How to survive may be one of the most important issues at the moment.
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Editor’s note: Affected by the new coronavirus epidemic, almost all walks of life have been hit to varying degrees. For start-up companies, how to survive in the difficult period of the epidemic may be one of the most important issues at the moment. This article, the original title is Six Startup Disciplines for Challenging Times, The author is Tomasz Tunguz, a venture capitalist at Red Dot Ventures, and he shared the difficult times with everyone in the article The 6 questions that startups should focus on, hope to inspire you.
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Before, I wrote an article specifically on the topic of how startup companies should estimate the macro environment in difficult times Effect on growth rate. When it comes to startups, the following period may be more difficult. Startups should focus on the following six issues.
First, transparent communication
Paypal ’s former chief operating officer and general partner and co-founder of Craft Ventures, David Sacks, recently published an article entitled Medium on the reading and writing platform “Happy Conversation and Pointing”Sharp dialogue” (Happy Talk versus Hard Talk) article.
This widely followed article shares with you how to communicate in times of crisis. He mentioned in the article that to enumerate the best case, he had to mention Winston Churchill, who had twice served as the British prime minister.
When you are talking about communication plans, be sure to be transparent, frank, and serious.
In March of this year, Arne Sorenson, CEO of global hotel industry giant Marriott Group, posted a video to all employees, stakeholders and investors via Twitter. In the video, Su Anli’s conversation exemplifies transparency, frankness and seriousness.
He frankly revealed the current crisis faced by the Marriott Group, and even compared the current crisis with the Great Depression and World War II. In addition, he also introduced in detail the various measures that the Marriott Group will take to overcome this crisis.
Second, assess customer health
Most SaaS companies have an existing customer base. Under the influence of the epidemic, some customers may be exempt from impact, and some may still benefit from it, but most customers may suffer losses from it.
The customer service and customer management team should focus on understanding the health of the customer, so as to better estimate the customer churn rate, assess the timing of customer payment, and assess the company ’s cash flow Or cash consumption.
If most customers cannot continue to pay for services on the annual contract renewal date, then your startup ’s cash flow will be very bad. Therefore, it is necessary to predict these situations in advance and make corresponding response plans.
Some startups may face a sudden decline in customer base. Estimate these possible situations in advance and have time to build a new financial forecasting model.
Third, change the annual plan to a quarterly or monthly plan
Looking at the extreme instability of the market, long-term planning does n’t seem to make much sense. Therefore, startups can try the first one or two stages of the following four-stage sales commission structure. Specifically :
Phase 1: Target Management (MBO)
At the beginning of the establishment of the company, if you do n’t understand how to sell or how to price, the most important goal should not be to maximize the price, but to successfully take the order. Many companies at this stage will guarantee a certain amount of salary to the account manager instead of paying them a commission, and the specific sales process is the responsibility of the company. The main factor affecting salary is the traditional goal or OKR.
Phase 2: Index based on the number of customers
Indicators are not determined by performance. The so-called indicator based on the number of customers, that is, “Can you get orders from 6 different customers within a certain period of time?” This indicator scheme can give the client manager more flexibility, so that he can try to find customers in a new way.
Phase 3: Short-term indicators (half a year)
Phase 4: Long-term indicators (1 year)
Alternatively, you can also directly change the current annual plan for the sales team to a monthly plan, or use the MBO method.
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Fourth, “runway” extension
Specifically, there can be multiple implementations, such as financing, debt, and dunning. The so-called dunning is to communicate with the customer and receive the payment in response.
To understand the company ’s dunning ability, the most important parameter index depends on the applicationReceivables recovery days (DSO). The specific algorithm is as follows:
DSO = Accounts Receivable / Net Sales Revenue * Days
For example, a group company recorded sales revenue of US $ 2.5 million in November 2016, of which US $ 1.5 million was credit sales and the remaining US $ 1 million was cash income. As of the end of November 2016, the balance of its accounts receivable was USD 800,000.
Based on the above data, you can calculate: DSO = 800000/1500000 * 30 = 16
That is, the number of days that accounts receivable are collected is 16 days. Usually DSO below 45 is considered a low level. Of course, the level of DSO cannot be separated from the specific nature of the business. Different industries also have different DSOs.
In short, for smaller companies, the ability to control and manage their own cash flow is the most important.
Fifth, a new form of demand mining
In difficult times, the focus of some sales teams is not to acquire new customers and orders, but to build them by providing products and services for free or at very low prices. Sales pipeline. Today, the establishment of trust can gain friendship, trust and later contracts. For example, on the official website of the video conference service platform Zoom, it has a section dedicated to providing users with a series of resources and training for free.
Sixth, leadership
Excellent leadership is different from excellent management skills. This is also one of the topics that I and Nick Caldwell, the chief product officer of data analysis company Looker, discussed at the previous SaaStr conference, the top SaaS industry conference.
Indeed, management skills and leadership are different. Management ability is more about how to “let trains run on time”, andAlways be consistent. Leadership is more about discovering dynamically changing factors and opportunities in the management process, and encouraging employees to seize and use them.
Translator: Junyi