Like most small businesses we have taken our lumps in the past 30 days. After a strong start to the year, we anticipated a record-setting Q1 and were bullish that our momentum would carry into the second quarter. Then the stay at home orders were issued. And then came the first call. A local non-profit organization we have been working with for over a year needed to press pause. Bummer. We love these guys, the work they’re doing, but we understood. A few days passed and the second call came. A private equity group unsure how the virus would impact their portfolio canceled their engagement. Not a big surprise but concerning nonetheless. Only the bleeding hadn’t stopped. In the next two weeks, 36% of our monthly recurring revenue would evaporate. Basically any “non-essential” business we were working with went on a hiring freeze. Most pausing their engagements, a few canceling altogether.
I’ve watched as close friends have lost their businesses overnight. Most non-essential businesses in a poor cash position have taken debilitating blows, many will never recover. Some found their survival wholly dependent upon relief from the SBA in the form of a forgivable loan (I’m going to stay away from diving into the PPP and EIDL since it’s fairly fresh, there’s still quite a bit of unknown, and rollout has largely been a cluster). For the majority of small businesses, this virus and its impact on the economy have been a blood bath.
The majority of our revenue (87% annual and 98% monthly recurring) comes from recruiting. Our clients usually need help finding talent for one of three reasons. 1.) They have minimal extra bandwidth to spend on recruiting efforts (think founder-led entities or high growth companies) 2.) They have whiffed on a few key hires and have lost confidence in their ability to source and assess talent. 3.) Unemployment is low, available talent is limited, and they don’t know how to poach talent from their competitors. If you’re watching the skyrocketing unemployment rate (15% this week?) you know that there is a flood of talent coming into the market. Thankfully, the 64% are still hiring and are in bucket one or two. As much as losing over a third of my business stings, I’m truly grateful we’re still cranking with 64% still on board. Especially since many recruiting firms have been forced to close their doors.
What follows is for those of you leading organizations (in “non-essential” industries) staring down the barrel of some difficult decisions. With permission from our team, I’m going to share how we have chosen to navigate the present moment and foreseeable future in hopes that it will help some of you as you wrestle with layoffs, pay cuts, furloughs, etc.
Two weeks ago after talking with some of the brightest and most informed people I know, I decided we would plan as if it will take our economy six months before we begin to recover. Could it take longer? Absolutely. Do we hope it is sooner? No question! But we needed to set a benchmark that would serve as an anchor for our decision making, especially with so much uncertainty. If nothing else, we were not going to be reactive. So what does that mean? We are running our models with the assumption that we will generate no new business and that no clients who have pressed pause will restart for six months. Now we have a framework we can operate inside of.
We picked up the phone and called all of our clients who make up the core of our recurring revenue to understand how they are being impacted by the pandemic and the subsequent impact on their growth plans. There’s no sense in trying to convince someone to stick around if they are already on the fence. We called to get as much clarity as possible about where things stood with our clients and to guarantee them that we were prepared to continue producing at a high level in such circumstances (our team was already 90% remote). I can’t imagine anything more awful for a business leader than waking up each day afraid of which clients they might lose.
The week before things hit the fan we had just hired two new team members. We came into March with a full pipeline and more opportunities for new business than we’d ever had. Some of that has disappeared, but the majority is still intact and on hold for now. If things start to warm up we want to be ready to take advantage of every opportunity. It takes 30 days to adequately train a new team member, more for those lacking professional experience. On top of being prepared to take advantage of new opportunities, I love our team! We’ve never been this strong and with such a great mix of talent, experience, and personality. We decided that a company-wide pay cut was the preferable route knowing that we risked losing some of our top talent. Last week we made the announcement and while no one was excited, the majority were relieved to hear they still had a job. If you are fortunate to receive approval and funding through the PPP, remember, it only buys you a few months.
I’ve written about this before, but it’s especially true in crisis. There is nothing worse for an employee than not knowing where they stand with their manager. It is mission-critical that your people are hearing from you early and often. We’ve committed to no surprises, meaning that we won’t keep our team in the dark if things start turning for the worse. When we announced the pay cut (30%), we also laid out the steps we would take should we contract some more. The next step would be an additional 20% (off original comp) bringing pay across the board down to 50%. After that, we would begin layoffs. None of this was fun to discuss with our team but to a person, all 16 on our payroll have expressed gratitude for the clarity. Two of the worst things you could do right now as a leader are keep your people in the dark or make a promise you can’t keep. Tell it like it is.
I am a big believer that the CEO, founder, etc. should always be the head of business development. This is especially true in moments like the one we’re in. I’ve spoken with several business leaders who have slowed their business development efforts way down. Who wants to purchase in a climate like this one? Sure, be tactful and sensitive to the times but keep the pedal down. Now isn’t the time to let off the gas or hope your sales team can generate new business. Potential clients should be hearing from you. We see this as a fantastic opportunity to break into new markets and build relationships we otherwise wouldn’t have pursued. Don’t miss out on the opportunities a crisis creates.
Most entrepreneur types are built for these kinds of moments. Uncertainty, volatility, and a bleak outlook are all old hat. A part of us comes alive in the chaos. Regardless, we are wading through new territory and making life-altering decisions along the way. Even for the strongest amongst us, it is too much for one person to carry. Find at least one or two other people in leadership positions you can speak to with regularity (weekly at a minimum) if for nothing else but to normalize some of what you are going through. It is never too late to pick up the phone and start forming a new relationship or taking an established one to a deeper level. One of the hidden gifts in a crisis is that for the most part pretense starts to disappear. For better or worse, our raw humanity is on display. It’s a great time to form new bonds and lean into others who are walking a similar path.
I hope this helps you gain clarity if your organization is contracting and you’re making difficult decisions. Keep a level head and do your best. No one cares what you’ve said, they care about what you are doing with the present moment. I’m pulling for you to do the next right thing and lead well. Go get em.