Here’s how to tackle the effects of Corona
Corona’s impact on the economy has not escaped anyone. But how can you as a startup contractor make you come out of the crisis stronger? Here Sting provides several hands-on advice and tips.
Sting has coached 300+ startups and has gone through several crises since we started in 2002. Here are advice and tips from Stings coaches Ivar Strömberg, Hannah Meiton and Magnus Rehn who share the most important steps you need to take now to save your business.
This is a summary of a Sting webinar, Corona Business Damage Control, held on March 18 mars. A presentation with extended information was given at a webinar on March 25, that presentation can be found here and a video recording here.
Review your business model
Some companies are losers and others are winners.
If you have a mixed digital and analog business model (for example, an edtech company that offers both digital and off-line courses), you can move your business towards digital products.
If your delivery changes from analog to digital, analyze your current customer base. Which customers should you spend more or less time on? For example, if you have a customer who is fully ready to become digital, spend more time on her or him and less time with those who are not there yet.
Look for additional revenue streams with a focus on short-term opportunities. Now is not the time to venture into strategic long-term projects.
Customer care is the key
In connection to the discussion on the transition to digital business above; this is actually a good time and an opportunity to make long-term efficiency gains through digital processes. The companies that come out of this steel bath come out stronger.
Remember, it is possible that several of your potential customers are considering a deal with you. To help them make a decision – give them an opportunity to “opt out” to feel comfortable with signing contracts.
Some natural customer contact points, such as trade shows and events, will be canceled. So what options do you now have to stay relevant?
Make sure you still have high customer satisfaction in these new times.
Now is probably not the time to expand, but a time to make the company more efficient and ensure that existing customers are satisfied.
Cost savings – look around every corner
If you are forced to cut back on the organization, do it all at the beginning. Why? Well, because when it comes to reducing the number of employees, several small cuts create uncertainty and lengthens the time before the organization can return to functioning reasonably normally again. It is better to release ten employees at the same time rather than 2, 2, 2, 2 and 2. Pull off the bandaid in one quick move.
Push costs forward as much as possible. Think about whether the cost is really necessary in the short term and refrain from any costs that can be eliminated. Also minimize the costs you have to incur. For example, negotiate rent payments for an extended lease term.
For many companies, labor is one of the biggest costs. See if you can delay or reduce your salary payments. If possible, replace parts of the salary with shares in the company.
If you have planned a new recruitment – postpone this if possible. The Swedish government has passed a law on short-term permits. More information can be found on the Government’s website and Tillväxtverket.
Liquidity – money coming in
New loans are difficult to obtain. Yes, the central bank has given banks loans with zero interest rates, but everything points to the fact that this money will not be used to take greater risks than usual. So a better option for you is to seek an extension of your current credit line. Get in touch with your contact person at Almi to apply for additional loans.
If you are currently raising capital and are in a financing round, the situation depends on the industry you are in and how affected it is. Therefore, if there is a term sheet on the table, now is not the right time to negotiate the terms offered – accept these, as you need the money now. Tomorrow, the conditions and the world may look completely different. Again.
Other ways to extend your liquidity are:
– prepayments from customers against cash rebates
– monitor payments and send reminders immediately (even before due date)
– use factoring for immediate payments against a sometimes 15% commission
– tighten the payment terms, ie shorter time, for the customers
– try to sell stock, even at a discount
– sell and lease your machines if you have
Liquidity – money that goes out
Now more than ever, cash is king.
If you can divide payments into monthly payments, do so. Your supplier is keen to have you as its customer, so it is a win-win situation.
Negotiate longer payment terms with your suppliers, for example 60-90 days.
If you have an Almi loan, contact them to stop the loan repayment plan (amortization) and/or try to negotiate the interest payments.
Try to delay or reduce salary payments.
Consider pausing the entire business for a while.
Do you have other questions you want to ask us?
Keep your eyes open for our Open Coaching. Here, as a startup entrepreneur, you can schedule an individual 15-20 minute meeting with us to discuss your plans and challenges.