General guidelines

• The macro situation is constantly evolving, adaptability of all plans is key
• Be prepared for the worst; then readjust if situation improves faster
• It’s important to be in alignment with the full team on what you are trying to solve for across different macro scenarios
  • In order to change direction, alignment is everything – and that will happen through honest, frequent and consistent communication. Consider holding a weekly CXO meeting to discuss business updates, burn and runway with the core team
  • For most companies the priorities should be: employee safety first, business continuity second, and liquidity and runway a key third
• Taking a “wait and watch” approach before taking any action in the hope that clarity will emerge is not a good idea in a situation like the one we’re in
• Start with “type 1” actions (those that can be easily reversed) first and then progressively consider more serious actions. An example of a type 1 decision is cutting digital marketing
• As you prepare scenarios, stress test all assumptions. We are in unprecedented times and normal business assumptions do not apply. Assume the following situations will happen:
  • Receivables getting delayed
  • Customers asking for price cuts for services they may have already consumed
  • Contracts not closing at the last minute

Scenario modeling

• The matrix below can help you create a structured plan that spans a range of scenarios:

  • The X axis represents the macro environment. The easiest way to think about this is duration of a lockdown and therefore impact on revenue
  • The Y axis represents company actions. Represent these as cuts in opex spend
  • Consequently estimate runway available based on your cash balance today
  • List out actions you would need to take for each scenario and plan
  • Start executing actions from the left, and keep executing newer actions as more clarity emerges on the macro scenarios
  • Goal is to be at least in the “yellows”, ideally in the “greens”

  

  Matrix source: https://medium.com/sequoia-capital/the-matrix-for-covid-19-c25bd5195f46