Three essential actions to survive the coming startup storm

Edited excerpt from How to prepare for the coming startup storm by Jeff Haynie:

The weather just took a turn for the worse and the storm is moving in fast. If you’re a startup founder, what do you do?

1. Take a hard look at your finances. Immediately freeze all planned future increase in spending.  Stop. Spending. Right. Now. You and your CFO should immediately assume that you will need to live with whatever you have in the bank for the next 12 months (at a minimum, ideally longer) — assuming conservative revenue assumptions. If you don’t have the runway with your current burn (excluding all the new spending you just cut), then you now need to take immediate action. The primary goal is a flight to safer ground. Screw this up and your startup will not survive.

2. Take a hard look at your priorities. What can you stop doing that you are doing right now? If it’s not core to the mission and not going to drive immediate short-term revenue (less than 6 months), stop doing it right now. Make sure everyone now clearly understands that revenue is going to be the priority over everything else. Growth at all costs doesn’t work right now, it’s now about survival.

3. Take a hard look at your people. Based on the past 2–3 years, you’ve likely got extra resources doing things that have now been deemed not a priority in the interim. Make a priority list. Rank each team member by the following: (1) must have or we cannot run the business, (2) really need to have them or things start to get difficult, (3) nice to have but in a worse case could live without, and (4) extra. What you do the list will greatly depend on your situation — mainly your burn rate, cash in the bank and your financing plan. With this list, you’re going to be able to have a rational and financial way to evaluate your situation with the least amount of emotion doing it.

Notes:
(1) Cf. Rafat Ali’s advice in Get to profitability — here’s how and “We simply can’t cut costs without hurting our growth”.
(2) If, after looking at your finances, you think you won’t survive, read: (i) There is always a move, (ii) One way for startups to gain time.

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