It is ironic that survival is the ultimate metric of growth and success, yet lucid strategies for survival rarely come first in business planning. Some think simply doing business implies planning for survival, and they’re wrong. Generally, we tend to be optimists, and why not? Hope springs eternal and pessimism is never a good startup theme. But, in truth, if you’ve not planned not to fail, you probably will.
Yates and Achebe teach us “things fall apart”, the “center cannot hold”, and that eventually all good things “go away”. These lessons tell us preparedness is survival’s progenitor, but they also provide clearer paths on how to survive well.
Experience has taught me that founders have not properly acknowledged that we may be in a tighter funding environment. As someone who’s lived through several down markets, I think it’s fair to say, survival is everything. I’ve seen companies succeed almost entirely because their competitors did not. The ability to last is what mattered. Not better products. Not better people. Just survival, plain and simple.
Fact: You can’t count on additional funding rounds. Therefore, you must reach sustainable revenue as fast as possible. If you’re unable to do this – well – that’s the survival part.
The nature of disruption is that one company’s growth often happens at the expense of another. Even if you have funding in place, or an investor who’s agreed to fund your next round, and even if you have cash on the books, failure to address questions of survival is dereliction of duty. Because, as mentioned earlier, things fall apart ... cash is burned, investors fail to invest, and down-rounds happen.
There are legitimate reasons for companies failing. Poor planning isn’t one of them. Failing for this reason is stupid. Planning is cool because it’s smart, and smart wins. Don’t be stupid. Be smart. Win.
So, how can you be smart and win? Ask hard questions. What’s our survival plan? What’s our competitive strategy vis-a-vis our revenue, EBITDA, and SG&A? How will we last through a lack of funding? How close are we to our perfect product/market fit? What assets exist that may help us survive?
Here are five survival essentials ... memorize them.
1.) Know your numbers and survive. Have professional financials made. A CFA/CPA should build your financials using realistic, well researched, metrics such that the defense of each number (spreadsheet- wide) is evident. I routinely hear from founders who say their investors told them not to worry about doing their financials. If you’re an investor telling people this – stop. It’s a disservice to the community. If you’re a founder hearing it, don’t listen and get your financials done anyway. If you don’t know your numbers, you don’t know your business! It’s that simple.
2.) Know what’s important and survive. Know your valuation and what matters. You must know the valuation, terms, and structure of your last raise. It’s possible you may have to accept a down-round to get funding. If you don’t know what’s important you may be ill-prepared to make good decisions. Forget about other companies, the terms they received, and the valuations they were given in markets less restrictive ... that time is waning ... and you must deal with what ‘is’ or you’ll not survive.
3.) Get to EBITDA ASAP and survive. Learn it. Love it. Base hits win baseball games. Not only do they win baseball games, but along the way they smooth revenue and provide excellent opportunities to strengthen execution with a focus on margins. Do this and win. It’s worth noting that the opposite is also true. Choose wisely.
4.) Good Morals = Good Morale. Govern yourself accordingly and survive. One cannot build great organizations without it. But, you ask, “How can we have good morale if we’re letting people go?” Let’s be clear, you must make it to sustainable revenue to survive. If you don’t optimize for this now you will not survive tightening markets. Not surviving = really low morale. I’ve had success being super honest with people. Respect them enough to tell them how it is. This lets them know it’s not their performance and gives them a good sense of your character. Do this well and people will work with you again. Do this poorly and you’ll earn bad reviews not just online, but other important places, like the hearts and minds of your colleagues.
5.) First Among Equals! Do this well and survive. The ancient Greeks had a saying, “Primus Inter Pares” (First Among Equals). It’s a term of earned respect and accomplishment that one can’t get by leading from behind, but rather, only by being the tip of the spear. All decisions of survival must begin and end with you. Never ask someone to do what you’ve not done. When you make cuts, ensure they affect you first. Ensuring cuts affect you first is what separates a quality person from an average person, and represents the best definition of leadership. So, when cuts must be made, ensure they are deep, quick, and affect you first.
Remember, “Fortune favors the prepared mind” (Louis Pasteur). Good Luck!