A new world order requires new frameworks for businesses to operate in a post-Covid19 world. Our series on how companies are adapting to WFH, pivoting their business models, redefining business functions and processes, and more.
In the aftermath of countries going into an unlimited period of lockdown, most supply chains are disrupted, sales are drying up and investors are growing unsure of their investment commitments.
This uncertainty has obviously pushed businesses into rethinking their budget allocations and future plans. Many experts and VCs advised startups to focus all their efforts towards surviving this pandemic. Survival today means different things for different businesses, some had to cutoff new initiatives, others resorted to layoffs and pay cuts. In these difficult times, there’s no space left for mistakes and we all could use a little guidance from business experts and leaders.
In the same spirit, Inc42 has started an ‘Ask Me Anything’ series under our campaign #StartupsVsCovid19. In this series, we will be speaking to business leaders and industry experts to help startups navigate the current situation.
In the latest session of our ‘Ask Me Anything’, Inc42 cofounder and CEO Vaibhav Vardhan was joined by cofounder and CEO of POSist, Ashish Tulsian. POSist is a leading point of sales solution provider to restaurants with operation spread across six countries and 100 cities.
Talking to Inc42, Tulsian said that everything changes — from the approach to funding deals, managing cash flow, hiring outlook for the next three months and difficult decisions of layoffs and pay cuts.
When a business is healthy and revenue are on high, startups launch initiatives which may not be valuable in times of crisis. They invest in the future and at times a little ahead. It’s not a bad strategy when things are going great but in times like these businesses might have to relook at these strategies.
That’s where budget cuts come in but no one hired people or build budgets with the thought process that they may have to cut down on them in a week’s time, so how does an entrepreneur approach this budget cut exercise, where to start and how to go about it. “First of all, we should understand, this is an event that is happening for the world. This is not really happening to one company, one sector or one domain. That’s the silver lining and that’s how I see this problem,” said Tulsian.
Further, he suggested that businesses need not rush into the budget-cutting exercise and start with creating contingency plans depending on the nature of their businesses and the respective impact on their industries.
The biggest problem about this situation is is that no one is sure whether this lockdown will go on for three months, six months or a year. So, businesses have to compute for this uncertainty in their survival plans.
“Companies should create three plans, Plan A if the slowdown lasts for three months, Plan B if it extends up to six months, and Plan C for the12 month period,” he said. His reasoning behind this was the need for drastically different actions in these different timelines.
Giving an example, Tulsian noted the uncertainty in his own business where sales have dried up, as most restaurants shut down their operations. “If this situation continues for three months I know that restaurants are going to bleed but they will come back. However, if this situation goes on for six to nine months, I don’t even know how many of these restaurants will shut down permanently. To me, planning for three months versus planning for nine months is drastically different,” he explained.
Deferring Decisions Over Cutting Off Relationships
But no one wants to layoff employees in this uncertain economic situation. Is there another way to ensure that a company has cash runway to survive 12-15 months?
Tulsian suggested deferring payments instead of completely cutting them off could work better. When startups list down their fixed expenses and figure out what all immediate cash flow expenses can be delayed in the next three months, it will give them more clarity. “In our case, we started talking to all all our vendors, all our fixed expenses, all our subscription services and started looking at relief packages from everywhere,” he added.
Even in the case of employees, Tulsian suggested the approach of deferring salaries to the future, instead of cutting pay.
He stressed on the importance of empathy in our conversations and the need for businesses to realise that this is not the end of the world. The world is going to come back to normal and hopefully, all of us are still going to be in business. Thus, cutting budgets does not mean burning bridges.
“Companies need to be empathetic in their conversations with their employees, customers, and landlords. Everyone is in this together and so they will understand what you’re saying. They may or may not agree with you, but they will understand,” he said.
Tulsian offered a similar approach towards dealing with the recent uncertainty around funding deals going through. In response to a bootstrapped founders’ query who is feeling anxious about an ongoing angel funding round, he said, “Immediately, write a note to all your angel investors that while some of them are still saying that the round will happen. You believe that there is merit in deferring the round. Give them comfort, that you are okay with they backing off. In fact, don’t make them look bad right now, it is the worst strategy to make them look bad.”
Reconfiguring Priorities Amid Recession
All said and done, it is a tough time for businesses. With physical interactions becoming non-existent, many companies are left with no option than shutting down operations. Same is with POSist. Tulsian agreed restaurant sales across India are down to 3%, from tracking INR 42 crore worth of sales on restaurants daily, it is now down to INR 1 Cr per day.
“And if sales of the restaurants are down by 97%, trust me, we mimic this behaviour throughout our sales too. I’ll not mince my words here. My dashboard is extremely scary right now,” he added.
So how can businesses keep customers engaged when there’s nothing left to sell? Tulsian noted that this is the time to serve customers with the information that they don’t know about your industry but can be helpful for their work. This is the time to engage your customers, a little smartly not about your product, but about the knowledge which they lack in their industry in their job, which may circle back to your product.
“This is free gyaan (advice), trust me, your customers are going to value you much more. This is the time of economic deficit but this is also the time of trust deficit. If you do things to build that trust it is really going to pay back when all of this is over,” said Tulsian.
Talking of recession, he noted that this time will push people to conserve cash and reconfigure their expenses for better products and even employees. Value is going to be of utmost importance in this time.
Even in this downturn, people are buying tools like Slack, Zoom, Notion. Even though companies have to shut down offices and are still paying rent for these months, they are investing heavily in video and remote collaboration products. That’s how economic uncertainty impacts consumer behaviour, people become wary of what is of most value.
“People in the post-coronavirus world are going to look for much much more value, they’re not going to stick with good-to-have products anymore, must-have-products are the only products and services, which are going to work in this new world,” he said.
Startups In The Post-Corona World
This pandemic has been a huge ongoing experiment for all sectors and businesses. From companies being resistant to the idea of work-from-home to instituting mandatory work-from-home policies — we all have come a long way in this new normal. Many have called this a big win for remote workers and freelancers.
Tulsian too agreed that hiring will move towards freelancers and remote workforce. Speaking from his experience of past two recession cycles, he said that everybody starts cutting down on people who were inefficient, but they also started hiring people who brought more efficiency to the process, even if it costed more.
“So I think people are going to reconfigure hiring as well, remote employees are actually going to be the new pool. I was talking to a freelancer marketplace company and there has actually been a surge in demand for remote workers,” he added.
The post-corona world will have some definite irreversible behaviour changes. With respect to POSist, he noted that the company’s focus will shift heavily towards delivery kitchens and cloud kitchens instead of dine-in restaurants.
“We can clearly see that delivery restaurants are still running in some or the other fashion, they’re not still making money, but it is going to happen. Dine-in people are not going to jump back soon. People are still going to be afraid of going out. It will take time for things to come to normal, but delivery businesses are gonna thrive immediately.”
Recently five-star hotel chain Oberoi ventured into home delivery last week and when something like that happens, Tulsian noted, the writing is very clear on the wall. The world is changing and we have to be on the lookout for all the behavioural changes as most of them will be irreversible.