2 million or so in revenue. Various government emergency and support packages are being implemented in most markets, including for start-ups.

Make sure you offer your customers a vital dose of medicine (preferably daily). Tune your offering to maximise the value to your customers, whose needs may also have evolved as a result of the crisis. Consider how to package or price your offering differently to shorten sales cycles and maximise retention.

Explore innovative, perhaps even radical, ways to secure new customers and deliver value to them. Push the edge on constraints, as this is a time when you really can try all kinds of (even strange) things. As a perhaps less radical but great example of this, Finnish company HappySignals, which provides employee experience management software for ServiceNow, rapidly updated their solution to include remote-working experience management, since companies around the world are struggling to implement remote working. As a result, their lead generation and new sales have grown rapidly during the last few weeks!

Actively engage with your customers. Reach out and offer support, just like you do with your teams. Listen, learn and react. If you previously had a vivid dialogue with your community and network, then move meetings online and try interacting using webinars so that you keep communicating with and supporting your clients, partners, team and leads.

Monitor your sales pipeline frequently and protect booked revenue. Now more than ever you need to understand immediately how your customers, sales channels and conversion pipelines are changing. Update your sales strategy to focus on accounts and verticals that have been less affected by the pandemic. Consider updating your commission plan to incentivise sales to get things done and close deals in the new context.

Phase 2 is the time to improve your operations and solutions continuously. You need to extend the runway so that you come out stronger at the end. It is also a time to gather data to help you analyse and forecast better, as you will need to update your scenarios if you want to weather this pandemic.

Phase 3 — Get ready for post-COVID-19 and the new norm: your team, business model and client base may all have changed significantly

When Phase 3 begins, you will reap the rewards from having outlasted the crisis. When planning this far ahead, some topics to consider include:

• You will have longer-lasting and deeper relationships with your customers.
• Potential new customers will be more ready to consider and purchase through purely digital interactions.
• Your sales channels and networks will need to be rebuilt.
• Your operational model will be leaner than before.
• Your team and culture will have evolved.

We certainly don’t claim to know what your business environment will look like when the world is free of coronavirus, or even when this will happen. For your business, the goal is to emerge from this downturn lean and well-positioned, likely with fewer competitors than before. Your company may, thus, be operating more efficiently than ever, but your customer base and economics of doing business could also have changed significantly.

Some topics to consider when planning for the new post-COVID-19 norm:

As noted in the previous post, make sure you get your product really right, by perfecting the product and market fit. This will allow you to go deeper with your core customers and form stronger (lasting) bonds.

By the time it is over, you should have gotten rid of any loss-leader customers. As a result, you should expect to emerge from the crisis with a much higher net retention rate (albeit, perhaps, initially with fewer customers).

Use the opportunities offered by the new digital world to create content and sales leads without geographic limitations. Your target audience will be much more open to online content, online interactions and online purchasing than they were before. As a result, on-site support is likely to be no longer a must-have for most buyers.

There will probably be less competition in the market of the survivors. Thus, win rates could be higher and churn lower than previously. However, with the changes you have made and the expected increase in insolvency during the pandemic, you cannot rely on picking up your original sales pipeline when the market recovers. You will most probably have to rebuild your sales channels and network.

Your operational model will be leaner. Define and measure your operational KPIs, for instance, customer success efficiency, from when you start making changes so you can demonstrate improvements later.

Hopefully, your company culture will have remained strong and similar to what it was, but do expect that things will have evolved: people will be working in new ways and many teams will be significantly affected by all the changes. As you start growing, you will begin hiring again. You will be running a really lean operation and there will have been some updates to your culture, so your recruiting practices and targets will also need to evolve. Your requirements may be tougher and you may want to emphasise different traits when you assemble your new A team.

If you made the hard choices in Phase 1 to ensure your business could ride out the storm, and then you stepped up your leadership and improved your offering during Phase 2, post-crisis you should have a stronger market position, better business model, and a leaner operation and team. This is a great platform from which to start reinvesting and growing into a long-term winner!

We hope the advice and best practices help you to analyse your operations with a data-driven perspective and you got input to weather the pandemic. If you have further questions, please join us at the webinar April 16 2 pm BST / 4 pm EEST from anywhere.

You can find part 1 & 2 of this series here.