Dear Entrepreneurs, Friends & Family of Gray Matters Capital,
Communities and companies (including start-ups like yours) around the globe are facing new challenges with the COVID-19 outbreak. As we brace ourselves to navigate this uncharted territory and ensure the health and safety of our families, employees and communities, we also want to remain mindful of the impact this crisis will have on businesses and explore ways to provide support to our portfolio companies and the social impact ecosystem.
The coLABS team at Gray Matters Capital has compiled and presented below a list of recommendations and cost saving measures for start-ups and social enterprises that we hope will be helpful, not just to our portfolio companies but to start-ups across the world during this time.
These are based on best practices and past learnings of Gray Matters Capital and our portfolio companies across the geographies we operate in.
Communications and Reporting:
- Establish feedback loops to learn from various parts of the organization
- Undertake daily cross-functional check-ins with the leadership team to align on key objectives and actions for the day
- Identify key (top 3) KPIs and implement a weekly dashboard
- Roll-out an 8 week calendar identifying milestones
- Be consistent in any activity you design
Financial Health:
- Model financial stress testing scenarios (immediate implementation, first impact on business, if things gets bad) and prepare contingency plan
- Empower Finance function / CFO to manage cash tightly
- Require Finance/CFO approval for spends above certain thresholds (should be relatively low early)
- Reduce marketing promotions, freeze non-committed budgets and expensive marketing channels
- Postpone non-urgent discretionary CapEx
- Cut travel and event related budgets
- Build a fully functioning detailed weekly or even daily cash flow model
- Prepare a list of cash preservation measures (payment delays/selected defaults based on risk level) depending on how the situation evolves
- Look into use of factoring
- Ensure rapid cash collection and manage all receivables tightly
- Monitor bad debts and accounts receivables
- Renegotiate/ extend payment terms with focus on large suppliers
- Payables (days payable outstanding): Explore the option of revising all supplier payment terms and move to extended deadlines
- Review and track liquidity of key customers
- Develop smart cancellation policies (retention vs. cash)
Government Regulations:
- Stay up to date on the regulations from Government and Health Authorities (this could include measure such as schools closures, restaurant closures, stores closures, ban of social and sports events, ban on public gatherings etc.) and the implementation of various (potential) support schemes.
- Reach out for Government incentives/subsidies to cover some of the costs
Compliance:
- Clarify legal implications arising from measures undertaken
- Review insurance policies; for example, business interruption
Operations and Admin:
- Renegotiate rents (offices, stores, warehouses)
- Remove color office printers
- Reduce spend on office stationery
- Restrict all non-essential travel
- Ensure tight inventory control
Marketing, Distribution, and Retention:
- Check on mid-/long-term implication of the crisis on your business model (unit economics) and identify new product/business opportunities
- Quickly develop line(s) of business that are not affected / will grow during the crisis
- Leverage opportunities to buy cheap (marketing/ad) inventory to run ad hoc campaigns
Mitigation and Recovery Plan
- Establish a recovery plan for handling the situation once the crisis is over and we are back to the “new normal”
- Have each department or branch come up with a list of mitigation actions and cost savings commitment in 3 waves (immediate implementation, first impact on business, if thing gets bad)
- Prepare team/business for demand rebound
- Track customer behavior and cohorts and implement client retention measures to preserve loyalty
We are in this together and are confident that the little steps that we implement and our ability to adapt quickly can create a significant impact. We also want to take this opportunity to acknowledge the numerous efforts and measures being taken by our portfolio companies as they continue to keep the ball rolling to support their communities and beneficiaries. Please do reach out to us if there is anything we can do to support you.
Stay resilient!
About Tanya Martinez
