This is a contributed article from Chris Varelas, co-founding partner of Riverwood Capital and a member of Nextdoor's board of directors.
As we flatten one curve, the challenge to flatten another hits us head on. The strategy to fight Covid-19 has created an economic shock unprecedented in our history. With the rise of globalization, a laser focus on efficiency, cost-based supply chains and a “just in time” management philosophy, western economies have become more dependent on the service industries for employment and job creation. As we spend time apart to survive this global pandemic, social distancing has torn much of this economic model to pieces.
Even the best run businesses operate with only a thin margin of resources to combat disruption. The downside scenario most ingrained in the minds of a manager or business owner is recession, which generally encompasses a loss of material business over a few quarters to a year. Very few envisioned a complete shutdown of their businesses for an uncertain period of time, followed by an unknowable business environment upon reopening. This is a business challenge for which there exists no experience, training, or guidance. We are all just figuring it out together.
Having spent over three decades advising companies facing unique challenges, and now as an investor going through it with businesses on many levels, from local restaurant to global leader, I feel a responsibility to offer what advice and assistance I can. I have three suggestions for the local business owner to combat the economic challenges created by social distancing.
1. Redefine Your Essentials
For business owners, the primary challenge is survival. What complicates the analysis is the uncertainty of time involved, both of the closure and the rate of recovery back to normalized business levels, whatever those may be. Unfortunately, that means returning to the inception of your business and thinking like a start-up, because that is what in essence you have become. Ask the questions you asked when you first had that great idea.
What do I absolutely need to create a business? The “minimal viable product” is the fancy term we use in Silicon Valley, but it essentially means to incur only those costs needed to create your product or service. Everything else is a luxury and must be cut.
The challenge here is to determine what is essential. While this is a time to be clinical and objective as to what is truly important, don’t forsake that which makes you special. Survival will not mean much if you lose the part of your business that is uniquely yours. Figure out what that is, what is responsible for it, and include that at the top of your mission critical list.
If you don’t know what makes you special, this is the time to figure it out. Ask those in your circle of employees, customers, and suppliers. This will not only be enlightening, but will also have key players feel invested and, we hope, they will be participants in your survival. Be as creative as possible. Evolve or adapt your business model to provide your product or service in a new way within the cost parameters necessary for survival. Quickly pivot to what is relevant today for your customers. Even operating on a limited basis within Covid-19 guidelines tops shutting down completely.
2. Stay Connected with Customers and Employees
The second action priority is to do whatever you can to stay in contact with the constituents that have been important for the conduct of your business. The form this takes can be whatever you’re comfortable with — phone calls, email, video conference calls. The medium you choose matters less than contact. The time will soon come for you to explain what life will look like during the restart process and that shouldn’t be the first time you have reached out.
Contact with your employees is not an option but a necessity, whether they have been retained, furloughed, or laid off. How you act now will define their view of you as a manager.
This is likely the most frightening and vulnerable period of their working lives. If you are able to keep employees, enlist their help in reaching out to customers and suppliers. Do whatever you can to make them feel invested in the survival of the business to which they have dedicated significant hours and sweat.
For furloughed employees, provide constant updates and check in often to see how they are doing. Offer any assistance you can, or at least a commitment to be there in the future. If you have been forced to lay off employees, do your best to use your contacts to find them alternate employment. Brainstorm next steps with them to show that you care and want them to be successful.
3. Take Action For Your Own Well-Being
Finally, focus on yourself. What are you doing to minimize the effect of the anxiety, fear, and distress resulting from the shock to your business and personal well-being? Connect and share with that inner circle you trust. Have the difficult conversations about what you face and how you feel. Connect with other managers or business owners in your position, through whatever group or associations available.
The most helpful thing here is action, action, and more action. Not only will reaching out to key constituents lower their anxiety, but just the act of doing so will likely have a significant positive impact on your mental wellbeing.
We have no excuse for remaining isolated and disconnected from the challenges we face. It may be easy to hunker down if one has the means to ride out the storm home alone, living comfortably watching Netflix or playing video games.
But as business leaders, we have no choice but to fight isolation. It is our duty to access our emotional reserves, to connect, and to pivot. Small businesses are the backbone of our economy. Without our Main Streets, our neighborhoods cannot thrive. We need to return to our communities when all of this is over. Get up, connect, and act.
For more resources to help your business during coronavirus, visit our Small Business Guide for Coronavirus Relief.