As with all crises, there are some businesses that stand to benefit. However, many companies in frontline countries are facing challenges as a result of the virus outbreak, including:
- Supply chain disruptions. The unprecedented lockdown in China is directly impacting global supply chains. Hardware, direct-to-consumer, and retailing companies may need to find alternative suppliers. Pure software companies are less exposed to supply chain disruptions, but remain at risk due to cascading economic effects.
- Drop in business activity. Some companies have seen their growth rates drop sharply between December and February. Several companies that were on track are now at risk of missing their Q1–2020 plans as the effects of the virus ripple wider.
- Curtailment of travel and canceled meetings. Many companies have banned all “non-essential” travel and some have banned all international travel. While travel companies are directly impacted, all companies that depend on in-person meetings to conduct sales, business development, or partnership discussions are being affected.
It will take considerable time — perhaps several quarters — before we can be confident that the virus has been contained. It will take even longer for the global economy to recover its footing. Some of you may experience softening demand; some of you may face supply challenges. While The Fed and other central banks can cut interest rates, monetary policy may prove a blunt tool in alleviating the economic ramifications of a global health crisis.
We suggest you question every assumption about your business, including:
- Fundraising. Private financing 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. More recently, Airbnb, Square, and Stripe were founded in the midst of the Global Financial Crisis. 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.
- Cash runway. Do you really have as much runway as you think? Could you withstand a few poor quarters if the economy sputters? Have you made contingency plans? Where could you trim expenses without fundamentally hurting the business? Ask these questions now to avoid potentially painful future consequences.
- Marketing. With softening sales, you might find that your customer lifetime values have declined, in turn suggesting the need to rein in customer acquisition spending to maintain consistent returns on marketing spending. With greater economic and fundraising uncertainty, you might even want to consider raising the bar on ROI for marketing spend.
- 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.
Notice of event postponement.
As you already know, our nation is seeing major disruptions due to the coronavirus (COVID-19) outbreak both here and abroad. This unprecedented event has forced President Trump as well as many governors and local officials to declare states of emergency. The cancellation of large public gatherings, and the closing of schools and libraries are just a few of the steps being taken to help curtail the further spread of the virus. Many businesses are also temporarily shutting their doors or ceasing operations to protect both employees and customers.
If you are the owner of a small UAS business that has been adversely affected by the COVID-19 outbreak, there may be some resources available to you that you may want to check out. The SBA has loan opportunities that can help your small business during these stressful times. Each of our businesses is eligible for these and many state programs and we encourage each of you to consider applying for assistance.
The chapter will be suspending monthly meetings until further notice. We intend to move to online gatherings once the region is past the shelter in place requirement and we can all focus on topics outside of our families and neighbors well being. We thank you all for being a member of our community and remind you to check back next month for the webinar series we are planning and request you call us with idea’s to showcase a topic as well. Please contact Communications at 866-266-3356 during normal business hours to share with us your webinar idea.
A distinctive feature of enduring companies is the way their leaders react to moments like these. Your employees are all aware of COVID-19 and are wondering how you will react and what it means for them. False optimism can easily lead you astray and prevent you from making contingency plans or taking bold action. Avoid this trap by being clinically realistic and acting decisively as circumstances change. Demonstrate the leadership your team needs during this stressful time.
President & Chairman
Silicon Valley Chapter of AUVSI