In this time of a Covid-19 pandemic, countless startups across the globe are being thrust into a situation that forces a turnaround effort. While it can be very satisfying to save companies or completely change their outcomes, leading a turnaround or a startup in crisis is not for everyone. I hope these six tips gained from my experience across industries with a number of business turnarounds, such as Housing.com, FreeCharge, Snapdeal, Valiant Entertainment and Emaar India, can be helpful to entrepreneurs.
Human Being First, Business Leader Second
Above being a business leader, one is a leader of people and a fellow human being with responsibilities for their health and safety. First and foremost, leaders need to care for their people’s well-being – physical and emotional – and not to be confused that this always stands at the top of the priority list. During times of crisis, people turn to their leaders more than ever for guidance, support and inspiration. It is important for leaders to embrace this and be even more mindful of their words, thoughts, and actions, and set a tone and example for their people.
If there is a sacrifice a team needs to make, then the leader should be the first to make that sacrifice and, ideally, the one that makes the largest sacrifice. Leadership is truly tested during difficult times, and it’s important for leaders to now rise to the challenge.
Capital Is The Oxygen Required for Survival
Conserving capital effectively is literally the difference between business life or death now more than ever, as capital is scarce at any cost. Prudently and decisively managing cash inflow versus outflow, especially outflow which is in one’s control, is essential. This includes vigilantly protecting cash on the balance sheet by any means necessary, such as reducing or deferring costs, and reducing, deferring or settling liabilities.
Of course, if there are other ways to generate cash like raising capital, including from existing investors, NBFCs or banks, and selling non-core assets, they should be explored; however, in most cases, these are unrealistic options during this time.
Also, being conservative, not optimistic and assuming there is a large margin of error in one’s projected cash requirements is critical because further shocks to the business are not just possible but likely. A meaningful percentage of businesses, including high-quality ones built over many years, are likely to perish based on this last point alone, so financial conservatism cannot be emphasized enough.
Reevaluate Strategy And Plan, Not Vision
Business strategies and plans are a map to success and are based on key factors like the environment the startup is operating in, the competitive landscape, learnings from strategies used by other companies, capabilities, resources and so on, many of which have suddenly changed or are changing. As a result, it’s important to reevaluate the strategy and plan at this time and modify the blueprint of the start-up if necessary.
At the same time, however, one should keep in mind the vision and foundation of the company that has been built over many years and not easily move away from or damage this because of short-term opportunities. As quickly as an industry may have changed, is as quickly it can change back or move in a different direction.
Turn Crisis Into Opportunity
Startups should try and turn this crisis into an opportunity wherever possible. For example, there may be other strategic businesses or assets that one could not merge with or acquire before, due to their unavailability or valuation or deal terms, which may be possible now. The same applies to human capital, as there has been a sudden shift in demand and compensation, making it perhaps one of the best periods in recent times to recruit high-quality talent.
Also, there may be important long-term initiatives, such as strategic reviews of businesses or company vision, team and culture building activities or brand building initiatives, that can be done even more effectively now than during conventional times.
There may be disagreements that were unsolved until now that are more likely to be resolved during these times when people are in a mindset of unity and compromise. These are just a few examples of the many possibilities. During these times, there are many ways big and small to “turn lemons into lemonade” that one should seize.
Align Stakeholders Continuously
Business is, of course, always a team sport and therefore it’s vital to engage with your stakeholders. During a time when there is a high level of uncertainty and fast-changing landscape, it requires leaders to regularly change directions; therefore, it also requires leaders to continuously engage with stakeholders on these decisions. While not all stakeholders will agree with all decisions, it’s important for them to be informed, understand the logic behind these decisions and provide their inputs and perspective.
At the same time, it’s not a democratic process and often leading in a crisis requires very difficult business decisions that most of the team wouldn’t agree with. Not everyone understands data science and, similarly, not everyone understands business transformation and that’s why it’s the leader’s role to make those decisions.
But that shouldn’t change the continuous communication that can boost morale and improve the team’s understanding, efforts and effectiveness in the execution of a business plan. This kind of greater understanding and support from teammates – employees, investors and other stakeholders – can change the trajectory of a company, like any team sport.
Success Is Survival, Not Popularity
No turnaround leader or leader in crisis is likely to win a popularity contest. Leadership and being responsible for a larger group of people is often mistakenly romanticized and there is nothing about leadership during these trying times that is glamorous or easy. Making decisions that will maximize the probability of survival is key, and a leader having that unwavering clarity is perhaps more critical than it’s ever been for a startup’s survival.
I believe an entire generation of strong startup leaders will be born from this crisis, leaders with compassion, clarity in their values, resilience, decisiveness and maturity, which bodes very well for the future.