5by7 is 11 years old, technically we aren’t a start-up. We have bootstrapped so far, raised very little money and mostly funded our growth from nothing to sales of more than 1 million units of products in 2019.
And yet there is no logical reason why we should have survived the covid-pounding young innovative businesses have gone through across the globe. Unless of course you’re guilt-tripping parents into powering your recurring-revenue <cough> Edtech <cough>.
Like a lot of other businesses, we faced land-mines of core-business issues, like :
- Cash-flow : bad cash-flow is the best known company slayer. Fuelling growth with bad-cash flow is a problem even Irodov would find hard to solve.
- Customer acquisition cycle : To be honest, your acquisition cycle is far more important than the acquisition cost. How often, how much effort and repeat sales cycles define it. This is a far more difficult problem to fix than the acquisition cost.
- Effort vs Reward : For different businesses it may be defined differently. You could find a way to quantify this, but sometimes this is just based on your understanding of your product/service delivery. Some businesses like digital product based companies are extremely efficient and some other businesses like promotional products (what we were in) are extremely inefficient when it comes to effort vs reward.
- Cash-frekin-flow : did I mention that?
Riding a strong market opportunity sometimes masks these fundamental issues. With a slow economy, these hidden business killers come out like a root-canal on cheat day. Not now!
Here we are, not dead.
Over the last 6 months, we evolved. It wasn’t optional; like most things in this pandemic. By having some really high-quality discussions internally, reflecting on our experience and by following our instincts we built a playbook for not only managing this crisis but any future phases where one would find himself in a crisis or even phases of plateaued growth, even when you're doing everything right.
Let’s dive in -
- Liberate yourself by admitting the core-business issues
The pandemic was a really humbling time for me personally. It was/is a massive opportunity to admit things aren’t working without taking the fall for it - Covid19 is a great fall-guy. Use this to liberate yourself from the entrepreneur-blindside you have, we all do!
Identify clearly the issues you are facing - I really do think solid businesses survive any market crash, and the rest of us have the opportunity to become one.
- Project the runway, conservatively
We conservatively held onto 6 months of cash and assumed 0 sales. While this seems a bit extreme; as entrepreneurs we have a tendency to be optimistic and in a crisis like this quality is actually harmful. Remember we all thought things would be back to normal by August..worst case?
We are still far away from it. This makes sense for businesses which are seeing market slow down due to pandemic not the ones that are seeing more traction because of it.
Double down on what works for you. Try to achieve a significant double digit cost or efficiency improvement. Be extra conservative in projections during this time and hold onto cash like you’re about to shout ‘Dracarys’ while nosediving together with Rhaegal.
- Focus on what works. Call it a pivot if you like.
Trying to be an innovative/disruptive business comes at a cost of having several battle-fronts (in the form of product or service offerings, revenue lines etc.). This is the time to focus on what the data (read: profitability) is telling you.
Ultimately this is the time for evolution. You have to find the intersection of what has worked for you in the past and what will still remain relevant during/after this crisis is over. Expecting things to go back to how it was before, customer behaviour or buying motivations; is being naive.
This means taking some tough decisions on a great idea you were working on before, but you have to let go. You will be lighter, more nimble both in resources you have to spend and mental bandwidth.
- Empower people. Give them an opportunity to share this load.
I am all for giving protection to our team and safeguarding them from the stress of all this craziness. But we would do a disservice to them if, as leaders we would project everything is great. This crisis is a good time to build leadership in your team and focussing on empowering them.
People most of the time care about the companies that treat them well and we need to use this time to come together to address challenges we face. We did this by communication regularly over virtual town-halls or smaller groups, by creating task-forces to solve ‘pivot’ related use-cases or to get the model right and by really coaching people with both skills and temperament.
The idea was to make more leaders who can make decisions on my behalf. This tremendously helped us in becoming a new company. People have to transform for a company to evolve, period.
- Do more for current customers
While you think of doing less as a company, you should think of doing more for the customers that are paying/profitable. This may seem 2 vectors in opposite directions, in-fact this is the best way to solidify your enhanced-more-focussed value proposition.
By staying closer and listening to the few profitable customers also makes you get feedback if your new selected path works well. We went back and forth in discussions with customers, all with the intention to add more value and the result was a much better packaged product. Current customers are the best people to build a better product with.
It was intense having all these different conversations internally and with our customers, the result however was a much stronger company with a better business model.
We realised that it would be a unique play to bundle our products with a service offering. It’s not an entirely new model, but a different spin and the service/product package we feel is a unique offering.
If you’re an entrepreneur stuck in a limbo during this time, please know that you’re not the only one and each of us have a lot of things at stake. I penned this down to help anyone looking at ideas or answers, if you know someone who would find this useful, then please do share it with them.