The spread of the coronavirus disease (COVID 19) and the information boom around it greatly affect the work of the business. In particular, Sequoia Capital experts identify three problems:
Fall in business activity. From December to February, some companies have sharply decreased growth rates. This can lead to a large part of the business being unable to fulfill the scheduled financial plans for 2020.
Supply chain failures. Problems on the China border have a big impact on the global supply chain. Because of this, many companies are forced to look for alternative suppliers. IT companies suffer least of all because of logistics problems. Nevertheless, at the moment, Chinese companies have postponed the delivery dates of Huawei, Xiaomi, Vivo, Lenovo, and also American Apple for an indefinite period. Automakers Toyota and Honda and Starbucks coffee chain have announced the suspension of their businesses and outlets in China. Google has also temporarily closed all offices in China. British Airways has canceled all flights to China. Samsung has also announced the temporary closure of enterprises in China.
Reschedule meetings and reduced number of business travel. Many companies have banned all “non-essential” trips. Obviously, the spread of coronavirus negatively affects tourism, but the rest of the business suffers too — important business meetings are canceled for fear of infection.
It will take a long time before humanity takes control of the coronavirus spread. Much time will be required to restore the global economy. Sequoia Capital experts give some tips on how to protect your business from possible shocks:
- Contingency plans. Companies need to develop a substantive strategy on how to behave in this situation. The document should reflect all potential risks and suggest ways to overcome them. You need to do sales forecasting and understand how your business falls behind your original financial plans.
- Marketing. Unexpected business conditions are a great occasion to generate new ideas. You need to think about productivity and analyze the number of staff.
- Fundraising. Private financings could soften significantly, as happened in 2001 and 2009. What would you do if fundraising on attractive terms proves difficult in 2020 and 2021? Could you turn a challenging situation into an opportunity to set yourself up for enduring success? Many of the most iconic companies were forged and shaped during difficult times. Google and PayPal soldiered through the aftermath of the dot-com bust. Constraints focus the mind and provide fertile ground for creativity.
- Headcount. Given all of the above stress points on your finances, this might be a time to evaluate critically whether you can do more with less and raise productivity.
- Sales forecasts. Even if you don’t see any direct or immediate exposure for your company, anticipate that your customers may revise their spending habits. Deals that seemed certain may not close. The key is to not be caught flat-footed.
- Capital spending. Until you have charted a course to financial independence, examine whether your capital spending plans are sensible in a more uncertain environment. Perhaps there is no reason to change plans and, for all you know, changing circumstances may even present opportunities to accelerate. But these are decisions that should be deliberate.
Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances. In downturns, revenue and cash levels always fall faster than expenses. In some ways, business mirrors biology. As Darwin surmised, those who survive “are not the strongest or the most intelligent, but the most adaptable to change.”