Posted on March 19, 2020 by steveblank
Jeff Epstein is a member of the board of directors of Shutterstock, Twilio, Kaiser Permanente, and was the chief financial officer of Oracle, DoubleClick, Nielsen and King World and is an operational partner of Bessemer Venture Partners. He teaches the Lean LaunchPad class at Stanford with me. And the minute he talks about funding, I shut up and take notes.
Yesterday, he sent this message to the financial directors of his companies.
(Read it with yesterday's survival strategy tips to CEOs.)
I thought it was important enough to share it with all of you.
Our first priority is the health and safety of our families, employees, customers and communities.
As CFOs, our next priority is to conserve cash.
For immediate action:
1. Evaluate your liquidity and the probable date of withdrawal in the worst case.
2. Objective: minimum 18 months of cash. 24 months is better.
If you are over 24 months old, congratulations.
If not, act now.
- Draw on all debt commitments. It’s like buying insurance. There is a cost, but it's worth it if things get worse. Ask for existing and new lenders for additional financing.
- Make a list of all suppliers, by amount spent. Call all the major suppliers and ask for lower prices. If applicable, offer to sign a longer agreement in exchange for lower cash payments in 2020 and 2021.
- Review all the marketing programs. Reduce marketing by x%.
- Salary costs are probably your most important cost element. If necessary, you may need to take action. Choices include:
- Hiring freeze
- Reduce all wages by 20%. Reduce CXO wages by 30%. Give employees equity in the value of their reduced wages.
- Some of your customers will delay paying you; some will be by default. Credit card customers will dispute charges that cause chargebacks. Frequently monitor collections and chargebacks. Develop a game manual for mitigation.
- If you own bonds or other investments, examine them for risks. Some companies, and perhaps some governments, may fail.
- Because events change so quickly, ask your CEO to consider sending a short weekly email to your board of directors with all the updates.
- Call if you want a sounding board to discuss the decisions you are considering.
Above all, stay safe.
Filed Under: Venture Capital |